M/s. Aurolab Trust, Madurai V. CIT, Madurai

ITA 135/CHNY/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5195 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 28-01-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOB IRS
• Assessee Lawyers: V RAMACHANDRAN; DR ANITA SUMANTH
• Keywords: Business income; Business expenditure; Search and seizure; Charitable institution; Principle of natural justice; Competent authority; Benefit of exemption
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHENNAI BENCH A BEFORE DR.O.K.NARAYANAN, VICE PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER I.T.A. NO. 135/MDS/2011 AUROLAB TRUST, NO.1, ANNA NAGAR, MADURAI 625 020. PAN AAATA 1142 P VS. THE COMMISSIONER OF INCOME TAX-I, MADURAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI V. RAMACHANDRAN AND DR. ANITA SUMANTH RESPONDENT BY : SHRI SHAJI P. JACOB, IRS O R D E R PER DR.O.K.NARAYANAN, VICE PRESIDENT THIS APPEAL IS FILED BY THE ASSESSEE. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX -I, AT MADURAI PASSED UNDER SEC.12AA(3) OF THE INCOME-TAX ACT, 196 1, CANCELLING THE REGISTRATION EARLIER GRANTED TO THE ASSESSEE UNDER ITA 135/11 :- 2 -: SEC.12A. THE REGISTRATION HAS BEEN CANCELLED THROU GH HIS PROCEEDINGS DATED 30.12.2010. 2. THE ASSESSEE IS A TRUST. IT WAS CREATED BY THE TRU ST DEED EXECUTED ON 6.7.1992. THE OBJECTS PROCLAIMED IN TH E TRUST-DEED ARE THE FOLLOWING : (A) TO ESTABLISH AND/ OR BUILD AND/OR MAINTAIN AND/ OR RUN AND/OR IMPROVE AND/OR RENDER FINANCIAL ASSISTANCE AND/OR MAKE DONATIONS TO AND/OR ASSIST IN THE ESTABLISHMENT, RUNNING, IMPROVING, OR EXTENSION OF HOSPITALS, SURGICAL HOMES, DISPENSARIES, HOMES FOR THE OLD, DISABLED OR HANDICAPPED PERSONS AND INSTITUTIONS OF MEDICAL RESEARCH AND SUCH OTHER SIMILAR INSTITUTIONS AS WOULD GIVE TEACHING AND EDUCATING, MEDICAL AND SURGICAL TREATMENT, CARE, CURE, RECUPERATION AND OTHER ADVANTAGES TO ALLEVIATE THE SUFFERINGS OF MANKIND. ITA 135/11 :- 3 -: (B) TO TAKE OVER ANY EXISTING INSTITUTIONS OF THE K IND REFERRED TO ABOVE AND CONDUCT, RUN, MAINTAIN, DEVELOP, EXTEND AND IMPROVE THE SAME. (C) TO PROMOTE AND CARRY ON RESEARCH IN DISEASES AND TO PROMOTE EDUCATION AND RESEARCH OF INNOVATION, EXPERIMENTAL, PREVENTIVE, CURATIVE AND DEMONSTRATIVE KINDS OF VARIOUS DISEASES PREVALENT AMONG THE PEOPLE. (D) TO RECRUIT, TRAIN AND PROVIDE OR TO ASSIST IN RECRUITMENT AND TRAINING MEDICAL AND OTHER STAFF FO R ANY SUCH INSTITUTIONS WITH A VIEW TO ATTAINING AND IN SUPPORT OF THE SAID OBJECTS. (E) TO PRODUCE OR MANUFACTURE OR HELP TO PRODUCE OR MANUFACTURE MEDICAL EQUIPMENTS INCLUDING OPHTHALMIC INSTRUMENTS, LENSES, SURGICAL EQUIPMENTS AND OTHER ACCESSORIES THAT ARE NECESSARY FOR THE TREATMENT OF PATIENTS OR ANY PRODUCT RELATING TO THE FIELD OF RESEARCH AND DEVELOPMENT OF TRUST OR ACTIVITIES OF THE TRUST AND ITA 135/11 :- 4 -: GENERALLY MAKE THEM AVAILABLE TO THE PUBLIC OR ENTE R INTO ANY ACTIVITY TO FACILITATE THE CARRYING ON OF BUSINESS WHICH IS INCIDENTAL TO THE ATTAINMENT OF MAIN OBJECTS OF THE TRUST. THE BUSINESS OR ANY ACTIVITY AMOUNTING TO BUSINESS REFERRED TO ABOVE SHOULD BE CARRIED ON SATISFYING THE CONDITIONS LAID DOWN IN THE INCOME TAX ACT FROM TIME TO TIME FOR GRANTING EXEMPTION, RELIEF AND REBATE. (F) TO DO ALL ACTS AND DEEDS OR LAWFUL THINGS AS AR E INCIDENTAL TO OR NECESSARY AND CONDUCIVE TO THE ATTAINMENT OF THE ABOVE OBJECTS OR ANY OF THEM PROVIDED HOWEVER NOTHING HEREINAFTER STATED SHALL BE DEEMED TO INCLUDE ANY OBJECT OR PURPOSE WHICH IS NOT A CHARITABLE PURPOSE WITHIN THE MEANING OF SECTION 2(15) OF THE INDIAN INCOME TAX ACT, 1961. 3. IN THE LIGHT OF THE ABOVE OBJECTS STATED IN THE TRU ST DEED, THE ASSESSEE HAD OBTAINED REGISTRATION UNDER SEC.12A AS A CHARITABLE TRUST SINCE 1992. THE REGISTRATION WAS GRANTED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) AT MADURAI ON 9.10.1992. THEREAFTER, TILL PASSING OF THE IMPUGNED ORDER BY C OMMISSIONER OF ITA 135/11 :- 5 -: INCOME-TAX, THE ASSESSEE TRUST HAS BEEN ENJOYING EX EMPTION UNDER SEC.11(1)(A) OF THE INCOME-TAX ACT, 1961. 4. THE ORDER APPEALED AGAINST, PASSED BY COMMISSIONER OF INCOME-TAX UNDER SEC.12AA(3) IS THE CULMINATION OF ENQUIRIES MADE BY THE COMMISSIONER IN RESPECT OF THE ACTIVITI ES CARRIED ON BY THE ASSESSEE TRUST. THE ENQUIRIES HAVE BEEN PRO MPTED BY THE MATERIALS FURNISHED BY THE ASSESSEE TRUST ALONG WIT H THE RETURN OF INCOME FILED FOR ASSESSMENT YEAR 2008-09. THE COMM ISSIONER ON PERUSAL OF REPORT IN FORM 3CD FILED ALONG WITH THE RETURN OF INCOME AND THE ENCLOSURES, FOUND THAT THE ASSESSEE TRUST I S CARRYING ON BUSINESS ACTIVITITIES EVEN THOUGH THE OBJECTS OF TH E TRUST ARE STATED TO BE CHARITABLE IN NATURE. IT HAS BEEN STA TED IN THE AUDIT REPORT THAT FOLLOWING ARE THE ACTIVITIES CARRIED ON BY THE ASSESSEE TRUST ; (A) MANUFACTURING AND TRADING IN INTRA OCULAR LENS (B) MANUFACTURING AND TRADING IN OPHTHALMIC AND CAR DIOVASCULAR SUTURE NEEDLES. (C) MANUFACTURING AND TRADING IN OPHTHALMIC PHARMAC EUTICAL PRODUCTS (D) MANUFACTURING AND TRADING IN ANTISEPTIC PHARMAC EUTICAL PRODUCTS (E) MANUFACTURING AND TRADING IN MICROSURGICAL BLAD ES ITA 135/11 :- 6 -: (F) MANUFACTURING AND TRADING IN BIPOLAR CAUTRY (G) TRADING IN CATARACT KITS. 5. THE COMMISSIONER OF INCOME-TAX OBSERVED THAT THE ASSESSEE IS ENGAGED IN THE ACTIVITITIES OF MANUFACT URING AND TRADING IN OPHTHALMIC AND CARDIOVASCULAR PRODUCTS A ND ACCESSORIES AND THE ABOVE ACTIVITIES ARE CARRIED ON AS A BUSINESS VENTURE AND THEREFORE, THE ACTIVITIES OF THE ASSESS EE TRUST COULD NOT BE CONSIDERED AS CHARITABLE IN NATURE. THE COM MISSIONER EXAMINED THE RELEVANT PROVISIONS OF LAW CONTAINED I N SEC.11(4) AND 11(4A) AND STATED THAT CHARITABLE OR RELIGIOUS TRUSTS CAN CARRY ON BUSINESS IF THE BUSINESS IS INCIDENTAL TO THE AT TAINMENT OF THE OBJECTS OF THE TRUST. HE STATED THAT THE BUSINESS INCOME OF A CHARITABLE TRUST OR INSTITUTION WOULD BE EXEMPT IF THE BUSINESS CARRIED ON BY THE TRUST OR INSTITUTION IS INCIDENTA L TO THE ATTAINMENT OF THE OBJECTIVES OF THE TRUST AND CARRYING ON THE BUSINESS SHOULD NOT BE THE PRIMARY OBJECT OF THE TRUST OR INSTITUTI ON. THE COMMISSIONER HELD THAT OUT OF THE SEVEN OBJECTS PRO NOUNCED IN THE TRUST DEED, THE ASSESSEE-COMPANY WAS CARRYING O N ONE PARTICULAR OBJECT ALONE WHICH RELATES TO MANUFACTUR E AND SALE OF ITA 135/11 :- 7 -: MEDICAL NECESSARIES INCLUDING OPHTHALMIC INSTRUMENT S, LENSES, SURGICAL EQUIPMENTS ETC. 6. THE COMMISSIONER FURTHER PERUSED THE PROFIT AND LOS S ACCOUNTS AND BALANCE SHEETS OF THE ASSESSEE TRUST F OR THE PERIOD COVERED BY ASSESSMENT YEARS 2007-08 TO 2010-11. TH E DETAILS EXAMINED BY THE COMMISSIONER HAVE BEEN TABULATED I N PAGE 4 OF HIS ORDER. AS STATED IN THE TABLE, THE ASSESSEE H AS MANUFACTURED AND SOLD OPHTHALMIC AND MEDICAL ITEMS IN THE PERIOD RELATING TO THE ASSESSMENT YEARS 2007-08 TO 2010-11. THE TOTAL TURNOVER OF THE ASSESSEE TRUST WAS ` 29,31,76,033/- FOR THE ASSESSMENT YEAR 2007-08; ` 32,79,24,968 FOR ASSESSMENT YEAR 2008-09; ` 41,84,68,857/- FOR THE ASSESSMENT YEAR 2009-10 AND ` 45,68,24,768/- FOR THE ASSESSMENT YEAR 2010-11. TH E COMMISSIONER FURTHER OBSERVED THAT IN ORDER TO ACHI EVE THE ABOVE SALES TURNOVER, THE ASSESSEE TRUST HAS INCURRED REG ULAR BUSINESS EXPENDITURE LIKE MARKETING COMMISSION AND INCENTIVE S TO DEALERS, ADVERTISEMENT ETC. THE PROFIT OF THE ASSESSEE TRUST FROM THE ABOVE BUSINESS WAS 49% OF THE TURNOVER FOR THE ASSESSMENT YEAR 2007- 08; 43% FOR THE ASSESSMENT YEAR 2008-09 AND 37% FOR THE ASSESSMENT YEAR 2009-10. THE ASSESSEE HAD MADE DON ATIONS IN ITA 135/11 :- 8 -: THE ABOVE ASSESSMENT YEARS WHICH ACCOUNTED FOR 3%, 1% AND 1% OF THE PROFITS FOR THE ASSESSMENT YEAR 2007-08, 2008-09, 2009-10 RESPECTIVELY. IT WAS ONLY FOR THE ASSESSME NT YEAR 2010- 11 THAT THE PERCENTAGE OF DONATIONS HAS BEEN INCREA SED TO 61% WHICH AMOUNTED TO ` 12,14,37,500/-. IN RESPECT OF THAT DONATION ALSO, THE COMMISSIONER FOUND THAT THE DONATIONS WER E PREDOMINANTLY MADE TO ITS ASSOCIATE TRUST, M/S. ARA VIND MEDICAL RESEARCH FOUNDATION. WHEN THE ASSESSEE HAS MADE A TOTAL DONATION OF ` 12,14,37,500/- IN THE ASSESSMENT YEAR 2010-11, AN AMOUNT OF ` 12 CRORES HAS BEEN MADE TO ARAVIND MEDICAL RESEARCH FOUNDATION ALONE WHICH ACCOUNTED FOR 98% O F THE DONATIONS MADE BY THE ASSESSEE TRUST. 7. IN THE LIGHT OF THE ABOVE OBSERVATIONS, THE COMMISS IONER OF INCOME-TAX HELD THAT EVEN THOUGH THE ASSESSEE TRUS T HAS BEEN REGISTERED AS A CHARITABLE TRUST, IT HAS NOT BEEN C ARRYING ON ANY CHARITABLE ACTIVITIES IN ACCORDANCE WITH THE OBJECT S PROCLAIMED IN ITS TRUST DEED. THE ASSESSEE TRUST IS CARRYING ON THE BUSINESS OF MANUFACTURING AND SELLING OF MEDICAL AND OPHTHALMIC ITEMS AND THE ENTIRE PROFIT GENERATED FROM THE BUSINESS IS AC CUMULATED IN THE HANDS OF THE ASSESSEE ITSELF AS FINANCIAL ASSET S AND WHEREVER ITA 135/11 :- 9 -: DONATIONS HAVE BEEN MADE, THE SAME HAVE BEEN SUBSTA NTIALLY MADE TO ITS OWN ASSOCIATE CONCERN, M/S. ARAVIND MED ICAL RESEARCH FOUNDATION. HE FOUND THEREFORE, THAT THE ASSESSEE TRUST HAS NOT CARRIED ON ANY CHARITABLE ACTIVITIES. ACCORDINGLY, HE ISSUED NOTICE TO THE ASSESSEE TRUST PROPOSING TO CA NCEL ITS REGISTRATION EARLIER GRANTED UNDER SEC.12A. THE AS SESSEE FILED DETAILED OBJECTIONS AGAINST THE NOTICE ISSUED BY TH E COMMISSIONER. THE ASSESSEE TRUST CONTENDED THAT TH E PRODUCTS MANUFACTURED BY THE ASSESSEE ARE SOLD AT AFFORDABLE PRICE BENEFITING THE WEAKER SECTIONS OF THE SOCIETY. THE ASSESSEE CONTENDED THAT ITS ACTIVITIES RELATED TO MEDICAL RE LIEF, GENERAL PUBLIC UTILITY IN THE FORM OF COST EFFECTIVE EYE CA RE PRODUCTS SUPPLIED TO THE POOR AND WEAKER SECTIONS OF THE SOC IETY WHO UNDERGO SURGERY IN VARIOUS NON-PROFIT HOSPITALS AN D UNDER VARIOUS NON-GOVERNMENTAL ORGANIZATION INITIATIVES. THE ASS ESSEE CONTENDED THAT IT IS PARTICIPATING IN THE MOVEMENT TO PREVENT BLINDNESS. THE ASSESSEE TRUST RELIED ON A SERIES O F DECISIONS INCLUDING THAT OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. SURAT CITY GYMKHANA (300 ITR 214), ADDL. CIT V. SUR AT ART SILK MANUFACTURERS ASSOCIATION (121 ITR 1). ITA 135/11 :- 10 - : 8. AFTER EXAMINING THE DETAILED OBJECTIONS FILED AND E XPLAINED BY THE ASSESSEE TRUST, THE COMMISSIONER HELD THAT T HE EXPLANATIONS OFFERED BY THE ASSESSEE TRUST ARE NOT SUFFICIENT TO JUSTIFY THE CHARACTERISTIC FEATURES OF THE ACTIVITI ES CARRIED ON BY THE ASSESSEE TRUST. THE COMMISSIONER FOUND THAT THE TU RNOVER OF THE ASSESSEE IS INCREASING YEAR AFTER YEAR AND THE PROF IT IS ALSO INCREASING MANIFOLD AND THE WHOLE ACTIVITY IS ALMOS T FOR THE PURPOSE OF GENERATING PROFIT AND IN SUCH CIRCUMSTAN CES, THE ASSESSEE CANNOT BE HELD TO BE A CHARITABLE TRUST AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF INDIAN CHAMBER OF COMMERCE V. CIT WB-II (101 ITR 234). THE COMMISSIO NER OF INCOME-TAX EXPLAINED THAT DISTRIBUTING OPHTHALMIC AND OTHER MEDICAL ACCESSORIES AT LOW COST OR CONCESSIONAL RAT E BY ITSELF IS NOT A CHARITABLE ACTIVITY. EVEN REGULAR BUSINESS H OUSES ARE GIVING SUCH PRICE BENEFITS TO THEIR CUSTOMERS. THEREFORE, THE PRICE ADVANTAGE ENJOYED BY CERTAIN GROUP OF PEOPLE CANNOT BE THE SOLE CRITERIA TO ACCEPT THE CONTENTION OF THE ASSESSEE T RUST THAT IT IS CARRYING ON CHARITABLE ACTIVITITIES. THE COMMISSIO NER OBSERVED THAT NO DETAILS ARE AVAILABLE IN RESPECT OF THE BEN EFICIARIES OF THE ACTIVITIES STATED TO BE CHARITABLE CARRIED ON BY TH E ASSESSEE. HE FURTHER RELIED ON THE JUDGMENT OF THE HON'BLE SUPREM E COURT IN THE ITA 135/11 :- 11 - : CASE OF YOGIRAJ CHARITY TRUST V. CIT (103-777) WHER EIN IT WAS HELD THAT WHERE THERE ARE VARIOUS OBJECTS OF A TRUST, WH ICH ARE ALL INDEPENDENT OBJECTS AND EVEN IF ONE OF ITS OBJECTS CANNOT BE DESCRIBED AS A CHARITABLE, THE CLAIM OF THE ENTIRE TRUST FOR EXEMPTION MUST FAIL . THE COMMISSIONER HELD THAT IN THE CASE OF THE ASSESSEE TRUST, OUT OF THE SEVEN OBJECTS, OBJEC T CLAUSES (E) AND (F) FAIL TO BE A CHARITABLE ONE, FOR THE WAY TH EY ARE PERFORMED AND THE REST OF THE FIVE OBJECTS (A) TO (D) AND (F) WHICH ARE IN THE NATURE OF CHARITABLE ACTIVITIES WOULD NOT BE OF ANY HELP TO THE ASSESSEE TRUST, FOR THE REASON THAT THOSE FIVE OBJE CTS HAVE NOT BEEN ATTENDED TO BY THE ASSESSEE TRUST THROUGH ITS ACTIVITIES. HE, ACCORDINGLY, CONFIRMED HIS PROPOSAL AND CANCELLED T HE REGISTRATION GRANTED TO THE ASSESSEE TRUST UNDER SEC.12A ON 9.10 .1922. THE ASSESSEE IS AGGRIEVED AND THEREFORE, THE APPEAL BEF ORE US. 9. THE DETAILED GROUNDS RAISED BY THE ASSESSEE TRUST I N THIS APPEAL ARE EXTRACTED BELOW : (A) THE COMMISSIONER OF INCOME-TAX ERRED IN HOLDIN G THAT THE APPELLANT DOES NOT DESERVE EXEMPTION UNDER SEC.11(1)(A) OF THE ACT AND ACCORDINGLY ERRED IN CANCELING THE REGISTRATION GRANTED UNDER SEC.12A(A) OF ITA 135/11 :- 12 - : THE ACT. THE ORDER OF THE COMMISSIONER OF INCOME-T AX IS AGAINST THE WEIGHT OF EVIDENCE AND DOCUMENTS ON RECORD. (B) THE COMMISSIONER OF INCOME-TAX OUGHT TO HAVE SEEN THAT THE APPELLANT IS A TRUST CONSTITUTED AS E ARLY AS 1992, ITS OBJECTS AND ACTIVITIES HAVE BEEN UNDER SCRUTINY, EVER SINCE THE CONSTITUTION OF THE TRUST HAS BEEN SUBMITTING RETURN REGULARLY AND THE ASSESSMENT S HAVE BEEN COMPLETED IN RESPECT OF ALL THE ASSESSMEN T YEARS UPTO 2007-08 ACCEPTING THE CLAIM OF THE TRUST FOR EXEMPTION UNDER SEC.11 AND THAT THERE ARE NO CHANGE S IN FACTS AND CIRCUMSTANCES. CONSEQUENTLY THERE IS NO JUSTIFICATION FOR THE COMMISSIONER TO TAKE A DIFFER ENT VIEW FROM THAT WHICH WAS ADOPTED IN ALL THE AFORESA ID PREVIOUS YEARS. (C) THE COMMISSIONER OF INCOME-TAX IS WRONG IN HIS VIEW THAT IN SO FAR AS THE APPELLANT HAD SPENT A SU M OF ` 17,53,40,952/- ON PURCHASE OF RAW MATERIALS AND OTHER COSTS AND WAS IN RECEIPT OF INTEREST OF ` 17,94,06,260/-, EXPORT INCENTIVE OF ` 14,77,643/-, PROFIT ITA 135/11 :- 13 - : ON SALE OF INVESTMENT OF ` 28,08,400/- AND DERIVED A NET PROFIT OF ` 19,80,75,566/- IT WOULD LEAD TO THE CONCLUSION THAT THE TRUST IS ENGAGED IN BUSINESS WH ICH YIELDS PROFIT AND CONSEQUENTLY THE PURPOSE OF THE T RUST DOES NOT SATISFY THE REQUIREMENTS THAT IT SHOULD BE ONE NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFIT. THIS CONCLUSION OF THE COMMISSIONER OF INCOME-TAX I S CONTRARY TO THE SETTLED POSITION OF LAW, AS SEEN FR OM A CATENA OF CASES DECIDED BY VARIOUS JUDICIAL FORA. (D) THE COMMISSIONER OF INCOME-TAX IS WRONG IN ASSUMING THAT THE DECISION OF THE HON'BLE SUPREME COURT IN LOKA SHIKSHANA TRUST SUPPORTS THE CONCLUSI ON ARRIVED AT BY HIM. THE COMMISSIONER OUGHT TO HAVE SEEN THAT THE POSITION OF LAW HAS TO BE DETERMINED BASED ON SEC.11(4A) OF THE ACT. LOKA SHIKSHANA TRU ST CASE WAS DECIDED WITHOUT REFERENCE TO SEC.11(4A). (E) THE COMMISSIONER OF INCOME-TAX FAILED TO NOTE THAT THE DECISION IN LOKA SHIKSHANA TRUST CASE DOES NOT LAY DOWN THE PROPOSITION THAT IF THE TRUST CARR IES ON BUSINESS WHICH PERMITS IT TO DERIVE PROFIT, THE EXI STENCE ITA 135/11 :- 14 - : OF PROFIT MOTIVE SHOULD BE ASSUMED OR THAT THE TRUS T SHOULD BE HELD NOT ELIGIBLE FOR THE BENEFIT OF SEC. 11 (F) THE COMMISSIONER OF INCOME-TAX FAILED TO NOTE THAT THE REQUIREMENT OF NOT INVOLVING IN ANY ACTIVI TY FOR PROFIT HAS TO BE UNDERSTOOD IN THE LIGHT OF THE PRO VISIONS OF SEC.11(4A) WHICH CLEARLY PERMITS A BUSINESS TO B E HELD UNDER TRUST FOR CHARITABLE PURPOSE AND SO LONG AS THE TWIN CONDITIONS OF SEC.11(4A) ARE SATISFIED, TH E BENEFIT UNDER SEC.11 CANNOT BE DENIED. (G) THE COMMISSIONER OF INCOME-TAX IS WRONG IN HI S OBSERVATION THAT THERE IS NO ELEMENT OF CHARITY IN THE ACTIVITIES CARRIED ON BY THE APPELLANT. THE COMMISSIONER OUGHT TO HAVE SEEN THAT THE ACTIVITY O F MANUFACTURING AND MARKETING OF EYE CARE PRODUCTS IS AN ACTIVITY INCIDENTAL TO THE ATTAINMENT OF THE MAI N OBJECT FOR CHARITY PURSUED BY THE TRUST AND THE TRU ST HAS COMPLIED WITH THE TWIN CONDITIONS OF SEC.11(4A) OF THE ACT. THE TRUST HAS MAINTAINED SEPARATE ACCOUNT S IN RESPECT OF THE AFORESAID ACTIVITY AND THE INCOME FROM THE SAID ACTIVITY HAS BEEN USED TO FEED THE CHARITY . ITA 135/11 :- 15 - : THUS, THE ACTIVITY WAS CARRIED ON AS INCIDENTAL TO AND FOR THE ATTAINMENT OF THE OBJECT OF MEDICAL RELIEF. CONSEQUENTLY, THE TRUST IS ENTITLED TO RELIEF UNDER SEC.11 AND THE REGISTRATION OF THE TRUST HAS TO BE CONTINUED. (H) THE COMMISSIONER OF INCOME-TAX IS WRONG IN HOLDING THAT THE TRUST IS NOT ENTITLED TO REGISTRAT ION ON THE GROUND THAT THERE IS NO ELEMENT OF CHARITY AND IT CLEARLY SHOWS NON-ADVERTENCE TO THE RELEVANT STATUT ORY PROVISIONS AND LEGAL PRINCIPLES THAT SHOULD BE APPL IED IN CONSIDERING THE ELIGIBILITY FOR EXEMPTION UNDER SEC.11 AND FOR REGISTRATION UNDER SEC.12A(A). (I) THE COMMISSIONER OF INCOME-TAX HAS FAILED TO N OTE THAT IN THE CASE OF ACTIVITY WHICH YIELDS PROFIT TH E QUESTION TO BE CONSIDERED IS THE SATISFACTION OF TH E TWIN CONDITIONS UNDER SEC.11(4A). IN SO FAR AS THE COMMISSIONER HAS NOT ADVERTED TO THIS ASPECT AT ALL AND HAS STEERED CLEAR OF THE SAID PROVISION, WHICH HAS TO BE CONSIDERED IN THIS CASE, THE CONCLUSION IS VI TIATED BY NON-APPLICATION OF MIND. ITA 135/11 :- 16 - : (J) THE COMMISSIONER OF INCOME-TAX HAS REPEATEDLY STATED THAT THE INSTITUTION SELLS MEDICAL PRODUCTS IN INDIA AND ABROAD AND HAS PROMOTED THE PRODUCTS AND HAS ACTED IN A COMMERCIAL MANNER. HE FAILED TO NOT E THAT THE HON'BLE SUPREME COURT HAS UNEQUIVOCALLY HEL D THAT WHERE A BUSINESS IS HELD UPON TRUST THE BUSINE SS HAS TO BE CARRIED ON IN A COMMERCIAL MANNER AND IT DOES NOT DETRACT FROM THE CHARITABLE ACTIVITY OF TH E TRUST, SO LONG AS THE INCOME FROM THE BUSINESS FEED S THE CHARITY. THIS IS THE SITUATION THAT APPLIES IN THE APPELLANTS CASE AND THE COMMISSIONER HAVING FAILED TO CONSIDER THIS ASPECT HAS PROCEEDED ON ERRONEOUS LINES IN CONSIDERING THE ELIGIBILITY OF THE TRUST F OR REGISTRATION UNDER SEC.12A(A) AND EXEMPTION UNDER SEC.11. (K) THE COMMISSIONER OF INCOME-TAX IS WRONG IN STATING THAT THERE ARE NO BENEFICIARIES TO THE TRUS T AND IN THE ABSENCE OF THE BENEFICIARIES, THE ORGANIZATI ON CANNOT CLAIM THE COLOUR OF A TRUST. HE FAILED TO N OTE THAT THE TRUST HAS MADE DONATIONS TO MEDICAL ITA 135/11 :- 17 - : INSTITUTIONS WHICH CONSTITUTE MEDICAL RELIEF AND HENCE HIS CONCLUSION THAT THE TRUST IS NOT DOING ANY CHAR ITABLE ACTIVITY AND THERE ARE NO BENEFICIARIES IS FACTUALL Y AND LEGALLY INCORRECT. EQUALLY ERRONEOUS IS HIS CONCLU SION THAT THE ACTIVITIES OF THE INSTITUTION ARE NEITHER INTENDED FOR CHARITABLE/MEDICAL RELIEF NOR FOR GENERAL PUBLI C UTILITY AND ARE PURELY COMMERCIAL VENTURES WITH PROFIT MOTI VE. THIS CONCLUSION IS UNTENABLE AND IS TOTALLY OPPOSED TO FACTS. (L) THE COMMISSIONER OF INCOME-TAX IS WRONG IN ASSUMING THAT ANY OF THE OBJECTS OF THE TRUST IS NO N- CHARITABLE AND HE ERRED IN INVOKING THE RATIO OF TH E DECISION IN YOGIRAJ CHARITY TRUST. IN THE APPELLAN TS CASE, ALL THE OBJECTS ARE CHARITABLE AND THE ACTIVI TY OF MANUFACTURING AND MARKETING OF EYE CARE PRODUCTS WAS CARRIED ON ONLY TO FEED THE CHARITY AND SATISFI ES THE REQUIREMENTS OF SEC.11(4A). 10. SHRI V. RAMACHANDRAN, THE LEARNED SENIOR COUNSEL AL ONG WITH DR. ANITA SUMANTH, APPEARED FOR THE ASSESSEE T RUST AND ARGUED THE CASE AT LENGTH. ITA 135/11 :- 18 - : 11. THE LEARNED COUNSEL CONTENDED THAT THE COMMISSIONER OF INCOME-TAX HAS ARRIVED AT HIS CONCLUSION IN TOTAL D ISREGARD OF BASIC FEATURES OF THE ASSESSEE TRUST. THE ASSESSEE TRUST IS MANUFACTURING AND SELLING OPHTHALMIC LENSES AND OTH ER MEDICAL AND SURGICAL ACCESSORIES NOT FOR THE PURPOSE OF MAK ING PROFITS BUT FOR THE PURPOSES OF ACTIVELY ENGAGING IN THE HEALTH SECTOR ON A CHARITABLE BASIS ESPECIALLY TO HELP THE ACTIVITIES CARRIED OUT TO PREVENT BLINDNESS AMONG THE PUBLIC. THE ASSESSEE I S CLOSELY ASSOCIATED WITH ARAVIND MEDICAL RESEARCH FOUNDATION AND THE TRUSTEES OF BOTH TRUSTS ARE COMMON AND THE ASSESSEE TRUSTEE IS AUGMENTING THE EFFORTS OF ARAVIND MEDICAL RESEARCH FOUNDATION TO PROVIDE LOW COST EYE CARE SUPPORT TO THE PUBLIC, ESPECIALLY WEAKER SECTIONS OF THE SOCIETY. 12. THE LEARNED COUNSEL CONTENDED THAT THE ASSESSEE IS DISTRIBUTING ITS PRODUCTS IN INDIA AS WELL AS EXPOR TING OUTSIDE INDIA TO MEET THE DEMAND OF WHO AND THE SALES ARE MADE AT A VERY CONCESSIONAL PRICE COMPARED TO NORMAL COMMERCIAL MA RKET RATE. THE ASSESSEE IS EARNING PROFIT IN THOSE ACTIVITIES AND EARNING OF PROFIT DOES NOT MEAN THAT THE ASSESSEE TRUST IS NOT CARRYING ON CHARITABLE ACTIVITIES. THE LEARNED COUNSEL EXPLAIN ED THAT THE ITA 135/11 :- 19 - : COMMISSIONER OF INCOME-TAX HAS MIS-CONSTRUED THE E XPRESSION OF BUSINESS AS A RESULT OF WHICH HE HAS MADE AN IMP RESSION THAT IF A BUSINESS IS CARRIED ON BY A CHARITABLE INSTITUTIO N, RUNNING OF THE SAID BUSINESS SHOULD NOT BE RUN LIKE THE BUSINESS R UN BY AN ORDINARY BUSINESS MAN. THE LEARNED COUNSEL EXPLAIN ED THAT THE PROPOSITION OF THE COMMISSIONER OF INCOME-TAX IS F ALLACIOUS. HE INVITED OUR ATTENTION TO THE DEFINITION BUSINESS PROVIDED UNDER CLAUSE (13) OF SEC.2, ACCORDING TO WHICH BUSINESS INCLUDES ANY TRADE, COMMERCE OR MANUFACTURE OR ADVENTURE OR ANY CONCERN IN THE NATURE OF TRADE, COMMERCE OR MANUFACTURE. A BU SINESS IS UNIVERSALLY ACCEPTED AS AN ACTIVITY FOR PROFIT. SE C.11(4) SPECIFICALLY USES THE EXPRESSION BUSINESS UNDERTAK ING AND PROVIDES THAT THE INCOME OF THE BUSINESS UNDERTAKIN G SHALL BE DETERMINED IN THE SAME MANNER AS PROVIDED UNDER INC OME-TAX ACT IN RESPECT OF ANY OTHER REGULAR BUSINESS UNDERT AKING. THE LEARNED COUNSEL EXPLAINED THAT SUB-SEC.(4A) OF SEC. 11 REFERS TO PROFITS AND GAINS OF BUSINESS. THE EXPRESSION PRO FITS AND GAINS OF BUSINESS IS IDENTICAL TO THE EXPRESSION USED IN SEC.28 WHICH REFERS TO PROFITS AND GAINS OF BUSINESS. HE EXPL AINED THAT THEREFORE, A COMPARISON OF SUB-SEC.4 AND (4A) OF SE C.11 WITH DEFINITION OF BUSINESS UNDER SEC.2(13) READ WITH SEC.28 AND ITA 135/11 :- 20 - : CHAPTER IV D WOULD CLEARLY SHOW THAT THE BUSINESS C ONCEIVED UNDER SUB-SEC.4 AND (4A) OF SEC.11 HAS TO BE TREATE D AT PAR WITH REGULAR BUSINESS AND DOES NOT HAVE ANY DIFFERENT CH ARACTER, NOR DOES IT EXCLUDE MAKING ANY PROFIT. 13. THE LEARNED COUNSEL, THEREFORE, CONTENDED THAT THE ASSESSEE CARRYING ON THE ACTIVITIES OF MANUFACTURIN G AND SELLING OF OPHTHALMIC AND MEDICAL PRODUCTS AND GENERATING PROF IT IN THOSE ACTIVITIES DOES NOT DISQUALIFY THE ASSESSEE TRUST T O BE A CHARITABLE INSTITUTION . THE ASSESSEE IS DOING ALL THESE ACTI VITIES TO ATTAIN ITS OBJECTS OF CHARITABLE PURPOSES ENSHRINED IN THE TRU ST DEED. HE EXPLAINED THAT THERE IS NO RULE THAT THE BUSINESS C ARRIED ON BY A CHARITABLE INSTITUTION SHOULD NOT BE EFFICIENTLY MA NAGED LIKE A BUSINESS CARRIED ON BY A BUSINESS HOUSE. IF A BUS INESS ACTIVITY IS CARRIED ON EFFICIENTLY, THERE WILL BE PROFIT ARISIN G AND THAT SHOULD NOT BE A FETTER AGAINST THE CONTENTION OF THE ASSES SEE THAT IT IS A CHARITABLE TRUST. 14. THE LEARNED COUNSEL FURTHER EXPLAINED THAT THE LAW HAS PROVIDED THAT A CHARITABLE TRUST MAY CARRY ON A BUS INESS INCIDENTAL TO THE ATTAINMENT OF OBJECT OF THE TRUST AND THIS P ROPOSITION HAS BEEN CONSIDERED BY HON'BLE SUPREME COURT IN THE CASE OF ACIT V. ITA 135/11 :- 21 - : THANTHI TRUST (247 ITR 735), WHEREIN THE COURT HAS HELD THAT ALL THAT IT REQUIRES FOR THE BUSINESS INCOME OF A TRUST OR AN INSTITUTION TO BE EXEMPT IS THAT THE BUSINESS SHOULD BE INCIDEN TAL TO THE ATTAINMENT OF THE OBJECTS OF THE TRUST OR INSTITUTI ON; THAT THE BUSINESS INCOME IS UTILIZED BY THE TRUST OR INSTIT UTION FOR THE PURPOSE OF ACHIEVING THE OBJECTIVES OF THE TRUST OR INSTITUTION IS, SURELY A BUSINESS WHICH IS INCIDENTAL TO THE ATTAIN MENT OF THE OBJECTIVES OF THE TRUST; THAT IN ANY EVENT, IF THER E BE ANY AMBIGUITY, THE PROVISION MUST BE CONSIDERED IN A MANNER THAT B ENEFITS THE ASSESSEE. THE LEARNED COUNSEL EXPLAINED THAT THE P RESENT CASE OF THE ASSESSEE TRUST IS SQUARELY COVERED BY THE AB OVE JUDGMENT OF THE HON'BLE SUPREME COURT RENDERED IN THE CASE OF ACIT V. THANTHI TRUST (247 ITR 735) AS THE ENTIRE PROFITS O F THE BUSINESS CARRIED ON BY THE ASSESSEE TRUST IS EXCLUSIVELY USE D FOR THE PURPOSE OF THE TRUST WHICH ARE ONLY CHARITABLE IN N ATURE. 15. REGARDING THE ABOVE SAID APPLICATION OF THE PROFITS OF THE ASSESSEE TRUST, THE LEARNED COUNSEL EXPLAINED THAT THE COMMISSIONER OF INCOME-TAX HIMSELF HAS STATED IN H IS ORDER THAT THE ASSESSEE HAD MADE DONATIONS TO OTHER CHARITABLE INSTITUTIONS IN THE COURSE OF ITS ACTIVITIES. ALL SUCH DONATION S HAVING BEEN ITA 135/11 :- 22 - : MADE TO ARAVIND MEDICAL RESEARCH FOUNDATION CANNOT BE A DISQUALIFICATION AGAINST THE ASSESSEE. EVEN THOUGH ARAVIND MEDICAL RESEARCH FOUNDATION IS AN ASSOCIATE TRUST O F THE ASSESSEE AND THE TRUSTEES OF BOTH THE TRUSTS ARE CO MMON, THERE IS NO DISPUTE THAT THE OTHER TRUST, ARAVIND MEDICAL R ESEARCH FOUNDATION IS CARRYING ON CHARITABLE ACTIVITIES AND THEREFORE, THE DONATIONS GIVEN BY THE ASSESSEE TRUST TO ARAVIND ME DICAL RESEARCH FOUNDATION ARE NOTHING BUT APPLICATION OF FUNDS FOR CHARITABLE PURPOSES. HE EXPLAINED THAT THE INCOME GENERATED BY THE ASSESSEE TRUST HAS BEEN PROPERLY ACCOUNTED AND REPORTED BEFORE THE ASSESSING AUTHORITY YEAR AFTER YEAR AND EXPLAINED THE POSITION MANY TIMES IN THE COURSE OF THE ASSESSMENT S COMPLETED UNDER SEC.143(3) AND THERE IS NO CASE AGAINST THE A SSESSEE TRUST THAT ANY PORTION OF ITS INCOME HAS BEEN APPLIED FOR NON CHARITABLE PURPOSES OR USED FOR THE PERSONAL GAINS OF THE TRUS TEES. THE ASSESSEE HAS ACCUMULATED ITS PROFITS WHEREVER POSSI BLE AND THOSE ACCUMULATIONS HAVE BEEN MADE STRICTLY IN ACCO RDANCE WITH THE LAW STATED IN THE INCOME-TAX ACT, 1961 AND ALL SUCH ACCUMULATIONS HAVE BEEN APPROVED BY THE ASSESSING A UTHORITY FOR ALL THE ASSESSMENT YEARS IN THE PAST AND IN SUC H ITA 135/11 :- 23 - : CIRCUMSTANCES, THERE CANNOT BE A VIEW DIFFERENT FRO M THAT THE ASSESSEE HAS APPLIED ITS INCOME ONLY FOR CHARITABLE PURPOSES. 