Fr. Muller Charitable Institution, V. ACIT,

ITA 1656/BANG/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 80699 (ITAT-BANGALORE)
• Duration Of Justice: 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-09-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 02-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR K SHANKAR PRASAD J
• Assessee Lawyers: BALARAM R RAO
• Keywords: Charitable institution; Opportunity of being heard
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH C : BANGALORE BEFORE SHRI RAJPAL YADAV , JUDICIAL MEMBER A ND SHRI JASON P.BOAZ, ACCOUNTANT MEMBER ITA NO. 1656 / BANG/20 13 (ASSESSMENT YEAR: 2010 - 11 ) FR.MULLER CHARITABLE INSTITUTIONS, F R. M ULLER ROAD, KANKANADY, MANGALORE - 575002. APPELLANT PAN: AAATF0345D VS. ASST. COMMISSIONER OF INCOME - TAX, CIRCLE 2(1), MANGALORE. RESPONDENT APPELLANT BY: SHRI BALARAM R RAO, ADVOCATE. RESPONDENT BY: DR.K.SHANKAR PRASAD, J CIT(DR) DATE OF HEARING : 18 - 0 9 - 2014 DATE OF PRONOUNCEMENT: 26 - 0 9 - 2014 O R D E R PER JASON P BOAZ, AM : THIS IS AN APPEAL PREFERRED BY THE ASSESSEE - FATHER MULLER CHARITABLE INSTITUTIONS, MANGALORE, AGAINST THE ORDER DATED 17 - 7 - 2013 OF THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) [CIT(A)], MYSORE, FOR THE ASSESSMENT YEAR 2010 - 11. 2. THE ASSESSEE IS A TRUST WHICH IS RUNNING HOSPITALS AND EDUCATIONAL INSTITUTIONS. DURING THE COURSE OF ASSESSMENT ITA NO . 1656 /BANG/20 13 FR.MULLER CHARITABLE INSTITUTIONS PAGE 2 OF 6 PROCEEDINGS, THE A SSESSING OFFICER (AO) NOTICED THAT ALONG WITH HOSPITALS AND COLLEGES, THE ASSESSEE - TRUST WAS ALSO OPERATING A MANUFACTURING UNIT AND THE UNIT IS INTO MANUFACTURE OF GENERIC HOMEOPATHIC PHARMACEUTICAL MEDICINES. ACCORDING TO THE AO, THE HOMEO PHARMACEUTICA L MEDICINES DIVISION HAS BEEN PLAYING THE ROLE OF PRODUCER AND DISTRIBUTOR OF MEDICINES LIKE ANY OTHER PHARMACEUTICAL COMPANY WHICH OPERATES ON PROFIT MOTIVE. THE AO ALSO OBSERVED THAT THE SAID UNIT HAS GENERATED SURPLUS TO THE EXTENT OF RS.94,92,581/ - . THE SURPLUS GENERATED IS CONSOLIDATED TOGETHER WITH INCOME FROM OTHER UNITS AND IS BEING UTILIZED FOR THE ATTAINMENT OF ITS OBJECTIVES. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME - TAX ACT, 1961[HEREINAFTER REFERRED TO AS 'THE ACT'] BY ORDER DATE D 27 - 12 - 2012 HOLDING THAT THE ACTIVITY OF H O MEO PHARMACEUTICAL MANUFACTURING DIVISION OF THE INSTITUTE IS IN THE NATURE OF BUSINESS ACTIVITY FOR THE ADVANCEMENT OF GENERAL PUBLIC UTILITY AND HENCE THE SURPLUS INCOME OF THE HOMEO PHARMACEUTICAL MANUFACTUR ING DIVISION IS TAXABLE UNDER THE PROVISIONS OF SEC.2(15) OF THE ACT. 3. AGGRIEVED BY THE ORDER OF ASSESSMENT FOR THE ASSESSMENT YEAR 2010 - 11 DATED 27 - 12 - 2012, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WHO, CONFIRMED T HE ORDER OF THE AO AND DISMISSED THE ASSESSEE S APPEAL BY ORDER DATED 17 - 7 - 2013. ITA NO . 1656 /BANG/20 13 FR.MULLER CHARITABLE INSTITUTIONS PAGE 3 OF 6 4. STILL AGGRIEVED, THE ASSESSEE IS ON SECOND APPEAL BEFORE US WITH THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME - TAX(APPEALS) ERRED IN DISMISSING THE APPEAL OF THE APPELLANT. 2. THE LEARNED APPELLATE AUTHORITY OUGHT TO HAVE APPRECIATED THAT THE RESTRICTION CONTAINED IN THE PROVISO TO SEC.2(15) OF IT ACT DOES NOT APPLY TO THE APPELLANT TRUST WHICH IS ENG AGED ONLY IN MEDICAL RELIEF AND EDUCATION. 3. THE LEARNED CIT(APPEALS) ERRED IN SUSTAINING THE AO S FINDING THAT THE ACTIVITY IN ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY . 4. WITHOUT PREJUDICE, THE ADDITION MADE BY THE AO IS ARBITRA RY, UNREASONABLE AND REQUIRES TO BE CANCELLED. 5. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED. 5.1 AT THE TIME OF HEARING, THE LEARNED AR APPEARING FOR THE ASSESSEE REIT ERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AS HIS ARGUMENTS. HE ALSO DREW OUR ATTENTION TO SEC.2(15) AND THE RELEVANT PROVISOS AND SUBMITTED THAT HOMEO MEDICINES WERE MANUFACTURED FOR THE INMATES AND WAS FALLING WITHIN THE MAIN OBJECT OF MED ICAL RELIEF. HE ALSO RELIED ON THE CBDT CIRCULAR NO.11 REPORTED AT PAGES 5 AND 6 OF 308 ITR(ST.) FOR THE PROPOSITION THAT WHERE THE PURPOSE OF TRUST IS RELIEF OF POOR AND MEDICAL RELIEF, THE PROVISO SHALL NOT BE APPLICABLE EVEN IF IT IS INCIDENTAL FOR THE PURPOSE OF CARRYING ON OF COMMERCIAL ACTIVITIES. HE ALSO SUBMITTED THAT THOUGH ELABORATE SUBMISSIONS WERE MADE ITA NO . 1656 /BANG/20 13 FR.MULLER CHARITABLE INSTITUTIONS PAGE 4 OF 6 BEFORE THE CIT(A), HE HAS PASSED A SUMMARY ORDER WITHOUT GIVING THE REASONS FOR REJECTING THE PLEA OF THE ASSESSEE. THE LD. AR SUBMITTED THAT THIS VERY SAME ISSUE WAS CONSIDERED AND ADJUDICATED UPON BY THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2009 - 10 IN ITA NO.147/BANG/2013 DATED 1 - 1 - 2014 AND THIS ISSUE WAS RESTORED BACK TO THE FILE OF THE LD. CIT(A) F OR FRESH CONSIDERATION. 5.2 PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5.3 WE HAVE HEARD BOTH PARTIES AND PERUSED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD. AS POINTED OUT BY THE LD. AR OF T HE ASSESSEE, THE SAME ISSUE WAS CONSIDERED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2009 - 10 IN ITA N O .147/BANG/2013 DATED 1 - 1 - 2014 WHEREIN THIS ISSUE WAS SET ASIDE TO THE FILE OF THE LD.CIT(A) FOR DE - NOVO CONS IDERATION AND ADJUDICATION. THE OPERATIVE PART OF THE ORDER AT PARA.6 THEREOF IS EXTRACTED HEREUNDER: 6. WE HAVE ALSO HEARD THE LEARNED DR AND CONSIDERED THE FACTS AND MATERIAL ON RECORD. WE FIND THAT THERE IS TRUTH IN THE SUBMISSIONS OF THE LEARNED SE NIOR COUNSEL THAT THE CIT(A) HAS NOT PASSED A SPEAKING ORDER. APART FROM EXTRACTING THE CONTENTS OF THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BEFORE THE AO, THE CIT(A) HAS DEVOTED PRACTICALLY A SINGLE PARA FOR GIVING A FINDING WHEREIN HE HAS ITA NO . 1656 /BANG/20 13 FR.MULLER CHARITABLE INSTITUTIONS PAGE 5 OF 6 DEALT WIT H ONLY THE SUBMISSION OF THE ASSESSEE REGARDING NON - VIOLATION OF SEC.13(1)(C) OR 13(1)(D). THIS SUBMISSION WAS RATHER AN ALTERNATIVE SUBMISSION MADE BY THE ASSESSEE BEFORE THE CIT(A). THE MAIN SUBMISSION WAS THAT THE ACTIVITY OF MANUFACTURING OF HOMEO ME DICINES WAS FALLING WITHIN THE MAIN OBJECT OF MEDICAL RELIEF. WE DO NOT FIND EVEN A SINGLE SENTENCE AS A FINDING ON THIS ISSUE BY THE CIT(A). IN THIS VIEW OF THE MATTER, WE DEEM IT FIT AND PROPER TO RESTORE THIS ISSUE BACK TO THE FILE OF THE CIT(A) WITH A DIRECTION TO PASS A SPEAKING ORDER, OF COURSE, AFTER GIVING EFFECTIVE OPPORTUNITY OF HEARING TO THE ASSESSEE, BY INCORPORATING REASONS FOR ACCEPTING OR NOT ACCEPTING THE SUBMISSIONS OF THE ASSESSEE IN RESPECT OF THE CLAIM THAT THE MANUFACTURING ACTIVITY IS PART AND PARCEL OF ITS MAIN OBJECT OF MEDICAL RELIEF. THE ASSESSEE IS DIRECTED TO PRODUCE NECESSARY DETAILS THAT WOULD BE REQUIRED BY THE CIT(A) FOR DECIDING THIS ISSUE. FOLLOWING THE AFORESAID DECISION OF THE CO - ORDINATE BENCH OF THIS TRIBUNAL IN T HE ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2009 - 10 (SUPRA), WE DEEM IT FIT TO RESTORE THIS ISSUE BACK TO THE FILE OF THE LD.CIT(A) WITH A DIRECTION TO PASS A SPEAKING ORDER AFTER AFFORDING THE ASSESSEE ADEQUATE OPPORTUNITY OF BEING HEARD BY INCORPORATING REASONS FOR ACCEPTING OR NOT ACCEPTING THE SUBMISSIONS OF THE ASSESSEE IN RESPECT OF THE CLAIM THAT THE MANUFACTURING ACTIVITY IS PART AND PARCEL OF ITS MAIN OBJECT OF MEDICAL RELIEF. IT IS ORDERED ACCORDINGLY. ITA NO . 1656 /BANG/20 13 FR.MULLER CHARITABLE INSTITUTIONS PAGE 6 OF 6 6. IN THE RESULT, THE ASSESSEE S APPEAL I S TREATED AS ALLOWED FOR STATISTICAL PURPOSES. PRON OUNCED IN THE OPEN COURT ON 26 TH OF SEPTEMBER , 201 4. SD/ - SD/ - ( RAJPAL YADAV ) (JASON P BOAZ) JUD ICIAL MEMBER ACCOUNTANT MEMBER EKSRINIVASULU COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE