DDIT (E), New Delhi V. Mool Chand Kharati Ram Trust, New Delhi

ITA 5681/DEL/2010

• Counselvise Citation: 568120114 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2012
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 18-01-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 15-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RA J TANDON
• Assessee Lawyers: C S AGGARWAL
• Keywords: Depreciation; Charitable institution; Rule of consistency; Application of stay; Benefit of exemption; Cancellation of registration; Capital expenditure; Ignorance of law
• Section: 80G; 12A; 12; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI. BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL I.T.A. NO.5681(DEL)/2010 ASSESSMENT YEAR: 2006-07 DEPUTY DIRECTOR OF INCOME MO OL CHAND KHARAITI RAM TRUST, TAX (EXEMPTION), INV. CIRCLE-I, VS. LAJPA T NAGAR-III, NEW DELHI. LAXMI NAGAR DISTRICT CENTRE, (P AN: AAATM 0394H) NEW DELHI. (APPLICANT) (RESPONDENT) APPELLANT BY : SHRI RAJ TANDON, CIT, DR RESPONDENT BY: SHR I C.S. AGGARWAL, SR. ADVOCATE & SHRI GAUTAM JAIN, C.A. DATE OF HEARIN G: 18.01.2012 DATE OF PRONOUN CEMENT: 03.02.2012. ORDER PER K.G. BANSAL : A.M THE REVENUE HAS TAKEN UP TWO SUBSTANTIVE GROUNDS IN THIS APPEAL TO THE EFFECT THAT ON THE FACTS AND IN THE CIRCUMSTA NCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) ERRED IN, - (I) ALLOWING EXEMPTION UNDER SECTIONS 11 AND 12 OF THE INCOME-TAX ACT, 1961, EVEN THOUGH THE ACTIVITIES OF THE ASSESSEE -TRUST HAVE NOT BEEN CARRIED OUT IN ACCORDANCE WITH OBJECTS OF THE TRUST; AND ITA NO. 5681(DEL)/2010 2 (II) ALLOWING DEDUCTION OF DEPRECIATION ON FIXED ASSETS WHEN FULL COST OF THE ASSETS HAD BEEN ALLOWED IN EARLIER YEARS U/ S 11 AS APPLICATION OF INCOME, THEREBY ALLOWING THE DEDUCTION OF THE SA ME EXPENDITURE TWICE OVER. 2. IN CONNECTION WITH GROUND NO. 1, THE LD. CIT, D R FURNISHED A BRIEF BACKGROUND ABOUT THE CASE. THE ASSESSEE-TRUST W AS CREATED UNDER A WILL WITH A VIEW TO UNDERTAKE TWO OBJECTS OF SPREADING SANSKRIT LANGUAGE AND PRACTICING AYURVEDIC SYSTEM OF MEDICINES. HOWEVE R, WITH EFFLUX OF TIME, THE MAIN ACTIVITY OF THE ASSESSEE HAS BECOME P REDOMINANTLY OF PROVIDING MEDICAL RELIEF THROUGH ALLOPATHIC SYSTEM OF MEDI CINES. THUS, WHILE THE OBJECT REGARDING SPREADING OF SANSKRIT HAS NOT BEEN FOLLOWED AT ALL, THE OTHER OBJECT OF PROVIDING MEDICAL RELIEF THROUGH AYURVEDIC SYSTEM HAS BEEN RELEGATED TO THE BACKGROUND. THIS HAS LEA D TO THE VIOLATION OF THE TERMS OF REGISTRATION OF THE ASSESSEE-TRUST. CON SEQUENTLY, THE REGISTRATION GRANTED TO THE ASSESSEE IS NO LONGER VALID, THER EFORE, THE ASSESSEE IS NOT ENTITLED TO EXEMPTION UNDER SECTIONS 11 AND 12 O F THE ACT. 2.1 HE HAS REFERRED TO THE OBJECTS OF THE TRUST C REATED THROUGH WILL BY SHRI KHARAITI RAM ON 08.01.1928. THE WILL BEQUEATHE D CERTAIN PROPERTIES ITA NO. 5681(DEL)/2010 3 TO THE TRUST FOR CARRYING OUT TWO OBJECTS- (I) IMPARTING EDUCATION IN AND PREACHING SANSKRIT ACCORDING TO SANATAN DHARMA MET HODS, AND (II) DEVISING MEANS FOR IMPARTING EDUCATION IN AND IMP ROVING THE AYURVEDIC SYSTEM OF MEDICINES AND PREACHING THE SAME. IN ORDER TO ATTAIN OBJECT NO. (II), IT IS NOT PROHIBITED TO TAKE HELP FROM TH E ENGLISH OR UNANI OR ANY OTHER SYSTEM OF MEDICINES AND ACCORDING TO NEED ONE OR MORE THAN ONE AYURVEDIC HOSPITALS MAY BE OPENED. 2.2 THEREAFTER, HE REFERRED TO FORM NO. 10A FILE D BY THE ASSESSEE ON 28.06.1973. A CERTIFIED COPY OF WILL OF THE DONOR HAD BEEN ATTACHED WITH THIS FORM, ON THE BASIS OF WHICH THE REGISTRATION WAS GRANTED UNDER SECTION 12A(A). A COPY OF THE ORDER OF REGISTRATION H AS BEEN PLACED IN THE PAPER BOOK ON PAGE NO. 7. THIS ORDER MENTIONS THAT THE CERTIFICATE OF REGISTRATION DOES NOT BY ITSELF CONFER ANY RIGHT TO CLAIM EX EMPTION FROM TAX IN RESPECT OF ITS INCOME, IN AS MUCH AS SUCH EXEMPTION DEP ENDS UPON THE SATISFACTION OF ALL OTHER CONDITIONS IN THIS BEH ALF LAID DOWN IN SECTIONS 11, 12, 12A(B) AND 13 OF THE ACT. ITA NO. 5681(DEL)/2010 4 2.3 HE ALSO DRAWS OUR ATTENTION TOWARDS THE SUBMIS SIONS MADE BEFORE THE AO FOR ASSESSMENT YEAR 1973-74, IN WHICH THE DE TAILS OF THE PATIENTS TREATED UNDER DIFFERENT SYSTEMS OF MEDICINES HAD B EEN FURNISHED AS UNDER:- (I) NUMBER OF OUTDOOR PATIENTS TREATED BY AYURVEDIC SYSTEM OF MEDICINE 2,69,776/- (II) NUMBER OF OUTDOOR PATIENTS TREATED BY MODERN SYSTEM OF MEDICINE 36,296/- (III) NUMBER OF INDOOR PATIENTS TREATED BY AYURVEDIC SYSTEM FREE OF CHARGE 1,115/- (IV) NUMBER OF INDOOR PATIENTS TREATED BY MODERN SYSTEM OF MEDICINES 1 ,834/- (A) MATERNITY PATIENTS 473/- 2,307/- ON THE BASIS OF THE DATA PROVIDED BY THE ASSESSE E FOR THAT YEAR, IT IS SUBMITTED THAT THE HOSPITAL SET UP UNDER THE WILL WAS INITIALLY PROVIDING MEDICAL RELIEF PREDOMINANTLY THROUGH AYURVEDIC SY STEM OF MEDICINES. HOWEVER, THE POSITION CHANGED DRASTICALLY OVER THE PERIOD OF TIME. THE POSITION IN ASSESSMENT YEAR 2006-07 IS DESCRIBED IN THE ASSESSMENT ORDER, TO WHICH WE SHALL REVERT LATER. 2.4 HE ALSO REFERRED TO PAGE NOS. 357 TO 372 OF T HE PAPER BOOK, WHICH IS A REMAND REPORT DATED 19.10.2009, ADDRESSED TO T HE LD. CIT(APPEALS) BY THE ASSESSING OFFICER. A NUMBER OF POINTS WERE COVERED IN THIS REPORT, ITA NO. 5681(DEL)/2010 5 HOWEVER, THIS REPORT HAS NOT CONSIDERED AT ALL BY THE LD. CIT(APPEALS) WHILE DECIDING THE APPEAL. 2.5 COMING TO THE ASSESSMENT ORDER, OUR ATTENTION HAS BEEN DRAWN TO PAGE NO. 2, WHERE IT IS INTER-ALIA MENTIONED THA T THE ASSESSEE-TRUST IS PERMITTED TO TAKE HELP OF ALLOPATHIC, UNANI OR ANY OTHER SYSTEM OF MEDICINE FOR PURSUING THE OBJECT OF IMPROVING THE AYURVEDIC SYSTEM OF MEDICINE AND PREACHING THE SAME. HOWEVER, FROM TH E ACCOUNTS IT IS SEEN THAT THE MAIN ACTIVITY NOW IS PROVIDING MEDICAL RELIEF THROUGH ALLOPATHIC SYSTEM. THE TOTAL RECEIPTS AMOUNT TO ABOUT RS. 18 .98 CRORE OUT OF WHICH THE RECEIPTS FROM AYURVEDIC RESEARCH INSTITUTE AM OUNT ONLY TO ABOUT RS. 55.41 LAKH. SIMILARLY, TOTAL EXPENDITURE AMOUNT S TO ABOUT RS. 27.97 CRORE, WHICH IS IN THE NATURE OF APPLICATION OF INCOME T OWARDS CHARITABLE OBJECTS, BUT THE EXPENDITURE OF THE AYURVEDIC RESEARCH I NSTITUTE AMOUNTS ONLY TO ABOUT RS. 53.31 LAKH. THE DETAILS OF EXPENDITUR E ON AYURVEDIC RESEARCH INSTITUTE IN TERMS OF STAFF EXPENDITURE, ADMINI STRATIVE EXPENDITURE, EXPENDITURE ON CHARITABLE CLAIMS AND PURCHASE OF AYURVEDIC MEDICINES HAVE BEEN FURNISHED. ITA NO. 5681(DEL)/2010 6 2.6 IT WAS SUBMITTED THAT THE OBJECTS PERMIT THE TAKING OF HELP OF ANY OTHER SYSTEM OF MEDICINE IN ORDER TO ACHIEVE OBJEC T NO. 2. IT HAS BEEN HELD THAT THE REFERENCE OF TAKING HELP FROM ENGLISH, UN ANI OR ANY OTHER SYSTEM OF MEDICINE IS FOR IMPARTING EDUCATION IN AYURVE DIC SYSTEM OF MEDICINE. THE TRUST HAS BEEN AUTHORIZED TO OPEN ONE OR MOR E AYURVEDIC HOSPITALS, THEREFORE, THE CLAIM THAT IT IS PERMITTED TO OPEN AN ALLOPATHIC HOSPITAL IS NOT CORRECT. 2.7 IT WAS FURTHER SUBMITTED THAT THE TRUST CAN ONLY OPEN THE HOSPITALS BUT IT CANNOT COMPEL THE COMMUNITY TO CHOOSE THE SYSTEM OF MEDICINE, THEREFORE, PATIENTS WANTING ALLOPATHIC TREATMENT ARE BEING PROVIDED TREATMENT UNDER THIS SYSTEM. THIS SUBMISSION HAS BEEN REJECTED BY MENTIONING THAT ALTHOUGH THE TRUST CANNOT COMPEL T HE COMMUNITY TO CHOOSE THE SYSTEM OF MEDICINE, BUT THAT DOES NOT MEAN G RANT OF ANY AUTHORITY TO THE TRUST UNDER THE WILL TO CARRY OUT OBJECTS BEYOND THE PERMITTED OBJECTS. 2.8 IT WAS ALSO SUBMITTED THAT EVEN AT THE TIME OF GRANT OF REGISTRATION AND IN EARLIER YEARS, THE HOSPITAL WAS ENGAGED IN PROVIDING MEDICAL RELIEF THROUGH MODERN MEDICINE. YET, IT WAS GRANTED BENE FIT UNDER SECTIONS 11 ITA NO. 5681(DEL)/2010 7 AND 12. THIS SUBMISSION HAS ALSO BEEN REJECTED BY MENTIONING THAT THE PRINCIPLE OF RES-JUDICATA DOES NOT APPLY TO INCOM E-TAX PROCEEDINGS. THE FACT OF THE MATTER IS THAT THE OBJECTS PERMITTED M EDICAL RELIEF THROUGH AYURVEDIC SYSTEM OF MEDICINES, BUT WITH THE PASSA GE OF TIME SUCH SERVICES BECAME A MINOR PART OF THE OVERALL ACTIVITIES OF T HE TRUST. IN FACT, THE OBJECT OF IMPARTING EDUCATION IN SANSKRIT HAS NOT AT AL L BEEN FOLLOWED BY THE ASSESSEE. 2.9 IT WAS ALSO SUBMITTED THAT ALL THE ACTIVITI ES OF THE TRUST CONSTITUTE CHARITABLE PURPOSE WITHIN THE MEANING OF SECTION 2(15) OF THE ACT. THIS SUBMISSION HAS BEEN REJECTED BY MENTIONING THAT THE ACTIVITIES MAY BE CHARITABLE PURPOSE BUT IF THEY ARE NOT IN ACCORD ANCE WITH THE OBJECTS OF THE TRUST, BENEFIT UNDER SECTIONS 11 AND 12 CANNOT B E GRANTED. THESE BENEFITS ARE SUBJECT TO THE CONDITIONS OF REGISTRATION. THE ASSESSEE-TRUST WAS MADE AWARE AT THAT TIME THAT THE CLAIM OF EXEMPTION CA NNOT BE MADE MERELY ON THE REGISTRATION GRANTED U/S 12A(A), BUT IT D EPENDS UPON FULFILLMENT OF CONDITIONS MENTIONED IN SECTIONS 11, 12, 12A AND 13 OF THE ACT. SECTION 12A(3) CONTAINS THE CONDITIONS THAT (I) OBJECTS OF THE TRUST ARE CHARITABLE, AND (II) THE ACTIVITIES ARE CARRIED OUT IN ACCORDANCE WITH OBJECTS OF THE TRUST. IF, THE ACTIVITIES EXCEED THE OBJECTS, THE REGISTRATION DOES NOT ITA NO. 5681(DEL)/2010 8 REMAIN VALID AND IN SUCH A SITUATION THE ASSESSEE LOOSES THE BENEFIT OF EXEMPTION UNDER SECTIONS 11 AND 12. 2.10 IN VIEW OF THE AFORESAID FINDINGS, IT IS VE HEMENTLY ARGUED THAT THE ASSESSEE-TRUST IS NOT ENTITLED TO EXEMPTION UNDE R SECTIONS 11 AND 12, OR AT LEAST IN RELATION TO THE ACTIVITIES OF GRANTING M EDICAL RELIEF THROUGH ALLOPATHIC SYSTEM OF MEDICINES. 3. IN REPLY, THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE ASSESSEE- TRUST WAS CONSTITUTED UNDER THE WILL OF LATE SH RI KHARAITI RAM DATED 08.01.1928. OUR ATTENTION HAS BEEN DRAWN TOWARDS THE OBJECTS. THESE OBJECTS HAVE ALREADY BEEN DESCRIBED BY US. IT I S THE CASE OF THE LD. COUNSEL THAT THE ASSESSEE HAS BEEN CARRYING OUT OBJECT NO. 2, I.E., DEVISING MEANS FOR IMPARTING EDUCATION IN AND IMPROVING TH E AYURVEDIC SYSTEM OF MEDICINE AND PREACHING THE SAME. IN DOING SO, THE TRUST IS NOT PROHIBITED FROM TAKING THE HELP FROM ENGLISH, UNANI OR ANY OTHER SYSTEM OF MEDICINES AND ACCORDING TO NEED ONE OR MORE THAN ONE AYURVEDIC HOSPITAL IS PERMITTED TO BE OPENED. ALTHOUGH THE RECEIPTS AND EXPENDITURE FROM PROVIDING RELIEF THROUGH ALLOPATHIC SYSTEM OF MED ICINES FAR EXCEED THE RECEIPTS AND EXPENDITURE IN PROVIDING MEDICAL REL IEF THROUGH AYURVEDIC ITA NO. 5681(DEL)/2010 9 SYSTEM OF MEDICINE, THE FORMER IS IN AID OF THE LATTER. THEREFORE, THE TRUST HAS NOT EXCEEDED THE OBJECTS IN THE TRUST DEE D. 3.1 OUR ATTENTION HAS BEEN DRAWN TOWARDS THE D EFINITION OF THE TERMS CHARITABLE PURPOSE, FURNISHED IN SECTION 2(15), WHICH INCLUDES MEDICAL RELIEF. IT IS ARGUED THAT PROVIDING MEDICAL RELIEF THROUGH ALLOPATHIC SYSTEM OF MEDICINE IS ALSO A CHARITABLE PURPOSE, T HEREFORE, THE ASSESSEE IS ENTITLED TO EXEMPTION UNDER SECTIONS 11 AND 12. 3.2 FURTHER, OUR ATTENTION HAS BEEN DRAWN TOWARD S THE APPLICATION MADE FOR REGISTRATION OF THE ASSESSEE-TRUST AND THE GRANT OF REGISTRATION IN 1972 OR THEREABOUT. THE ASSESSEE HAS ALSO BEEN GR ANTED APPROVAL UNDER SECTION 80G(5) FOR THE PERIOD 01.04.2004 TO 31.03 .2007 VIDE ORDER DATED 26.04.2004, A COPY OF WHICH HAS BEEN PLACED IN THE PAPER BOOK ON PAGE NO. 8. IT IS ARGUED THAT THE ASSESSEE HAS BEE N CARRYING ON SAME ACTIVITIES AS IN PAST. THE REGISTRATION IS IN FORCE AND THE A PPROVAL IS VALID FOR THE PERIOD UNDER CONSIDERATION. THEREFORE, THERE IS N O REASON FOR NOT GRANTING EXEMPTION UNDER SECTIONS 11 AND 12. ITA NO. 5681(DEL)/2010 10 3.3 IT IS SUBMITTED THAT THE DIRECTOR OF INCOME-TA X (E) HAD CANCELLED THE REGISTRATION WITH EFFECT FROM ASSESSMENT YEAR 2 002-03. THIS ACTION HAS BEEN SET ASIDE BY THE E BENCH OF THE TRIBUNAL I N ITA NO. 3611(DEL)/2009 ON 12 TH MARCH, 2010. A COPY OF THE ORDER HAS BEEN PLACED IN THE PAPER BOOK ON PAGE NOS. 417 TO 423. WE FIND THAT THE ORDER WAS CANCELLED ON THE GROUND THAT THE DIRECTOR OF INC OME-TAX (E) DID NOT HAVE POWER TO CANCEL REGISTRATION GRANTED U/S 12A. T HUS, THE CANCELLATION OF THE ORDER WAS ON TECHNICAL GROUND AND NOT ON MERIT S. 3.4 ON THE BASIS OF AFORESAID FACTS, IT HAS BEEN ARGUED THAT THE ASSESSEE HAS BEEN PROVIDING MEDICAL RELIEF AND, THEREFORE, IT IS ENTITLED TO EXEMPTION UNDER SECTIONS 11 AND 12. THE REVENUE HAS ALL TH ROUGH ACCEPTED THE AFORESAID CLAIM OF THE ASSESSEE AND THIS CANNO T BE IGNORED IN THIS YEAR. 4. IN THE REJOINDER REPLY, IT IS SUBMITTED THAT THE ASSESSEE-TRUST HAS EXCEEDED ITS CHARTER IN PROVIDING MEDICAL RELIEF THROUGH ALLOPATHIC SYSTEM OF MEDICINES AND BY SETTING UP AN ALLOPATHIC H OSPITAL. THE PROVISIONS CONTAINED IN SECTIONS 11 AND 12 HAVE TO BE INT ERPRETED IN PURPOSIVE MANNER AND IT HAS TO BE SEEN WHETHER THE INTENT WAS TO PROMOTE RELIEF THROUGH AYURVEDIC SYSTEM OF MEDICINES OR ALLOPATH IC SYSTEM OF MEDICINES. ITA NO. 5681(DEL)/2010 11 IF THE TRUST EXCEEDS ITS OBJECTS, IT CANNOT B E SAID THAT THE ACTIVITIES ARE GENUINE. THEREFORE, THE EFFECT OF REGISTRATION IS LOST. 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE FACTS ARE THAT THE ASSESSEE-T RUST WAS CREATED UNDER THE WILL OF LATE SHRI KHARAITI RAM WITH A VIEW TO PUR SUE TWO OBJECTS- (I) IMPARTING EDUCATION AND PREACHING SANSKRIT IN ACC ORDANCE WITH SANATHAN DHARMA, AND (II) IMPARTING EDUCATION AND IMPROV ING AYURVEDIC SYSTEM OF MEDICINE. FOR ATTAINING OBJECT NO. (II), THE TRUST WAS PERMITTED TO TAKE HELP OF ENGLISH, UNANI OR ANY OTHER SYSTEM OF ME DICINE. IT ALSO COULD OPEN ONE OR MORE AYURVEDIC HOSPITALS. INITIALL Y, THE OBJECT OF PROVIDING MEDICAL RELIEF THROUGH AYURVEDIC SYSTEM OF MEDI CINE WAS UNDERTAKEN, AND IT CONSTITUTED THE MAJOR ACTIVITY IN ASSESSMEN T YEAR 1973-74, AS SEEN FROM THE DETAILS FURNISHED IN PARAGRAPH NO. 2.3 ( SUPRA). HOWEVER, WITH THE PASSAGE OF TIME, MEDICAL RELIEF THROUGH AYURVEDI C MEDICINES AND RESEARCH WAS RELEGATED TO THE BACKGROUND AND THE ACTI VITIES MAINLY CONSTITUTED OF PROVIDING MEDICAL RELIEF THROUGH ALLOPATHIC SY STEM OF MEDICINES. THE DETAILS IN RESPECT OF THIS YEAR ARE MENTIONED IN PARAGRAPH NO. 2.5 (SUPRA). THE CASE OF THE LD. CIT, DR IS THAT THE ASSESSEE IS NOT ENTITLED TO ITA NO. 5681(DEL)/2010 12 EXEMPTION UNDER SECTIONS 11 AND 12. ON THE OT HER HAND, IT IS THE CASE OF THE LD. COUNSEL THAT THE ASSESSEE IS ENTITLED TO THE AFORESAID EXEMPTION. 5.1 THE FIRST ISSUE IN THIS CONNECTION IS AS TO WHETHER THE ASSESSEE HAS BEEN FOLLOWING THE OBJECTS NARRATED IN THE WILL. THE CASE OF THE LD. CIT, DR IS THAT WHILE HELP COULD HAVE BEEN TAKEN FROM OTHER SYSTEMS OF MEDICINES, THE PRIME OBJECT WAS TO PROVIDE MEDIC AL RELIEF THROUGH AYURVEDIC SYSTEM OF MEDICINES AND TO PROMOTE RE SEARCH IN THIS AREA. AS AGAINST THE AFORESAID, THE TRUST PROVIDES MEDIC AL RELIEF THROUGH ALLOPATHIC SYSTEM OF MEDICINES IN ITS HOSPITAL. THEREFORE, IT IS NOT A CASE OF TAKING HELP FROM ALLOPATHIC SYSTEM OF MEDICINES TO CARRY OUT RESEARCH OR TREATMENT OF PATIENTS IN AYURVEDIC SYSTEM OF ME DICINES. THE ARGUMENTS OF THE LD. COUNSEL ARE NOT VERY CLEAR IN THIS REGA RD. HE MERELY REFERRED TO THE OBJECTS AND SUBMITTED THAT HELP CAN BE TAK EN FROM ANY OTHER SYSTEM OF MEDICINE. THEREFORE, ACTIVITIES OF THE TRUST A RE CONFINED TO ITS OBJECTS. HAVING CONSIDERED THE FACTS AND RIVAL ARGUMEN TS, WE ARE OF THE VIEW THAT THE ALLOPATHIC SYSTEM OF MEDICINE HAS MORE OR LOSS SUPPLANTED AYURVEDIC SYSTEM OF MEDICINE AND IT IS NOT A CAS E WHERE ONLY HELP IS TAKEN FROM ALLOPATHIC SYSTEM OF MEDICINE FOR TREATMENT A ND RESEARCH UNDER AYURVEDIC SYSTEM OF MEDICINE. THE OBJECT OF PR OMOTING SANSKRIT IS NOT ITA NO. 5681(DEL)/2010 13 FOLLOWED AT ALL. THEREFORE, IT IS HELD THAT PRED OMINANT PART OF THE ACTIVITIES OF THE ASSESSEE EXCEEDS THE POWERS CONFERRED ON THE TRUSTEES UNDER THE OBJECTS. IN OTHER WORDS, THE OBJECTS ARE NOT B EING FULLY FOLLOWED IN ACCORDANCE WITH THE MANDATE OF THE WILL. 5.2 THE NEXT QUESTION IS-WHETHER, IN SPITE OF AFOR ESAID CONCLUSION THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 11(1)(A)? THE LD. CIT, DR HAS MADE THREE PROPOSITIONS IN THIS REGARD:- (I) AS THE TRUST IS NOT FOLLOWING THE OBJECTS PRES CRIBED IN THE WILL, ITS REGISTRATION CEASES TO HAVE EFFECT, (II) AS THE TRUST IS NOT FOLLOWING THE OBJECTS PRESCRIB ED IN THE WILL, DEDUCTION U/S 11(1)(A) IS NOT ADMISSIBLE, AND (III) PRINCIPLE OF RES-JUDICATA DOES NOT APPLY TO INCO ME-TAX PROCEEDINGS AS EACH YEAR IS A SEPARATE YEAR. 5.3 IN RESPECT OF THE FIRST PROPOSITION, RELIANCE IS PLACED ON THE DECISION IN THE FOLLOWING CASES:- (A) M. VISVESWARAYA INDUSTRIAL RESEARCH AND DEVELOPMENT CENTRE VS. ITAT & OTHERS, (2001) 251 ITR 852, (B) CANE DEVELOPMENT COUNCIL VS. CIT, (2010) 35 SOT 308, (C) CIT VS. RED ROSE SCHOOL, (2007) 163 TAXMAN 19 (AL L.), ITA NO. 5681(DEL)/2010 14 (D) NEW LIFE IN CHRIST EVANGELISTIC ASSOCIATION VS. CIT & ANOTHER, (2000) 246 ITR 532, (E) AGGARWAL MITRA MANDAL TRUST VS. DIT (E) (2007) 106 ITD 531, AND (F) SURAT TENNIS CLUB VS. ACIT, (2000) 75 ITD 362 (A HD.). 5.4 IN THE CASE OF M. VISVESWARAYA INDUSTRIAL RES EARCH AND DEVELOPMENT CENTRE (SUPRA), A CERTIFICATE OF RE GISTRATION WAS GRANTED ON 08.02.1984. THIS REMAINED IN FORCE. THE AO MADE ASSESSMENTS UP TO ASSESSMENT YEAR 1988-89, IN WHICH DEDUCTION U/S 11 WAS GRANTED, ALTHOUGH EXEMPTION U/S 35(1)(II) WAS WITHDRAWN ON 31.0 3.1981. THE COURT HELD THAT THE ASSESSEE HAD BEEN GRANTED CERTIFICATE. HOWEVER, THE ISSUANCE OF CERTIFICATE DOES NOT PREVENT THE ASSESSING OFFICER FROM CONSIDERING IN A PARTICULAR YEAR WHETHER THE ASSESSEE WAS ENTITLED TO DEDUCTION UNDER SECTIONS 11 AND 12. THIS POINT HAS NOT BEEN LOO KED INTO BY THE TRIBUNAL. THEREFORE, THE MATTER WAS REMANDED TO THE TRIBUN AL. THE RATIO OF THE CASE IS THAT NOTWITHSTANDING GRANT OF REGISTRATI ON, THE AO HAS TO EXAMINE IN EACH YEAR WHETHER DEDUCTION U/S 11 IS ADMISS IBLE TO THE ASSESSEE. IN THE CASE OF CANE DEVELOPMENT COUNCIL (SUPRA) AL SO, IT HAS BEEN HELD THAT THE QUESTION OF DEDUCTION U/S 11(1) WILL HAVE T O BE LOOKED INTO AT THE TIME OF ASSESSMENT IN THE LIGHT OF PROVISION CONT AINED IN SECTION 2(15) ITA NO. 5681(DEL)/2010 15 READ WITH ITS PROVISO. IN THE CASE OF RED ROSE SCHOOL (SUPRA), IT WAS INTER-ALIA HELD THAT THE MISUSE OF INCOME DERIVED BY A CHARITABLE INSTITUTION FROM ITS CHARITABLE ACTIVITIES MAY BE A GROUND FOR REFUSING EXEMPTION ONLY WITH RESPECT TO THAT PART OF THE INCOME, HO WEVER, THE SAME IS NOT SYNONYMOUS WITH THE EXPRESSION THAT ACTIVITIES OF THE INSTITUTION ARE NOT GENUINE. IN THE CASE OF NEW LIFE IN CHIRST EVAN GELISTIC ASSOCIATION (SUPRA), IT WAS HELD THAT AT THE STAGE OF GRANT ING REGISTRATION, THE COMMISSIONER CANNOT INSIST ON THE SOCIETY TO SHOW T HAT ITS INCOME WILL NOT BE USED FOR RELIGIOUS PURPOSES. THE QUESTION OF EXEMPTION UNDER SECTIONS 11 AND 12 WOULD COME ONLY WHEN SUCH EXEMPTIONS AR E CLAIMED IN THE RETURN OF INCOME. SUCH IS ALSO THE DECISION IN THE CASE OF AGGARWAL MITRA MANDAL TRUST (SUPRA). IN THE CASE OF SURAT TENNIS CLUB (SUPRA), IT HAS BEEN HELD THAT REGISTRATION U/S 12A WILL NOT BY ITSELF ENTITLE THE ASSESSEE TO CLAIM EXEMPTION U/S 11. 5.5 ON THE OTHER HAND, THE CASE OF THE LD. COUNSEL IS THAT THE ASSESSEE HAD BEEN GRANTED REGISTRATION, WHICH WAS CANCELLED WITH EFFECT FROM ASSESSMENT YEAR 2002-03. THIS ORDER HAS BEEN SE T ASIDE BY THE TRIBUNAL ON 12.03.2010. THEREFORE, IT HAS TO BE HELD THA T THE ASSESSEE-TRUST CONTINUES TO BE REGISTERED. THE ORDER OF THE TRIB UNAL HAS BEEN UPHELD BY ITA NO. 5681(DEL)/2010 16 HONBLE DELHI HIGH COURT IN ITA NO. 54 OF 2011 DATED 04.04.2011. THUS, ONE OF THE ESSENTIAL CONDITIONS FOR AVAIL ING EXEMPTION U/S 11 STANDS SATISFIED IN THIS CASE. HAVING CONSIDERE D THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US, IT IS NOT NECESSARY FOR US TO GO INTO THE CASE LAW. THE FACTS ARE THAT THE REGISTRATION WAS C ANCELLED BY THE DIRECTOR OF INCOME-TAX (E), HOWEVER, HIS ORDER HAS BEEN SET ASIDE BY THE TRIBUNAL. THE ORDER OF THE TRIBUNAL HAS BEEN CONFIRMED BY T HE HIGH COURT. THEREFORE, THE ASSESSEE CONTINUES TO ENJOY THE B ENEFIT OF REGISTRATION. IT IS ANOTHER MATTER THAT MERE REGISTRATION DOES NOT ENTITLE THE ASSESSEE TO CLAIM EXEMPTION U/S 11. THIS MATTER HAS TO BE EXAMINED AT THE TIME OF ASSESSMENT. 5.6 THIS BRINGS US TO THE QUESTION AS TO WHETHER ON THE FACTS MENTIONED ABOVE, THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 11(1)(A). IN THIS CONNECTION, THE LD. CIT, DR HAS RELIED ON THE F OLLOWING CASES:- (A) SAKTHI CHARITIES VS. CIT, (1984) 149 ITR 624 (MA D.), (B) ALLAHABAD AGRICULTURAL INSTITUTE AND ANOTHER VS. UNION OF INDIA & OTHERS, (2007) 291 ITR 116 (ALL.), (C) AUROLAB TRUST VS. CIT, (2011) 46 SOT 125 (CHENNA I). ITA NO. 5681(DEL)/2010 17 5.7 THE MAIN QUESTION BEFORE THE HONBLE COURT IN THE CASE OF SAKTHI CHARITIES (SUPRA) WAS-WHETHER, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE TRIBUNAL WAS RIGHT IN LAW IN HOL DING THAT THE ASSESSEE-TRUST AS ORIGINALLY CONSTITUTED COULD NOT BE REGARDED AS A CHARITABLE TRUST ENTITLED TO EXEMPTION U/S 11 OF THE ACT? BRIEFLY , THE FACTS ARE THAT THE TRUST WAS ESTABLISHED ON 25.06.1968 WITH A