16. AS THE ASSESSEE HAS BEEN ESTABLISHED FOR CARRYING O UT CHARITABLE ACTIVITIES AND ONE OF THE ACTIVITIES IS OF MANUFACTURE AND SALE OF OPHTHALMIC AND MEDICAL PRODUCTS FOR THE BEN EFIT OF THE GENERAL PUBLIC AND THE SAID ACTIVITY HAS BEEN CARRI ED ON BY THE ASSESSEE TRUST RESULTING IN SURPLUS INCOME AND THE SURPLUS HAVING BEEN ACCUMULATED IN ACCORDANCE WITH LAW AND APPLIED FOR CHARITABLE PURPOSES BY WAY OF LEGITIMATE DONATIONS, UPHOLD THE UNDISPUTED LEGAL STATUS OF THE ASSESSEE AS A CHARIT ABLE INSTITUTION AND THEREFORE, THE COMMISSIONER OF INCOME-TAX HAS GROSSLY ERRED IN CANCELLING THE REGISTRATION GRANTED TO THE ASSES SEE UNDER SEC.12A OF THE I.T. ACT, 1961. 17. MEANWHILE THE PRICE DETAILS OF THE PRODUCTS MANUFAC TURED AND TRADED BY THE ASSESSEE TRUST HAVE BEEN PRODUCED BEFORE US. THE SAME HAVE BEEN PRODUCED TO SUPPORT ITS ARGUMENT THAT THE ASSESSEE TRUST IS MANUFACTURING AND DISTRIBUTING ES SENTIAL MEDICAL AIDS COMPARATIVELY AT A LESSER PRICE FOR THE PUBLIC . THE ASSESSEE HAS HIGHLIGHTED ITS ARGUMENT ON THE PRICE DIFFERENT IATION AS ONE OF THE REFLECTIONS OF ITS CHARITABLE ACTIVITIES. ITA 135/11 :- 24 - : 18. SOME OF THE DETAILS FURNISHED BY THE ASSESSEE TRUST ARE REPRODUCED BELOW FOR A READY COMPARISON : ITA 135/11 :- 25 - : ITA 135/11 :- 26 - : COMPARISON OF AUROLABS LASER PRICE WITH COMPETITOR ORICE (IN ` ) PRODUCT NAME AUROLASE 532 (AUROLAB) OCULIGHT GLX (IRIS) VISULAS 532S (ZEISS) GYC 1000 (NIDEK) LASER WITH SLITLAMP 1,000,000 1,300,000 1,200,000 1,100,000 19. LET US MAKE A QUICK COMPARISON OF THE PRICE OF VARI OUS PRODUCTS AS DETAILED BY THE ASSESSEE. UNDER THE HE AD PHARMA PRODUCTS, HPMC 2% W/V IS SOLD BY THE ASSESSEE AT ` 125 FOR 2 ML. M/S. SHAH & SHAH, A PRIVATE MANUFACTURER ALSO SELLS THE SAID PRODUCT AT THE SAME RATE. IN THE CASE OF SAME PROD UCT FOR 3 ML. THE RATE OF THE ASSESSEE IS ` 60 AND AGAIN THE RATE OF ANOTHER PRIVATE FIRM, M/S. APPASAMY IS ` 60. IN THE CASE OF TRYPAN BLUE 0.06% W/V, THE ASSESSEE CHARGES ` 100 PER ML. WHEREAS M/S. BIOTECH AT ` 125 PER ML. THE PRICE VARIATION IS NOT SIGNIFICAN T. THIS IS THE CASE WITH ALMOST ALL THE PRODUCTS MANUF ACTURED AND TRADED BY THE ASSESSEE. ON AN OVER ALL COMPARISON OF THE PRICE OF VARIOUS PRODUCTS, WE FIND THAT THE PRICE CHARGED BY THE ASSESSEE CANNOT BE HELD TO BE CHARITABLY LOW. IN THESE CI RCUMSTANCES, WE ARE NOT IN A POSITION TO ACCEPT THE SAID CONTENTION OF THE ASSESSEE ITA 135/11 :- 27 - : THAT IT IS FEEDING CHARITY THROUGH PRICE DIFFERENTI ATION OF ITS PRODUCTS. 20. THE LEARNED SENIOR COUNSEL HAS ALSO RELIED ON THE FOLLOWING DECISIONS : 1. THIAGARAJAR CHARITITES V. ADDL. CIT (225 ITR 101 0) 2. CIT V. KARIMIA TRUST (302 ITR 57) 3. DIT V. WELLINGTON CHARITABLE TRUST (195 TAXMAN 232) 4. DIT(EXEMPTIONS) V. GOVINDU NAICKER (315 ITR 237 ) 5. DIT(EXEMPTIONS) V. SPAN FOUNDATION (178 TAXMAN 436) 6. CIT V. JYOTHI PRABHA SOCIETY (310 ITR 162) 7. DIT(EXEMPTIONS) V. GARDEN CITY EDUCATION TRUST (191 TAXMAN 238) 8. ADDL.CIT V. SURAT ART SILK MANUFACTURERS ASSOCI ATION (121 ITR 1) 21. THE LEARNED COUNSEL ALSO CONTENDED TO DISTINGUISH T HE FACTS OF THE PRESENT CASE FROM THE DECISIONS RENDERED IN THE CASES OF SOLE TRUSTEE, LOKA SHIKSHANA TRUST V. CIT (101 ITR 234) AND CIT V. P. KRISHNA WARRIER (84 ITR 119). ITA 135/11 :- 28 - : 22. THE LEARNED COUNSEL FURTHER ARGUED THAT THE ASSESSE E HAS BEEN RECOGNIZED AS A CHARITABLE INSTITUTION SINCE I TS INCEPTION IN 1992. THE ASSESSEE HAS BEEN AVAILING THE BENEFIT U NDER SEC.11 FOR ALMOST TWO DECADES. THE ACTIVITIES OF THE ASSE SSEE HAVE BEEN CONSISTENT THROUGH OUT. A NUMBER OF TIMES, THE ASS ESSMENTS WERE COMPLETED UNDER SEC.143(3). THE ASSESSING AUT HORITY HAS OVER AND AGAIN CONSIDERED THE SCOPE AND APPLICATION OF SEC.11 IN THE CASE OF THE ASSESSEE TRUST FOR A PERIOD OF TWO DECADES AND GRANTED EXEMPTION UNDER SEC.11 WHICH SHOW THAT THE DEPARTMENT IS SATISFIED ABOUT THE GENUINENESS OF THE TRUST AND THE CHARITABLE NATURE OF ITS ACTIVITIES. WHEN THIS IS THE POSITIO N, THE COMMISSIONER OF INCOME-TAX IS NOT JUSTIFIED IN BRE AKING THE CHORD OF CONTINUITY RELYING ON CERTAIN OBSERVATIONS WHICH DO NOT HAVE SUPPORT EITHER IN FACTS OR IN LAW. 23. THE LEARNED SENIOR COUNSEL CONTENDED THAT THE ORDE R OF THE COMMISSIONER OF INCOME-TAX IS UNJUSTIFIED, UNWARRA NTED AND ARBITRARY. HIS ORDER VIOLATES THE PRINCIPLES OF NA TURAL JUSTICE IN SO FAR AS THE COMMISSIONER HAS PROCEEDED ON AN ERRONEO US PRESUMPTION THAT THE OBJECT OF THE ASSESSEE TRUST FALLS WITHIN THE FOURTH LIMB OF SEC.2(15). THE COMMISSIONER HAS NOT ADVERTED TO ITA 135/11 :- 29 - : THE MATERIALS SUBMITTED BEFORE HIM TO ESTABLISH THA T APART FROM THE VARIOUS DONATIONS GIVEN TO ARAVIND MEDICAL RESEARCH FOUNDATION, THE ASSESSEE HAS ALSO SPENT CONSIDERABLE AMOUNT FOR CREATING INFRASTRUCTURE FOR THE MANUFACTURE OF EYE CARE PROD UCTS WHICH ARE USED FOR THE ADVANCEMENT OF MEDICAL RELIEF. THOSE EXPENDITURE INCURRED BY THE ASSESSEE TRUST CONSTITUTE APPLICATI ON OF FUNDS FOR CHARITABLE PURPOSES. HE, THEREFORE, CONCLUDED THAT THE ORDER OF THE COMMISSIONER OF INCOME-TAX MAY BE SET ASIDE AND THE REGISTRATION OF THE ASSESSEE TRUST UNDER SEC.12A BE RESTORED. 24. SHRI SHAJI P. JACOB, THE LEARNED COMMISSIONER APPEA RING FOR THE REVENUE, ON THE OTHER HAND, CONTENDED THAT THE COMMISSIONER OF INCOME-TAX-I, MADURAI IS JUSTIFIED IN CANCELLING THE REGISTRATION GRANTED TO THE ASSESSEE FOR GOOD A ND SUFFICIENT REASON THAT THE ASSESSEE IS NOT CARRYING ON ANY CHA RITABLE ACTIVITIES STATED IN ITS TRUST DEED AS ITS OBJECTS. 25. THE LEARNED COMMISSIONER CONTENDED THAT THE OBJECTS FOR WHICH THE ASSESSEE TRUST WAS SET UP ARE TO ESTABLIS H AND RUN HOSPITALS, SURGICAL HOMES, DISPENSARIES, OLD AGE HO MES; TO TAKE OVER MAINTENANCE AND MANAGEMENT OF SUCH INSTITUTIO NS; TO PROMOTE RESEARCH AND STUDY IN MATTERS RELATING TO P REVENTION OF ITA 135/11 :- 30 - : DISEASES AND INVENTION OF NEW DRUGS; TO RECRUIT, TR AIN AND PROVIDE MANPOWER IN VARIOUS HEALTH SECTOR; TO PRODUCE OR MA NUFACTURE OPHTHALMIC INSTRUMENTS AND OTHER MEDICAL AND SURGIC AL ITEMS AND TO DO OTHER ACTS OF CHARITY WHICH ARE INCIDENTAL TO OR NECESSARY AND CONDUCIVE TO THE ATTAINMENT OF THE MAIN OBJECTS . THE LEARNED COMMISSIONER HAS POINTED OUT THAT IN SPITE OF THE ABOVE EXHAUSTIVE OBJECTS PROVIDED IN ITS TRUST DEED, THE ASSESSEE HAS SOUGHT TO CARRY ON, ONLY A SINGLE ACTIVITY FOR ALL THE YEARS SINCE ITS INCEPTION. THAT SINGLE ACTIVITY CARRIED ON BY THE ASSESSEE TRUST IS TO MANUFACTURE AND SELL MAINLY INTRA OCULAR LENS AL ONG WITH MANUFACTURING AND TRADING IN OPHTHALMIC AND CARDIOV ASCULAR SUTURE NEEDLES AND OTHER SURGICAL ITEMS. THE PRODU CTS MANUFACTURED AND TRADED BY THE ASSESSEE TRUST ARE R ELATED TO MEDICAL FIELD BUT THAT DOES NOT MEAN THAT THE ACTIV ITY OF MANUFACTURING AND TRADING IN THOSE ITEMS ARE CHARIT ABLE ACTIVITIES. THE MANUFACTURING AND TRADING OF THE ABOVE ITEMS AR E MAINLY CARRIED OUT BY BUSINESS UNDERTAKINGS AND ONLY FOR T HE REASON THAT THE PRODUCTS ARE USED IN MEDICAL FIELD, IT DOES NOT MEAN THAT THE MANUFACTURE OF THOSE PRODUCTS, PER SE, IS A CHARITA BLE ACTIVITY. THE LEARNED COMMISSIONER EXPLAINED THAT AS THE ASSE SSEE IS CARRYING ON THAT ACTIVITY ALONE AND HAS NOT CARRIED ON ANY OTHER ITA 135/11 :- 31 - : CHARITABLE ACTIVITIES, THE BUSINESS CARRIED ON BY T HE ASSESSEE IN THE NATURE OF MANUFACTURING AND TRADING CANNOT BE T REATED AS A BUSINESS CARRIED ON BY THE ASSESSEE IN THE COURSE O F DISCHARGING ITS CHARITABLE OBLIGATIONS AND INCIDENTAL TO THE AT TAINMENT OF MAIN OBJECTIVES. 26. THE LEARNED COMMISSIONER FURTHER EXPLAINED THAT THE COMMISSIONER OF INCOME-TAX HAS ANALYSED THE WORKIN G RESULTS OF THE ASSESSEE TRUST FOR THE PREVIOUS YEARS RELEVANT TO THE ASSESSMENT YEARS 2007-08 TO 2010-11 ON THE BASIS O F WHICH HE HAS MADE A FINDING OF FACT THAT THE ASSESSEE IS CAR RYING ON THE ACTIVITIES OF MANUFACTURING AND TRADING IN INTRO OC ULAR LENS AND OTHER MEDICAL AND SURGICAL PRODUCTS AS IF IT IS A B USINESS CARRIED ON WITH NO LET DOWN IN THE PROFIT RATE OR THE PROF IT MARGIN. THE PROFIT EARNED BY THE ASSESSEE IS VERY ATTRACTIVE RA NGING FROM 37% TO 49%. THE TURNOVER OF THE ASSESSEE TRUST INCREAS ING YEAR AFTER YEAR. THE ASSESSEE IS INCURRING ALL KINDS OF EXPEN DITURE AS INCURRED IN THE CASE OF A PRIVATE BUSINESS MAN. TH EREFORE, HE CONTENDED THAT IN THE ACTIVITY OF MANUFACTURING AND TRADING IN INTRA OCULAR LENS AND OTHER RELATED PRODUCTS, THERE IS NO ELEMENT OF CHARITY AS TO CLAIM THE BENEFIT OF EXEMPTION UNDER SEC.11. ITA 135/11 :- 32 - : 27. THE LEARNED COMMISSIONER FURTHER EXPLAINED THAT TH E PROFIT GENERATED OUT OF THE BUSINESS CARRIED ON BY THE ASS ESSEE TRUST HAS BEEN CONSISTENTLY CAPITALIZED BY THE ASSESSEE T RUST IN THE FORM OF VARIOUS FINANCIAL ASSETS. THE ONLY APPLICA TION OF FUND MADE BY THE ASSESSEE TRUST WAS DONATIONS MADE IN VA RIOUS ASSESSMENT YEARS. EVEN THE DONATIONS PAID FOR THE ASSESSMENT YEARS 2007-08, 2008-09 AND 2009-10 WERE ONLY A NOMI NAL PART OF THE PROFITS GENERATED BY THE ASSESSEE TRUST FOR THO SE ASSESSMENT YEARS. THE DONATIONS WERE RESPECTIVELY ` 66,50,000/-, ` 30,66,000/- AND ` 30,00,000/-. BUT FOR THE ASSESSMENT YEAR 2010-11, THE ASSESSEE HAS MADE A DONATION OF ` 12,14,37,500/-. OUT OF THE ABOVE AMOUNT, A SUM OF ` 12 CRORES HAS BEEN GIVEN TO ITS OWN ASSOCIATE TRUST, ARAVIND MEDICAL RESEARCH F OUNDATION. THE ASSESSEE HAVING NOT CARRIED OUT ANY CHARITABLE ACTIVITIES IN ITS ENTIRE LIFE, BUT CARRYING ON THE BUSINESS OF MANUFA CTURING AND TRADING IN INTRA OCULAR LENS AND OTHER MEDICAL AND SURGICAL PRODUCTS AND PURSUING ONLY ON THAT OBJECT OF THE TR UST, CANNOT BE SAID TO HAVE INDULGED IN CHARITABLE ACTIVITY ONLY F OR THE REASON THAT IN A PARTICULAR ASSESSMENT YEAR A HUGE SUM OF AMOUN T WAS GIVEN TO ITS OWN ASSOCIATE TRUST BY WAY OF DONATION. BUT FOR THE AMOUNT GIVEN TO ITS OWN ASSOCIATE TRUST, THE DONATION MADE FOR THE ITA 135/11 :- 33 - : ASSESSMENT YEAR 2010-11, ALMOST ALL THE PROFITS GEN ERATED OUT OF ITS BUSINESS ACTIVITIES HAVE BEEN CONVERTED INTO FI NANCIAL ASSETS FROM TIME TO TIME. 28. THE LEARNED COMMISSIONER ARGUED THAT AS POINTED OUT BY THE COMMISSIONER OF INCOME-TAX -I, MADURAI THERE IS NO EVIDENCE ON RECORD TO SHOW THAT THE ASSESSEE HAD DISTRIBUTED INTRA OCULAR LENS EITHER FREE OF COST TO THE PUBLIC OR AT ANY CO NCESSIONAL RATE TO THE PUBLIC. THERE IS NOTHING AVAILABLE ON RECORD T O SHOW THAT THE SALES WERE MADE BY THE ASSESSEE AT A CONCESSIONAL R ATE ULTIMATELY TO BE BENEFITED BY WEAKER SECTIONS OF TH E SOCIETY. 29. IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CAS E, THE LEARNED COMMISSIONER CONTENDED THAT THE COMMISSIONE R OF INCOME-TAX-I, MADURAI IS JUSTIFIED IN RELYING ON T HE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF YOGIRAJ CHARITY TRUST V. COMMISSIONER OF INCOME-TAX (103 ITR 777) WHEREIN IT WAS HELD THAT IN SPITE OF ALL OTHER INDEPENDENT OBJECTS IF A NY OF THE OBJECTS CANNOT BE TREATED AS CHARITABLE, THE CLAIM OF ENTIR E TRUST FOR EXEMPTION HAS TO FAIL. HE FURTHER EXPLAINED THAT I N THE PRESENT CASE, THE SITUATION IS MORE VULNERABLE IN THE SENSE THAT THE ASSESSEE TRUST HAS NOT CARRIED OUT ANY OTHER ACTIVI TY OTHER THAN THE ITA 135/11 :- 34 - : BUSINESS ACTIVITY OF MANUFACTURING AND SELLING INTR A OCULAR LENS AND OTHER MEDICAL AND SURGICAL PRODUCTS. 30. THE LEARNED COMMISSIONER EXPLAINED THAT THE FIN ANCE ACT, 2008 WHICH BECAME EFFECTIVE FROM 1 ST APRIL, 2009, FROM ASSESSMENT YEAR 2009-10 AND SUBSEQUENT ASSESSMENT Y EARS HAS RESTATED THE MEANING OF CHARITABLE PURPOSE BY STREA MLINING THE DEFINITION THEREOF. SEC.2(15) DEFINES CHARITABLE P URPOSE TO INCLUDE RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AN TH E ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. IT WAS NOTICED IN THE PAST A NUMBER OF ENTITIES CARRYING ON COMMERCIAL ACTIVIT IES CLAIMED EXEMPTION EITHER UNDER SEC.10(23C) OR SEC.11 BY CLA IMING THEMSELVES AS CHARITABLE INSTITUTIONS. THEY ALWAY S TOOK SHELTER UNDER THE EXPRESSION ADVANCEMENT OF AN OBJECT OF G ENERAL PUBLIC UTILITY. THE AMENDMENT SOUGHT TO LIMIT THE SCOPE OF THE PHRASE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. ACCORDINGLY, SEC.2(15) HAS BEEN AMENDED TO PROVIDE THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY SHALL NOT BE A CHARITABLE PURPOSE, IF IT INVOLVES TO CARRY ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, ANY ACTI VITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COM MERCE OR ITA 135/11 :- 35 - : BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERAT ION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION, O F THE INCOME FROM SUCH ACTIVITY. 31. THE LEARNED COMMISSIONER FURTHER EXPLAINED THAT IN THE ABOVE LEGAL SCENARIO THE ACTIVITY CARRIED ON BY THE ASSESSEE INVOLVES NOTHING BUT CARRYING ON OF AN ACTIVITY IN THE NATURE OF TRADE, COMMERCE AND BUSINESS FOR WHICH THE ASSESSEE IS CHARGING PRICE. IN SUCH CIRCUMSTANCES, EVEN IF A PORTION OF INCOME IS DONATED TO ANOTHER CHARITABLE INSTITUTIONS, IT DOES NOT MAKE THE ASSESSEE A CHARITABLE INSTITUTION. HE, THEREFORE, CONTENDED THAT IN THE LIGHT OF RESTATED SEC.2(15), THE ACTIVITIES CAR RIED ON BY THE ASSESSEE TRUST CANNOT BE TREATED AS CHARITABLE ACTI VITIES AND THEREFORE, THE COMMISSIONER OF INCOME-TAX HAS RIGH TLY CANCELLED ITS REGISTRATION UNDER SEC.12AA OF THE I.T.ACT, 196 1. 