VIEW TO CARRY OUT VARIOUS OBJECTS. THE ASSESSEE APPLIED FOR APPROVAL U/S 80 G(5). THE COMMISSIONER OBJECTED TO CERTAIN OBJECTS, AS A CONSEQUENCE OF WHICH THE TRUSTEES EXECUTED A RECTIFICATION DEED ON 31.01.1969 R EMOVING THE OFFENDING CLAUSES IN THE OBJECTS. THEREAFTER, THE AO GRANTED EXEMPTION U/S 11 READ WITH SECTION 80G BY AN ORDER PASSED ON 04.03.1 969. IN A SUBSEQUENT ASSESSMENT, THE AO TOOK AN OBJECTION THAT CERT AIN CLAUSES WHICH WERE OMITTED DID NOT CONSTITUTE CHARITABLE PURPOSE AND THAT SUBSEQUENT RECTIFICATION DEED WAS NOT VALID, THEREFORE, HE REFUSED TO GRANT THE RELIEF. THE HONBLE COURT CAME TO THE CONCLUSION THAT THE TRUST DEED, AS IT ORIGINALLY EXISTED, HAD BOTH CHARITABLE AND NO N-CHARITABLE OBJECTS. THE TRUST DEED DID NOT GRANT ANY AUTHORITY TO THE TRUSTEES TO ALTER THE OBJECTS. THE WELL-ESTABLISHED LAW ON THE ISSUE IS THAT ONC E A VALID TRUST HAS BEEN CREATED, EVEN THE FOUNDER OF THE TRUST CANNOT MAKE ANY CHANGE IN THE OBJECTS. THUS, THE DELETING OF SOME OF THE OBJ ECTS WAS NOT VALID. IT HAS ITA NO. 5681(DEL)/2010 18 ALSO BEEN HELD THAT EVEN IF IT IS ASSUMED THAT THE DISTRICT COURT IS EMPOWERED TO DELETE THE OFFENDING CLAUSES, IT C ANNOT DO SO RETROSPECTIVELY. ACCORDINGLY, THE QUESTION WAS AN SWERED AGAINST THE ASSESSEE AND IN FAVOUR OF THE REVENUE. 5.8 IN THE CASE OF ALLAHABAD AGRICULTURAL INSTIT UTE AND ANOTHER (SUPRA), THE HONBLE COURT MENTIONED THAT THE ARGUMENT THAT THE REGISTRATION CAN BE CANCELLED BY THE COMMISSIONER ONLY U/S 12AA(3) AP PLIES WHERE OBJECTS OF THE TRUST OR INSTITUTION REMAIN THE SAME ON PAP ER, BUT THE ACTIVITIES OF SUCH TRUST OF INSTITUTION ARE CONTRARY TO THE S AID OBJECTS OR FICTITIOUS OR FRAUDULENT OR NOT GENUINE OR NOT WITHIN THE SCOPE OF THOSE OBJECTS. HOWEVER, WHERE THE OBJECTS OF THE TRUST OR INSTI TUTION, WHICH ARE THE BASIS FOR GRANT OF REGISTRATION, ARE ALTERED AFTER SUC H GRANT OF REGISTRATION, THE VERY FOUNDATION OF THE REGISTRATION HAVING BEEN RE MOVED BY A VOLUNTARY ACT OF THE ASSESSEE, THE REGISTRATION WOULD NOT SUR VIVE. IT HAS BEEN FURTHER MENTIONED THAT WHERE OBJECTS OF THE TRUST OR INSTI TUTION HAVE BEEN ALTERED WHOLESALE AFTER GRANT OF REGISTRATION, AND INTIM ATION OF THE ALTERATION HAS NOT BEEN GIVEN TO THE COMMISSIONER, THE ORDER OF THE ASSESSING AUTHORITY ON THE ASSUMPTION THAT THE REGISTRATION, WHICH W AS GRANTED ON THE BASIS OF A PARTICULAR REPRESENTATION, HELD OUT BY THE AS SESSEE NO LONGER SURVIVES OR ITA NO. 5681(DEL)/2010 19 HOLDS GOOD, WOULD NOT CALL FOR INTERFERENCE BY THIS COURT IN EXERCISE OF ITS EQUITABLE AND DISCRETIONARY JURISDICTION. THE CASE OF AUROLAB TRUST (SUPRA) DEALS WITH THE ISSUE OF CANCELLATION OF REGISTRATION. IT HAS BEEN HELD THAT WHERE THE INCIDENTAL OBJECTS OF CARRYING ON BUSINESS HAVE BEEN CONVERTED INTO MAIN OBJECTS AND THE MAIN OBJECTS O F CHARITABLE PURPOSE HAVE NOT BEEN CARRIED ON, THE COMMISSIONER WOULD BE JUSTIFIED IN CANCELLING REGISTRATION. 5.9 ON THE OTHER HAND, THE CASE OF THE LD. COUNSEL IS THAT THE ASSESSEE IS UNDOUBTEDLY CARRYING ON THE OBJECT OF MEDICAL RELI EF THROUGH AYURVEDIC AND ALLOPATHIC SYSTEMS OF MEDICINES. SECTION 2(1 5) INCLUDES MEDICAL RELIEF WITHIN THE AMBIT OF THE EXPRESSION CHARITABLE P URPOSE. FURTHER, SECTION 11(1)(A) GRANTS DEDUCTION FROM INCOME DERIVED FROM PROPERTY HELD UNDER TRUST WHOLLY FOR CHARITABLE PURPOSE TO THE EXTEN T TO WHICH SUCH INCOME IS APPLIED TO SUCH PURPOSE IN INDIA. THE WORDS SUC H PURPOSE CAN ONLY MEAN THE CHARITABLE PURPOSE. THEREFORE, EVEN IF IT IS ASSUMED THAT THE TRUSTEES HAVE EXCEEDED THE AUTHORITY GRANTED TO T HEM UNDER THE WILL AND CARRIED OUT THE PURPOSE OF MEDICAL RELIEF THROUGH ALLOPATHIC SYSTEM OF MEDICINE OR SET UP AN ALLOPATHIC HOSPITAL, THE ASSESSEE WOULD STILL BE ENTITLED TO DEDUCTION UNDER THIS PROVISION. ITA NO. 5681(DEL)/2010 20 5.10 HE REFERRED TO THE DECISION IN THE CASE O F ALLAHABAD AGRICULTURAL INSTITUTE (SUPRA), AND SUBMITTED THAT THE CASE DE ALT WITH STAY OF DEMAND AND, THEREFORE, THE OBSERVATIONS OF THE COURT SHO ULD BE READ IN THE LIGHT OF THE MAIN ISSUE BEFORE IT. THE DECISION OF TH E COURT IS THAT THE ASSESSEE IS REQUIRED TO SHOW SUBSTANTIAL PRIMA FACIE CASE IN ITS FAVOUR, WHICH MEANS THAT A PRIMA FACIE ERROR SHOULD HAVE BEEN SHOWN IN THE ASSESSMENT. HE RELIED ON THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF S. RM. M. CT. M., TIRUPPANI TRUST VS. CIT, (1998) 230 ITR 63 6. THE FACTUAL BASIS ON WHICH EXEMPTION U/S 11(1) WAS DENIED IN THIS CASE WAS THAT BEFORE GIVING INFORMATION FOR ACCUMULATION OF INCOME IN FORM NO. 10, THE ASSESSEE UTILIZED A SUM OF RS. 8.00 LAKH IN THE ACCOUNTING YEAR FOR PURCHASE OF A BUILDING MEANT FOR A HOSPITAL INSTEAD OF INVESTING THE AMOUNT IN GOVERNMENT SECURITIES. THE HONBLE COUR T HELD THAT SECTION 11(1)(A) GRANTS DEDUCTION IN RESPECT OF INCOME WH ICH IS APPLIED TOWARDS CHARITABLE PURPOSE. THE ASSESSEE IS NOT CLAIMING A NY BENEFIT U/S 11(2) AND IT ALSO CANNOT CLAIM THIS BENEFIT BECAUSE CONDITION OF SECTION 11(2) IS NOT SATISFIED. HOWEVER, THE ASSESSEE IS ENTITLED TO CLAIM THE BENEFIT OF SECTION 11(1)(A) AS IT HAS APPLIED RS.8.00 LAKH FOR CHA RITABLE PURPOSE IN INDIA BY PURCHASING A BUILDING WHICH IS TO BE UTILIZED A S A HOSPITAL. ITA NO. 5681(DEL)/2010 21 5.11 IN THE REJOINDER, THE CASE OF THE LD. CIT, DR IS THAT THE PROVISION CONTAINED IN SECTION 11(1)(A) CANNOT BE READ IN ISOLATION. IT HAS TO BE READ ALONG WITH OTHER PROVISIONS CONTAINED IN SECTION S 11, 12, 12A AND 13 FOUND IN CHAPTER III OF THE ACT. IF IT IS SO DON E, IT WOULD BE CLEAR THAT THE TRUSTEES CANNOT EXCEED THE MANDATE GIVEN TO THEM AND, THEREFORE, INCOME APPLIED TOWARDS THE PURPOSES OTHER THAN THE PURPOSES MENTIONED IN THE WILL CANNOT BE DEDUCTED U/S 11(1)(A). 6. WE HAVE CONSIDERED THE FACTS OF THE CASE AN D SUBMISSIONS MADE BEFORE US. WE HAVE ALREADY HELD THAT THE TRUSTE ES HAVE EXCEEDED THE MANDATE GIVEN TO THEM UNDER THE OBJECTS MENTIONED IN THE WILL FOR CARRYING OUT THE TWO OBJECTS REGARDING PROPAGATI ON OF SANSKRIT AND AYURVEDIC SYSTEM OF MEDICINES. HOWEVER, IT IS A LSO A FACT THAT THEY ARE CARRYING ON CHARITABLE PURPOSE WHEN MEDICAL RELIE F IS PROVIDED THROUGH ALLOPATHIC SYSTEM OF MEDICINE. THE TRUSTEES HAVE N O AUTHORITY TO SUO MOTU AMEND THE OBJECTS AS HELD IN THE CASE OF SAKTHI CHARITIES. AT THE SAME TIME, THE FACTS OF THE CASE DO NOT CORRESPOND WITH THE FACTS OF AUROLAB TRUST AS THAT ASSESSEE WAS NOT CARRYING OUT ANY CHARITABLE ACTIVITIES AND HAD PURSUED ONLY INCIDENTAL OBJECTS OF CARRYIN G ON BUSINESS. THE OBSERVATIONS OF THE HONBLE COURT IN THE CASE OF A LLAHABAD AGRICULTURAL ITA NO. 5681(DEL)/2010 22 INSTITUTE (SUPRA) THUS POSE A PROBLEM FOR GRANT O F DEDUCTION U/S 11(1)(A) AS IT HAS BEEN MENTIONED THAT EVEN WHEN REGISTRATIO N IS IN FORCE, IF THE OBJECTS CARRIED OUT ARE NOT WITHIN THE SCOPE OF OBJECTS ON THE BASIS OF WHICH REGISTRATION WAS GRANTED, THE REGISTRATION WILL CEASE TO HAVE EFFECT. IN THIS CONNECTION, THE CASE OF THE LD. COUNSEL IS THAT PRIMARILY THIS CASE DEALS WITH STAY OF DEMAND AND THE OBSERVATIONS WERE MA DE IN THE CONTEXT THAT THE ASSESSEE HAD TO SHOW THAT THERE WAS PRIMA FA CIE ERROR IN THE FINDING OF THE AO. HOWEVER, HE HAS NOT BEEN ABLE TO SHOW ANY CONTRARY OBSERVATION OR DECISION. FURTHER, WE DO NOT SEE HOW THE DE CISION IN THE CASE OF S. RM. M. CT. M. TIRUPPANI TRUST (SUPRA) HELPS THE CASE OF THE ASSESSEE AS NO CASE WAS MADE OUT THAT SETTING UP OF THE HOSP ITAL WAS NOT ONE OF THE MAIN OBJECTS. ON THE BASIS OF THE CASES CITED BE FORE US, IT CAN BE SAID THAT THE INCOME AND EXPENDITURE IN RESPECT OF MEDICAL R ELIEF THROUGH ALLOPATHIC TREATMENT ARE BEYOND THE SCOPE OF THE OBJECTS. THEREFORE, THEY WILL HAVE TO BE SEGREGATED AS THEY DO NOT FALL WITHIN THE OB JECTS OF THE INSTITUTION. WE ARE AWARE THAT THE DECISION IN THE CASE OF ALLAH ABAD AGRICULTURAL INSTITUTE (SUPRA) WAS DECIDED ON A DIFFERENT POINT, BUT TH E FACT REMAINS THAT THE HONBLE COURT MENTIONED AT LENGTH THAT THE INCOME APPLIED TO OBJECTS OTHER THAN THE PERMITTED OBJECTS CANNOT BE DEDUCTED AS THE BASIS OF REGISTRATION CEASES TO EXIST. SINCE WE ARE RELYING ON THIS JUDGMENT, IT WILL BE ITA NO. 5681(DEL)/2010 23 APPROPRIATE TO REPRODUCE THE CONTENTS OF PLACITUM 10 ON PAGE 119 OF THE REPORT, WHICH READS AS UNDER:- THE ARGUMENT IS MISCONCEIVED. THE REGISTRATION IS GRANTED BY THE COMMISSIONER. IT CAN BE CANCELLED BY THE COMMIS SIONER UNDER S. 12AA(3). HOWEVER, THE WORDS OF THAT STATUT ORY PROVISION SHOW THAT IT APPLIES WHERE THE OBJECTS OF THE TRUST OR INSTITUTION REMAIN THE SAME ON PAPER, BUT THE ACTUA L ACTIVITIES OF SUCH TRUST OR INSTITUTION ARE CONTRARY TO THE SAID OBJECTS OR ARE FICTITIOUS OR FRAUDULENT OR NOT GENUINE OR NOT WITH IN THE SCOPE OF THOSE OBJECTS. HOWEVER, WHERE THE OBJECTS OF THE TR UST OR INSTITUTION, WHICH WERE THE BASIS OF GRANT OF REGIS TRATION, ARE ALTERED AFTER SUCH GRANT OF REGISTRATION, THE VERY FOUNDATION OF THE REGISTRATION HAVING BEEN REMOVED BY A VOLUNTARY ACT OF THE ASSESSEE, THE REGISTRATION WOULD NOT SURVIVE. THE I MMEDIATE INTIMATION REQUIRED TO BE GIVEN BY THE ASSESSEE TO THE COMMISSIONER OF INCOME TAX IS PERHAPS MERELY TO EN ABLE HIM TO KEEP HIS (COMMISSIONERS) RECORDS UPDATED. IF, F OR THE SAKE OF ARGUMENT, IT IS ASSUMED THAT THE INTIMATION IS R EQUIRED TO BE GIVEN TO ENABLE THE COMMISSIONER TO EXERCISE THE PO WER OF CANCELLATION, EVEN THEN WHERE THE PETITIONERS HAD F AILED TO GIVE SUCH INTIMATION, THEY CANNOT BE PERMITTED, IN THE D ISCRETIONARY JURISDICTION UNDER ART. 226 OF THE CONSTITUTION OF INDIA, TO PLEAD THE DEFENCE THAT THE COMMISSIONER HAS NOT CANCELLE D THE REGISTRATION. FURTHER, IN A SITUATION WHERE THE OBJ ECTS OF THE TRUST OR INSTITUTION HAVE BEEN ALTERED WHOLESALE AFTER TH E GRANT OF REGISTRATION AND INTIMATION OF THE ALTERATION HAS N OT BEEN GIVEN TO THE COMMISSIONER, THE ORDER OF THE ASSESSING AUT HORITY ON THE ASSUMPTION THAT THE REGISTRATION, WHICH WAS GRANTED ON THE BASIS OF A PARTICULAR REPRESENTATION, HELD OUT BY THE ASS ESSEE NO LONGER SURVIVES OR HOLDS GOOD, WOULD NOT CALL FOR INTERFER ENCE BY THIS COURT IN EXERCISE OF ITS EQUITABLE AND DISCRETIONAR Y JURISDICTION. TO SUM UP, WE ARE UNABLE TO EXERCISE OUR DISCRETION TO ENABLE THE ASSESSEE TO CONTINUE TO UTILIZE AND ENJOY THE R EGISTRATION DESPITE THE WHOLESALE CHANGE IN THE OBJECTS WITHOUT GIVING ITS IMMEDIATE INTIMATION TO THE COMMISSIONER. ITA NO. 5681(DEL)/2010 24 6.1 THE LD. CIT, DR HAS ALSO TAKEN THE PLEA THA T THE PROVISION CONTAINED IN SECTION 11(1)(A) CANNOT BE READ I N ISOLATION AND AS A CODE UNTO ITSELF. THIS PROVISION HAS TO BE READ ALO NG WITH PROVISIONS CONTAINED IN SECTIONS 12, 12A AND 13. AS A WHOLE, THESE PROVISIONS CONSTITUTE A CODE UNTO THEMSELVES FOR THE PURPOSE OF GRANTING EXEMPTION U/S 11(1)(A). THESE PROVISIONS INVOLVE REGISTRATION OF THE INS TITUTION BASED ON A WRITTEN DOCUMENT OF INCORPORATION, OBJECTS AND GENUINENES S OF THE ACTIVITIES. THE PROVISIONS ALSO ENSURE THAT FINANCIAL DISCIPLINE IS MAINTAINED IN RESPECT OF SURPLUS MONEY OR ACCUMULATED INCOME IN TERMS OF THE PATTERN OF INVESTMENT. THE GENUINENESS OF ACTIVITIES INHE RENTLY INVOLVE THE IDEA OF PURSUING THE OBJECTS PERMITTED BY THE INSTRUMENT OF FORMATION AND NOTHING MORE. THE OBSERVATIONS OF THE HONBLE HIGH COURT IN THE CASE OF ALLAHABAD AGRICULTURAL INSTITUTE (SUPRA) ALSO SUP PORT THE VIEW THAT MERE REGISTRATION WOULD NOT ENTITLED AN INSTITUTION T O CLAIM EXEMPTION U/S 11 IF THE BASIS OF REGISTRATION UNDERGOES A CHANGE. THE REFORE, WE FIND FORCE IN THE ARGUMENT OF THE LD. CIT (DR) THAT FOR CLAIM ING EXEMPTION U/S 11(1)(A) THE ASSESSEE WILL HAVE TO ADHERE TO THE O BJECTS FOR WHICH IT WAS FORMED. ACCORDINGLY, IT IS HELD THAT SINCE MEDICAL RELIEF THROUGH ALLOPATHIC TREATMENT DOES NOT FALL WITHIN THE AMBIT OF THE OBJECTS MENTIONED IN THE WILL, THE INCOME AND EXPENDITURE FROM THIS ACTIV ITY WILL HAVE TO BE ITA NO. 5681(DEL)/2010 25 TREATED SEPARATELY. A CONSEQUENCE OF THIS FINDI NG IS THAT SURPLUS FROM THIS ACTIVITY CANNOT FORM SUBJECT MATTER OF EXEMPTION U/S 11. 7. IN REGARD TO THE APPLICABILITY OF PRINCIPLE OF RES-JUDICATA, THE LD. CIT, DR SUBMITTED THAT WHERE THERE IS A BREACH OF LAW, THE ERROR IN EARLIER ORDERS CANNOT BE ALLOWED TO BE CONTINUED. FOR THIS PURPOSE, HE RELIED ON FOLLOWING CASES:- (I) PRAGATI CONSTRUCTION CO. VS. ACIT, (2004) 89 ITD 271 (DEL); AND (II) ALL INDIA J.D. EDUCATION SOCIETY VS. DGIT, (2 011) 338 ITR 218 (DEL). 7.1 IN THE CASE OF ALL INDIA J.D. EDUCATION SOC IETY (SUPRA), THE HONBLE COURT MENTIONED THAT THE APPLICATION MADE BY THE ASSESSEE WAS ADMITTEDLY FILED BEYOND THE PRESCRIBED DATE AND THE EXPLANATION FOR DELAY WAS THAT THE PROVISION WAS A NEW ONE. IT IS A SETTLED POSITION OF LAW THAT IGNORANCE OF LAW IS NOT AN EXCUSE. IN THIS CO NNECTION, IT IS IMMATERIAL WHETHER THE POWERS OF THE DIRECTOR GENERAL OF INC OME-TAX (E) WERE ADMINISTRATIVE OR JUDICIAL IN NATURE. THEREFORE, T HE APPLICATION WAS BARRED BY LIMITATION. WHILE DEALING WITH THE MERITS OF THE CASE, IT WAS MENTIONED THAT ABSENCE OF FINDING ON DISCREPANCY OR INCONSISTENC Y IN EARLIER YEARS WHILE ITA NO. 5681(DEL)/2010 26 GRANTING REGISTRATION U/S 12A AND APPROVAL U/S 8 0G WILL NOT AUTOMATICALLY ENTITLE THE SOCIETY TO HAVE APPROVAL U/S 10(23C) I N SUBSEQUENT YEARS. THE REASON IS THAT IN INCOME-TAX MATTERS, EACH ASSESSM ENT YEAR IS AN INDEPENDENT YEAR AND THE PRINCIPLE OF RES-JUDICATA, IN GENERA L, IS NOT APPLICABLE. IN THE CASE OF PRAGATI CONSTRUCTION CO. (SUPRA), IT HAS B EEN MENTIONED THAT IN CASE THE ASSESSING OFFICER DEPARTS FROM THE CONSISTEN T STAND, THEN HE IS REQUIRED TO SPELL OUT CLEARLY THE REASONS FOR THE DEPAR TURE. HE IS REQUIRED TO GIVE A NOTICE TO THE ASSESSEE TO ENABLE HIM TO FILE HI S OBJECTIONS AND STATE HIS CASE. AFTER HEARING THE ASSESSEE, IF THE ASSESS ING OFFICER STILL FEELS THAT FOLLOWING THE RULE OF CONSISTENCY WOULD RESULT I N A GRAVE ERROR OF LAW, THEN HE IS REQUIRED TO GIVE HIS REASONS FOR NOT ACCEPTING THE ASSESSEES CONTENTION. IT IS FURTHER MENTIONED THAT SIMPLY BECAUSE IN EARLIER ASSESSMENT YEARS THE DEPARTMENT HAD ACCEPTED THE STAND OF THE ASSESSEE THAT REASON BY ITSELF IS NOT ENOUGH. IT IS ALS O MENTIONED THAT IT IS A SETTLED LEGAL POSITION THAT THE AO IS REQUIRED TO EXAMIN E AND ASCERTAIN EFFECT OF PAST ACTIONS TO SEE THE INTENTION OF THE ASSESSE E AND RES-JUDICATA DOES NOT APPLY AS FACTS OF EACH YEAR ARE TO BE EXAMINED INDEPENDENTLY. 7.2 IN REPLY, THE LD. COUNSEL RELIED ON A NUMBE R OF DECISIONS ON THE RULE OF CONSISTENCY. IN PARTICULAR, OUR ATTENTIO N HAS BEEN DRAWN TOWARDS ITA NO. 5681(DEL)/2010 27 THE DECISION IN THE CASE OF RADHASOAMI SATSANG V S. CIT, (1992) 193 ITR 321 (SC). 8. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. IN THIS CASE, THE DIT(E) HAD SOUGHT TO CANCEL REGISTRATION FROM ASSESSMENT YEAR 2002-03. HOWEVER, THIS ACTION WA S SET ASIDE BY THE TRIBUNAL ON TECHNICAL GROUNDS THAT HE DID NOT HAV E SUCH POWER WHEN THE ORDER WAS PASSED. THIS DECISION HAS BEEN CONFIRM ED BY THE HONBLE DELHI HIGH COURT. THE CONDUCT OF THE REVENUE ITSELF SHO WS THAT COGNIZANCE WAS TAKEN OF THE FACT THAT THE TRUSTEES EXCEEDED TH EIR AUTHORITY UNDER THE WILL. HOWEVER, DUE TO INADEQUACY IN LEGAL FRAME WORK, THE DEPARTMENT HAD TO ULTIMATELY ASSESS INCOME UNDER CHAPTER III . THE DECISION IN THE CASE OF ALLAHABAD AGRICULTURAL INSTITUTE (SUPRA) SHOWS THAT THE AO COULD HAVE MADE A DEPARTURE FROM PAST EVEN IN EARLI ER YEARS. IN THE LIGHT OF THE AFORESAID DECISION, GRANT OF BENEFIT U/S 11(1)(A ) WOULD BE BEYOND THE PURVIEW OF LAW. IN SUCH A SITUATION, THE RULE OF CONSISTENCY CANNOT PREVAIL OVER THE WELL ENTRENCHED PRINCIPLE OF RES-JUDICA TA. AS DISCUSSED EARLIER BY REFERENCES TO THE DECISION IN THE CASE OF PR AGATI CONSTRUCTION CO. AND ALL INDIA J.D. EDUCATION SOCIETY (SUPRA). THEREF ORE, WE ARE OF THE VIEW THAT THE AO WAS WELL WITHIN HIS RIGHT TO EXAMI NE THE FACTS OF THIS YEAR ITA NO. 5681(DEL)/2010 28 INDEPENDENTLY. SINCE THERE WERE PRESSING REASON S TO MAKE A DEPARTURE, HE WAS WELL WITHIN HIS RIGHT TO DO SO. 9. IN THE RESULT, GROUND NO. 1 IS PARTLY ALLOWED. 10. GROUND NO. 2 IS THAT THE LD. CIT(APPEALS) ERRE D IN GRANTING DEPRECIATION ON FIXED ASSETS WHOSE FULL COST HA D BEEN ALLOWED TO BE DEDUCTED U/S 11(1)(A) IN EARLIER YEARS. THE FI NDING OF THE AO IS THAT THE ASSESSEE CLAIMED DEPRECIATION AMOUNTING TO RS. 1, 85,58,569/- ON ASSETS WHOSE COST HAD BEEN ALLOWED IN EARLIER YEARS BY WAY OF APPLICATION OF INCOME. HE REFERRED TO THE DECISION IN THE CAS E OF ESCORTS LTD. & ANOTHER VS. UNION OF INDIA & OTHERS., (1993) 199 ITR 43, AND PRAKASH EDUCATION SOCIETY IN ITA NOS. 4730 AND 4731(DEL)/2007. A CCORDING TO HIM, IN VIEW OF THESE DECISIONS, DEPRECIATION CANNOT BE ALLOWED WHERE THE ASSET HAS BEEN ALLOWED TO BE WRITTEN OFF U/S 35 OR 1 1. THEREFORE, THE CLAIM TO THE AFORESAID EXTENT WAS DISALLOWED. ON THE OTH ER HAND, THE LD. CIT(APPEALS) HELD THAT THE DECISION IN THE CASE OF ESCORTS LTD. HAD NO APPLICATION AS IT WAS RENDERED U/S 35 OF THE ACT. THE CASE OF THE ASSESSEE IS COVERED BY THE DECISION OF CIT VS. INSTITUTE OF BANKING, (2003) 264 ITR 110 (BOM.). ITA NO. 5681(DEL)/2010 29 11. BEFORE US, THE LD. CIT, DR SUBMITTED THAT THE ISSUE HAS BEEN DECIDED DIFFERENTLY BY DIFFERENT COURTS. APART FROM THE DECISIONS ALREADY MENTIONED, HE RELIED ON THE DECISION OF COCHIN BENCH IN THE CASE OF DDIT VS. ADI SANKARA TRUST, 46 SOT 230, I N WHICH THE MATTER WAS DECIDED IN FAVOUR OF THE REVENUE BY MENTIONING THA T UNLESS THERE IS A PROVISION TO THE CONTRARY, THE LEGISLATIVE INTE NT IS FOR NON-DEDUCTION OF THE SAME AMOUNT TWICE OVER. 11.1 IN REPLY, THE LD. COUNSEL RELIED ON THE ORD ER OF THE LD. CIT(APPEALS). 12. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. WE MAY REITERATE OUR EARLIER FINDING HERE THAT WHILE THE ACTIVITIES OF PROVIDING MEDICAL RELIEF THROUGH AYURVEDIC SYSTEM OF MEDICINES ARE INTRA-VIRES, THE ACTIVITIES OF PR OVIDING MEDICAL RELIEF THROUGH ALLOPATHIC SYSTEM OF MEDICINES ARE ULTRA-VIRES THE OBJECTS. IN THIS VIEW WE HAVE HELD THAT THE ASSESSEE IS NOT ENTITLED TO EXEMPTION U/S 11 IN RESPECT OF EXPENDITURE INCURRED ON MEDICAL RELIEF THROUGH ALLOPATHIC SYSTEM OF MEDICINE. THE INCOME AND EXPENDITURE FROM THESE ACTIVITIES HAVE TO BE SEGREGATED, WHICH HAS TO BE TAKEN AS PROFIT AVAILABLE FOR THE PURPOSE OF PURSUING THE MAIN OBJECT OF SANSKRIT AND AYURVEDIC SYSTEM OF MEDICINES. IN THE CASE OF ESCORTS LTD. (SUPRA), IT IS MENTIONED THAT THE ITA NO. 5681(DEL)/2010 30 PETITIONERS CONTENTION IS THAT ALLOWANCE UNDER THE TWO PROVISIONS ARE BY NATURE UNCONNECTED WITH, AND INDEPENDENT OF, EA CH OTHER. HOWEVER, THE TWO DEDUCTIONS ARE OF THE SAME NATURE WHICH ENABL E THE ASSESSEE TO WRITE OFF CERTAIN ITEMS OF CAPITAL EXPENDITURE AGAINS T HIS BUSINESS PROFITS. IT IS FURTHER MENTIONED THAT THE MERE FACT THAT A BAS ELESS CLAIM WAS RAISED BY SOME OVER-ENTHUSIASTIC ASSESSEES WHO SOUGHT A DOUBLE ALLOWANCE OR THAT SUCH CLAIM MAY PERHAPS HAVE BEEN ACCEPTED BY S OME AUTHORITIES IS NOT SUFFICIENT TO ATTRIBUTE ANY AMBIGUITY OR DOUBT AS TO THE TRUE SCOPE OF THE PROVISIONS AS THEY STOOD EARLIER. ON THE BASIS O F THIS FINDING, SOME PRE- EXISTING DECISIONS WERE OVERRULED. IT IS ALSO MENTIONED THAT THE PARLIAMENT NEVER INTENDED TO PROVIDE FOR A DOUBL E DEDUCTION WHICH IS SUPPORTED BY THE OPINION OF DIRECT TAX LAWS CO MMITTEE (POPULARLY KNOWN AS CHOKSI COMMITTEE). IN THE CASE OF ADI SANKARA TRUST (SUPRA), THIS DECISION HAS BEEN FOLLOWED. IN THE CASE OF INSTITUTE OF BANKING (SUPRA) IT HAS BEEN HELD THAT THE TRIBUNAL WAS RIGHT IN LAW IN DIRECTING THE AO TO ALLOW DEPRECIATION ON THE ASSETS, THE COST OF WHICH HAD BEEN FULLY ALLOWED AS APPLICATION OF INCOME U/S 11 IN THE PAST YEAR. THE EFFECT OF AFORESAID DECISIONS IS THAT IN SO FAR AS INCOM E FROM PROVIDING RELIEF THROUGH ALLOPATHIC SYSTEM OF MEDICINE IS CONCER NED, THE DECISION IN THE CASE OF ESCORTS LTD. & ANOTHER (SUPRA) IS CLEARLY APPLICABLE. THEREFORE, THE ITA NO. 5681(DEL)/2010 31 ASSETS UTILIZED IN THIS AREA, WHOSE COST HAS BE EN WRITTEN OFF IN EARLIER YEARS U/S 11(1)(A), DEPRECIATION IS NOT ADMISSIB LE. HOWEVER, THE DECISION IN THE CASE OF INSTITUTE OF BANKING AND ADI SAN KARA TRUST ARE AT VARIANCE WITH EACH OTHER. IN SUCH A SITUATION, WE CHOSE TO FOLLOW THE DECISION OF THE HIGH COURT. IT IS HELD THAT DEPRE CIATION ON ASSETS USED FOR PROVIDING RELIEF THROUGH AYURVEDIC SYSTEM OF MED ICINE OR RESEARCH ARE ENTITLED TO DEDUCTION OF DEPRECIATION NOTWITHSTA NDING THE FACT THAT THE COST HAS BEEN ALLOWED TO BE WRITTEN OFF IN THE PAST U/S 11(1)(A). THUS, THIS GROUND IS ALSO PARTLY ALLOWED. 13. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. SD/- SD/- (RAJPAL YADAV) (K.G. BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER SP SATIA COPY OF THE ORDER FORWARDED TO:- MOOL CHAND KRARAITI RAM TRUST, NEW DELHI. DEPUTY DIT (E), INV. CIRCLE-I, LAXMI NAGAR DISTRIC T CENTRE, NEW DELHI. CIT(A) CIT, THE D.R., ITAT, NEW DELHI. ASSISTANT REGISTRAR.