32. WITH REFERENCE TO THE CONTENTION OF THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE THAT THE COMMISSIONER HA S VIOLATED THE PRINCIPLES OF NATURAL JUSTICE BY TAKING A DIFFE RENCE VIEW AGAINST THE CONSISTENT VIEW OF THE DEPARTMENT FOR ALL THE A SSESSMENT YEARS IN THE PAST, THE LEARNED COMMISSIONER CONTEND ED THAT THE COMMISSIONER OF INCOME-TAX WAS NOT EMPOWERED IN TH E PAST TO ITA 135/11 :- 36 - : CANCEL A REGISTRATION ONCE GRANTED. THERE WAS NO E NABLING PROVISION IN THE ACT. AFTER THE INTRODUCTION OF SU B-SEC.(3) TO SEC.12AA(1A) WITH EFFECT FROM 1.10.2004 AND AFTER T HE ENLARGEMENT OF THAT SUB-SECTION WITH EFFECT FROM 1. 6.2010, THE LAW GAVE AUTHORITY TO THE COMMISSIONER OF INCOME-TAX T O CANCEL THE REGISTRATION FOR GOOD AND VALID REASONS. AS SOON A S THE LAW PROVIDED FOR SUCH ENABLING PROVISION, THE COMMISSIO NER OF INCOME-TAX INITIATED ACTION TO CANCEL THE REGISTRA TION OF THE ASSESSEE TRUST. THEREFORE, A VALID REGISTRATION FO R THE PAST , DOES NOT GIVE ANY RIGHT TO THE ASSESSEE TO ARGUE THAT TH ERE WAS A CONSISTENCY IN THE MATTER OF REGISTRATION ENJOYED B Y THE ASSESSEE SOCIETY. IN THE PAST, THE DEPARTMENT HAD NO WAY TO CANCEL THE REGISTRATION. NOW, PROVISION IS AVAILABLE IN THE A CT AND IT HAS BEEN ACTED UPON BY THE COMPETENT AUTHORITY. 33. THE LEARNED COMMISSIONER FURTHER ARGUED THAT TH E ASSESSING AUTHORITY MIGHT HAVE COMPLETED A NUMBER O F ASSESSMENTS INCLUDING UNDER SEC.143(3) ACCEPTING TH E ACCUMULATION PETITIONS FILED BY THE ASSESSEE TRUST. THE ASSESSING AUTHORITY MIGHT HAVE UNDER THE IMPRESSION THA T THE ASSESSEE TRUST WAS CONTEMPLATING IMMEDIATE INVOLVEMENT IN CH ARITABLE ITA 135/11 :- 37 - : ACTIVITIES. BUT EVEN AFTER A LONG PERIOD OF EXISTE NCE, IT WAS FOUND THAT THE ASESSEE TRUST WAS NOT CARRYING ON CHARITAB LE ACTIVITIES, EVEN THOUGH IT WAS ENJOYING THE BENEFITS OF SEC.11. IT IS AT THAT POINT OF TIME THAT THE COMMISSIONER OF INCOME-TAX HAS MADE HIS INTERVENTION. THEREFORE, THERE IS NO CASE OF VIOLA TION OF PRINCIPLES OF NATURAL JUSTICE IN THE PRESENT CASE AS ALLEGED B Y THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE. 34. THE LEARNED COMMISSIONER, THUS, CONCLUDED THAT IN THE LIGHT OF THE ACTIVITIES CARRIED ON BY THE ASSESSEE TRUST, THE COMMISSIONER OF INCOME-TAXI, MADURAI HAS RIGHTLY C ANCELLED ITS REGISTRATION. HE PRAYED THAT THE APPEAL FILED BY T HE ASSESSEE MAY BE DISMISSED. 35. IN SPITE OF THE WIDE RANGING ARGUMENTS ADVANCED BY BOTH SIDES, WE FIND THAT THE BASIC FACTS RELATING TO THE ACTIVITIES CARRIED ON BY THE ASSESSEE TRUST ARE BY AND LARGE OUT OF DI SPUTE. THE ASSESSEE TRUST WAS CREATED AS PER TRUST DEED DATED 6.7.1992. THE REGISTRATION UNDER SEC.12A WAS GRANTED ON 9.10. 1992. THEREAFTER TILL THE ASSESSMENT YEAR 2010-11, THE AS SESSEE TRUST HAS BEEN HOLDING THE REGISTRATION VALID AND ENJOYIN G THE BENEFITS OF SEC.11 OF THE I.T. ACT. THE ASSESSEE IS MANUFAC TURING INTRA ITA 135/11 :- 38 - : OCULAR LENS AND OTHER SURGICAL ACCESSORIES. THESE ITEMS ARE SOLD LOCALLY AS WELL AS EXPORTED OUTSIDE INDIA. TH E PROFIT GENERATED IN THE BUSINESS CARRIED ON BY THE ASSESSE E IS RANGING FROM 37% TO 49%. THE ASSESSEE ACCUMULATED A MAJOR PORTION OF ITS PROFITS EARNED IN THE COURSE OF BUSINESS, OF CO URSE, FOLLOWING THE PROCEDURES PRESCRIBED BY LAW. THE ONLY APPLICA TION MADE BY THE ASSESSEE TRUST OUT OF ITS DISPOSABLE FUND IS T O GIVE DONATIONS TO OTHER CHARITABLE TRUSTS. THE PRINCIPAL BENEFICI ARY OF SUCH DONATIONS MADE BY THE ASSESSEE TRUST FROM TIME TO T IME IS ITS OWN ASSOCIATE TRUST, ARAVIND MEDICAL RESEARCH FOUNDATIO N. IN A NUTSHELL THIS IS THE BACKGROUND PICTURE OF THE CAS E. 36. NOW, THE QUESTION IS WHETHER THE ACTIVITY CARRI ED ON BY THE ASSESSEE TRUST COULD BE TREATED AS CHARITABLE OR NO T . IT HAS BEEN REPEATED A NUMBER OF TIMES IN THIS ORDER AS TO WHAT ARE THE OBJECTIVES DECLARED IN THE TRUST DEED. ONE OF THE OBJECTS DECLARED IN THE TRUST DEED IS THE PRODUCTION OR MANUFACTURE AND SALE AND DISTRIBUTION OF OPHTHALMIC LENS, SURGICAL EQUIPMENT S AND OTHER ACCESSORIES ETC. THERE IS NO CONTRADICTION WHEN IT IS STATED THAT THE ONLY ACTIVITY CARRIED ON BY THE ASSESSEE TRUST SINCE ITS CREATION HAS BEEN THE SOLE FUNCTION OF MANUFACTURE AND SALE OF INTRA OCULAR ITA 135/11 :- 39 - : LENS AND OTHER SURGICAL ACCESSORIES. AS A MATTER OF FACT IT HAS TO BE BROUGHT ON RECORD THAT THE MANUFACTURING ACTIVIT Y IS THE ONLY ACTIVITY CARRIED ON BY THE ASSESSEE TRUST DURING TH E ENTIRE PERIOD OF ITS LIFE, SO FAR. 37. THEREFORE, THE QUESTION TO BE CONSIDERED IF FUR THER MODIFIED IS, WHETHER THE ACTIVITY OF MANUFACTURING AND SELLI NG OF INTRA OCULAR LENS AND OTHER SURGICAL ACCESSORIES IS CHARITABLE A CTIVITY OR NOT. AS THE ASSESSEE TRUST HAS NOT CARRIED OUT ANY OTHER ACTIVITIES IN NATURE AS PROVIDED IN THE TRUST DEED, THE BUSINESS ACTIVITY CARRIED ON BY THE ASSESSEE HAS TO BE EVALUATED INDEPENDEN TLY WITHOUT THE COMPANY OF OTHER OBJECTS THEORETICALLY PROVIDED IN ITS TRUST DEED. WHEN OTHER OBJECTS OF CHARITY PROVIDED IN TH E TRUST DEED ARE DE-LINKED FROM THE COMPANY OF OTHER OBJECTS, IT IS TO BE SEEN AS TO WHETHER THE ACTUAL ACTIVITY OF MANUFACTURING AND TRADING CARRIED ON BY THE ASSESSEE TRUST IS CHARITABLE IN N ATURE AS CONSTRUED UNDER SEC.11. AS THAT IS THE ONLY ACTIV ITY CARRIED ON BY THE ASSESSEE, THE SAID ACTIVITY CANNOT BE TREATED A S ACTIVITY FOR THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY IN THE LIGHT OF THE LAW STATED IN SEC.2(15) AS IT STOOD WI TH EFFECT FROM 1.4.2009. THE LAW HAS STATED THAT CARRYING ON OF A BUSINESS, ITA 135/11 :- 40 - : SHALL NOT BE CONSIDERED AS A CHARITABLE ACTIVITY, I RRESPECTIVE OF THE NATURE OF THE APPLICATION OF ITS PROFIT OR DISPOSAB LE FUNDS. IN THE LIGHT OF THIS LAW, IT IS TO BE SEEN THAT EVEN IF TH E ASSESSEE TRUST HAS MADE DONATIONS TO OTHER CHARITABLE TRUSTS AND HAS A CCUMULATED THE AVAILABLE FUNDS IN ACCORDANCE WITH LAW, IT DOES NOT MEAN THAT THE ASSESSEE IS CARRYING ON A CHARITABLE ACTIVITY F OR THE REASON THAT IT IS CARRYING ON A BUSINESS. THE FALL OUT OF THE LEGAL POSITION IS THAT THE CONTENTION OF THE ASSESSEE THAT IT HAS NOT APPLIED ITS INCOME FOR NON CHARITABLE PURPOSES WOULD NOT BE REL EVANT IN CONSIDERING THIS CASE, BECAUSE THE LAW HAS PROVIDED THAT THE APPLICATION OF INCOME IS NOT THE CRITERIA TO DECIDE THE NATURE OF AN INSTITUTION WHETHER CHARITABLE OR NOT, IF THE SAID INSTITUTION IS CARRYING ON BUSINESS IN THE NATURE OF MANUFACTURE, TRADE, COMMERCE ETC. 38. THEREFORE, IT IS OUR CONSIDERED OPINION THAT TH E ACTION OF THE COMMISSIONER OF INCOME-TAX IS JUSTIFIED IN THE LIG HT OF THE DEFINITION OF THE EXPRESSION CHARITABLE PURPOSE P ROVIDED INSEC.2(15) OF THE I.T. ACT, 1961. THIS IS BECAUSE THE SINGULAR ACTIVITY OF CARRYING ON OF BUSINESS CONTINUED BY TH E ASSESSEE TRUST THROUGH OUT ITS LIFE CANNOT BE TREATED AS A CHARITA BLE ACTIVITY. ITA 135/11 :- 41 - : 39. THE APPLICATION OF FUNDS AND PROFITS OF THE BUS INESS CARRIED ON BY A TRUST SHALL BE RELEVANT FOR THE PURPOSE OF SEC.11, ONLY AFTER IT IS PRIMARILY HELD THAT THE INSTITUTION IS ESTAB LISHED FOR CARRYING ON CHARITABLE PURPOSE AND IN FACT, THE SAID INSTITUTIO N IS CARRYING ON SUCH ACTIVITIES. THEREFORE, CARRYING ON OF THE SIN GULAR ACTIVITY OF BUSINESS AGAINST OTHER CHARITABLE OBJECTIVES STATED IN THE TRUST DEED IS NOT SUFFICIENT TO CLAIM THE STATUS OF A CHARITABLE INSTITUTION. THE LITMUS TEST OF A CHARITABLE I NSTITUTION IS THAT IT SHOULD PRIMARILY CARRY ON CHARITABLE ACTIVITIES. T HE LAW RELATING TO CHARITY PROVIDED IN THE INCOME-TAX ACT, 1961 HAS NO T DILUTED IN ANY WAY THE REAL MEANING AND CONCEPT OF THE EXPRESS ION CHARITY. CHARITY IS THE NOBLE CAUSE MEANT FOR THE BENEFIT AN D UPLIFTMENT OF THE DOWN TRODDEN, POOR AND THE NEEDY. CHARITY IS N OT A TECHNICAL CONCEPT SAFEGUARDED BY LEGAL JARGONS. CHARITY IS NOT AN EDIFICE BUILT ON LOGICAL DELIBERATIONS. CHARITY IS A DIVIN E REFLECTION OF HUMAN CIVILIZATION WHICH FINDS WAYS AND MEANS TO HE LP THE NEEDY, TO PROTECT THE HELPLESS, TO SUPPORT THE POOR AND TO WORK FOR THE BETTERMENT OF THE SOCIETY AND MAN KIND. SO WHAT IS NECESSARY IS ACTUAL WORK OF CHARITY, HOW SO EVER HUMBLE IT MIGHT BE. IF THE ASSESSEE FAILS IN THIS BASIC TEST, IT IS NOT NECESS ARY TO PROCEED FURTHER TO FIND OUT HOW THE ASSESSEE HAS APPLIED IT S PROFIT/ ITA 135/11 :- 42 - : DISPOSABLE FUNDS; WHETHER IT HAS ACCUMULATED OR IT HAS BEEN DONATED. THE CLAIM OF THE ASSESSEE FAILS AT THE TH RESHOLD ITSELF. WHERE THE ASSESSEE HAS NOT CARRIED ON ANY CHARITABL E ACTIVITIES BUT ONLY A BUSINESS AND EVEN IF A PART OF THAT BUSI NESS INCOME IS APPLIED FOR CHARITABLE PURPOSES, STILL THE ASSESSEE COULD NOT BE TREATED AS AN INSTITUTION ENTITLED FOR THE BENEFIT OF SEC.11. IT IS FOR SUCH INSTITUTION, THE ACT HAS PROVIDED THE SCHEME U NDER SEC.80G. THERE IS A DISTINCTION BETWEEN CARRYING ON OF CH ARITABLE ACTIVITIES AND DONATIONS FOR CHARITABLE PURPOSES . IN THE FIRST CASE THAT OF CHARITABLE ACTIVITIES, THE INSTITUTION IS ENGAGED IN CHARITABLE ACTIVITIES. CHARITY IS ITS SOUL. BUT IN THE LATTER CASE, THE ACTIVITIES ARE BUSINESS ACTIVITIES EVEN THOUGH, AS A GOOD SAMARITAN A PORTION OF ITS INCOME IS GIVEN FOR CHAR ITY. THAT IS ONLY AN APPROPRIATION OF INCOME. IT IS TO TAKE CARE OF SUCH SITUATION THAT THE ACT HAS PROVIDED FOR SEC.80G. THEY ARE NOT ENT ITLED FOR CLAIMING DEDUCTION UNDER SEC.11. WE ARE AFRAID THA T THE ASSESSEE FALLS IN THIS CATEGORY. EVEN THOUGH CHARI TABLE ACTIVITY IS A LIBERAL MANIFESTATION, THE FRAME OF A CHARITABLE INSTITUTION UNDER THE PROVISIONS OF THE INCOME-TAX ACT IS STRICTLY DE FINED. THE ASSESSEE HAS BEEN CARRYING ON THE SOLE FUNCTION OF MANUFACTURE AND SALE OF INTRA OCULAR LENS AND OTHER PRODUCTS. THE ASSESSEE ITA 135/11 :- 43 - : IS EARNING HIGH AMOUNT OF PROFITS FROM YEAR TO YEAR . THERE IS NOTHING ON RECORD TO SHOW ANYTHING ABOUT CONCESSION AL PRICE COLLECTED FOR DISTRIBUTION OF SUCH PRODUCTS AMONG N EEDY PUBLIC. EVEN THOUGH THE ASSESSEE HAS ACCUMULATED ITS PROFIT S AS PER INCOME-TAX LAW, THAT ACCUMULATION HAS BECOME A TOOL OF CAPITALIZATION OF ITS FUNDS. SEC.11(4A) PROVIDES F OR SATISFYING OF TWO CONDITIONS TO CLAIM THE BENEFITS OF SEC.11, IN THE CASE OF AN INSTITUTION EARNING INCOME FROM PROFITS AND GAINS O F BUSINESS. THE FIRST CONDITION IS THAT THE BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF THE TRUST. THE SECOND CONDITION IS THAT SEPARATE BOOKS OF ACCOUNT ARE TO BE MAINTAINED IN RESPECT OF SUCH BUSINESS. AS FAR AS THIS CASE IS CONCERNED, THE SE COND CONDITION IS SATISFIED. BUT THE QUESTION IS WHETHER THE ASSE SSEE HAS SATISFIED THE FIRST CONDITION THAT WHETHER ITS BUSI NESS HAS BEEN CARRIED ON AS A BUSINESS INCIDENTAL TO THE ATTAINME NT OF ITS OBJECTIVES OR NOT. 40. CARRYING ON OF A BUSINESS TO BE INCIDENTAL TO T HE CHARITABLE ACTIVITIES OF A TRUST, IT IS NECESSARY THAT THE TRU ST SHOULD ALSO CARRY ON THE CHARITABLE ACTIVITIES STATED AS ITS OBJECTS. CARRYING ON OF THE BUSINESS SHOULD ONLY BE IN THE COURSE OF CARRYI NG ON OF ITS CHARITABLE ACTIVITIES. THEREFORE, CARRYING ON OF T HE MAIN OBJECTS OF ITA 135/11 :- 44 - : THE CHARITABLE ACTIVITIES IS AN INDISPENSABLE REQUI REMENT FOR CLAIMING THE STATUTORY RECOGNITION AS A CHARITABLE INSTITUTION. CARRYING ON OF THE BUSINESS ALONE, WITHOUT CARRYING ON THE PROCLAIMED CHARITABLE OBJECTIVES DOES NOT MAKE THE BUSINESS INCIDENTAL TO THE CARRYING ON OF THE PRINCIPAL CHAR ITABLE ACTIVITIES. THE ASSESSEE HAS PROCLAIMED FIVE OBJECTIVES AS PRIN CIPAL CHARITABLE OBJECTIVES AND TWO OBJECTS [OBJECTS (E) AND (G)] TO CARRY ON BUSINESS INCIDENTAL TO THE ATTAINMENT OF OTHER F IVE MAIN OBJECTIVES OF THE TRUST. BUT IN THE PRESENT CASE, THE ASSESSEE HAS CONVERTED THE INCIDENTAL OBJECTS AS THE MAIN OBJECT OF THE ASSESSEE BEING THAT OF CARRYING ON OF FULL-FLEDGED BUSINESS AND CHOSE NOT TO CARRY ON THE PROCLAIMED MAIN OBJECTS O F THE CHARITABLE ACTIVITIES. IN THESE CIRCUMSTANCES, WE HAVE TO HOLD THAT THE BUSINESS CARRIED ON BY THE ASSESSEE TRUST CANNO T BE CONSIDERED AS BUSINESS INCIDENTAL TO THE ATTAINMENT OF MAIN OBJECTS OF CHARITY. WE HAVE TO HOLD THEREFORE THAT , THE ASSESSEE HAS NOT SATISFIED THE FIRST CONDITION OF SEC.11(4A) . 42. AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES O F THE CASE AND THE APPLICABLE LAW, WE FIND THAT THE COMMISSION ER OF INCOME- TAX-I, MADURAI IS JUSTIFIED IN CANCELLING THE REGIS TRATION GRANTED TO THE ASSESSEE UNDER SEC.12A. HIS ORDER IS UPHELD. ITA 135/11 :- 45 - : 43. IN RESULT, THIS APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 11 TH DAY OF MAY, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI : 11 TH MAY, 2011 MPO* COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR