DDIT, CHENNAI V. Pranic Healing Foundation of Tamilnadu, CHENNAI

ITA 982/CHNY/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7845 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2016
• Appeal Filed By: Department
• Bench Allotted: D
• Next Hearing Date: 27-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 21-04-2014
• Court: TRIBUNAL
• Department Lawyers: DURAI PANDIAN
• Assessee Lawyers: T BANUSEKAR
• Keywords: Depreciation; Charitable institution; Reasonable cause
• Section: 143(3); 2; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . , # $ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO. 982/MDS/2014 & C.O. NO. 39/MDS/2015 / ASSESSMENT YEAR : 2010-11 DEPUTY DIRECTOR OF INCOME TAX, (EXEMPTIONS -IV), AAYAKAR BHAVAN, ANNEXE BUILDING -III FLOOR, 121, M G ROAD, NUNGAMBAKKAM, CHENNAI 600 034. VS. M/S. PRANIC HEALING FOUNDATION OF TAMILNADU, FLAT NO. G#, RMC GARDEN, NO. 51, STERLING ROAD, NUNGAMBAKKAM, CHENNAI 600 034. [PAN: AAATP 0370L] (APPELLANT) (RESPONDENT/ CROSS OBJECTOR) & ' / APPELLANT BY : SHRI DURAI PANDIAN, JCIT *+& ' / RESPONDENT BY : SHRI T. BANUSEKAR, CA ' /DATE OF HEARING : 27.09.2016 ' /DATE OF PRONOUNCEMENT : 22.12.2016 /O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THIS APPEAL OF THE REVENUE AND THE CROSS OBJECTIO N OF THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)- - 7, :-2-: I.T.A. NO.982/MDS/2014 & C.O. NO. 39/MDS/2015 CHENNAI DATED 20.12.2013 IN ITA NO. 300/12-13 FOR T HE ASSESSMENT YEAR 2010- 11 PASSED U/S. 143(2) AND 250 OF THE INCOME TAX ACT . 2. THE REVENUE HAS FILED THE APPEAL CHALLENGING THE ACTION OF THE CIT(A) IN CONSIDERING THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S. 11 OF THE ACT AND NOT AFFECTED BY THE AMENDMENTS OF SECTION 2 (15) OF THE ACT, OBJECT OF 'GENERAL PUBLIC UTILITY', IRRESPECTIVE OF THE FACT THAT THE TOTAL RECEIPTS OF THE ASSESSEE TRUST EXCEED THE THRESHOLD LIMIT UNDER PRO VISIONS OF SECTION 2(15) OF THE ACT AND MADE A DISTINCTION OF ACTIVITIES IN THE NAT URE OF 'DOMINANT ACTIVITIES' AND 'SUBSERVIENT ACTIVITIES'. 3. THE BRIEF FACTS OF THE CASE THAT THE ASSESSEE TRUST WAS REGISTERED UNDER THE PROVISIONS OF SECTION 12A(A) OF THE INCOM E TAX ACT VIDE LETTER NO. DIT(E) NO. 2(65)/94-95 DATED 14.06.1994. FOR THE AS SESSMENT YEAR 2010-11 THE RETURN OF INCOME WAS FILED ON 28.10.2010 AND WAS PR OCESSED U/S. 143(1) OF THE ACT ON 22.09.2011. THE CASE WAS SELECTED FOR SCRUT INY AND NOTICE U/S. 143(2) WAS ISSUED IN RESPONSE TO THE NOTICE, LD. AO APPEAR ED FROM TIME TO TIME AND FILED DETAILS. THE LD. AO ON PERUSAL OF INFORMATI ON AND RECORDS FOUND THAT THE ASSESSEE'S TRUST WAS FORMED ON 19.01.1994 WITH OBJE CTIVES REFERRED IN ASSESSMENT ORDER AT PAGE 2. THE ASSESSEE TRUST IS TO REGULATE THE PRACTICE OF PRANIC HEALING THERAPY AND CONFINED IN ESTABLISHING PRANIC HEALERS THROUGHOUT TAMILNADU AND FURTHER TO MONITOR THE LEADING ACTIVI TIES OF PRANIC HEALERS AND TO PROTECT AND MAINTAIN THERAPY AND TECHNICAL STANDARD S AND TO DEVELOP AND :-3-: I.T.A. NO.982/MDS/2014 & C.O. NO. 39/MDS/2015 ORGANIZE ITSELF AS A SUPREME COMPETENT BODY TO TRAI N PERSONS IN TO PRANIC HEALING METHOD AND ISSUE COMPETENCY CERTIFICATE FOR PRACTIC ING PRANIC HEALING. THE ACTIVITIES ARE TO PROMOTE PRANIC HEALING THROUGH HE ALTH AND EDUCATIONAL PROGRAMMES OF GOVERNMENT AND OTHER AGENCIES AND TO ORGANIZE CONVENTIONS OF PRANIC HEALERS TO SHARE THEIR EXPERIENCE AND ALSO T O AFFILIATE WITH ORGANIZATIONS LIKE INDIAN PRANIC HEALING FOUNDATION OR OTHER SIMI LAR ORGANIZATIONS 4. THE ASSESSING OFFICER ON THE VERIFICATION OF FI NANCIAL STATEMENTS FOUND THAT THE ASSESSEE COURSE FEE RECEIPTS OF RS. 39,69,650/- RECEIVED ON CONDUCTING THE PRANIC HEALING TO ENHANCE LIFE, KRIY A SHAKTI AND PRE LEVEL-II AND PRE REVIEW ETC., AND THESE COURSES DURATION FOR 1 O R 2 DAYS. FURTHER, THE ASSESSEE ALSO RECEIVED A ROYALTY FROM TRAINERS WHO CONDUCT COURSES TO TRAIN PRANIC HEALING. ALL THE TRAINERS WHO ARE CONDUCTIN G PRANIC HEALING COURSES HAVE TO PAY THE COURSE FEE RECEIPTS AS ROYALTY TO THE ST ATE LEVEL FOUNDATION AND IN TURN THE STATE LEVEL FOUNDATION SHALL PAY TO ALL INDIA Y OGA VIDYA PRANIC HEALING FOUNDATION AND THE ENTIRE PROCESS OF RECEIVING OF R OYALTY IS DOCUMENTED AND RESOLUTIONS ARE PASSED AND SIGNED BY THE TRUSTEES I N THE YEAR 1997. THE ASSESSEE TRUST RECEIVED ON SALE OF BOOKS, CDS, CASS ETTES & POSTERS AGGREGATING TO RS. 28 LAKHS IN THE SAID FINANCIAL YEAR. THE AS SESSING OFFICER ANALYSIS THE FINANCIAL ASPECTS AND IS OF THE OPINION THAT THE AS SESSEE IS RENDERING THE BUSINESS ACTIVITIES AND THE BOOKS AND CDS ARE BEING ARE SOLD AT MARK-UP PRICE AND RESULTS IN HUGE PROFITS TO TRUST AND HENCE THERE IS NO CHAR ITABLE ACTIVITY INVOLVED.. FURTHER, THE LD. AO ISSUED SHOW CAUSE NOTICE MENTIO NING THAT THE ACTIVITIES OF THE :-4-: I.T.A. NO.982/MDS/2014 & C.O. NO. 39/MDS/2015 TRUST ARE IN THE NATURE OF TRADE, COMMERCE OR BUSIN ESS AND CANNOT BE TREATED AS CHARITABLE PURPOSE. IN COMPLIANCE TO NOTICE, THE A SSESSEE TRUST HAS EMPHAZISED THAT THE TRUST ACTIVITIES ARE IN THE NATURE OF EDUC ATIONAL AND MEDICAL RELIEF. WHEREAS, THE LD. AO DISTINGUISHED THE ACTIVITIES AN D RELIED ON THE APEX COURT DECISION AND IS OF THE OPINION THAT THE TEACHING, A CQUIRING OF KNOWLEDGE DOES NOT FALL WITHIN THE MEANING OF EDUCATION AS PER SECTION 2(15) OF THE ACT AND RELIED ON THE DECISION OF TRIBUNAL AND HIGH COURT AND CAME TO A OPINION THAT THE ACTIVITIES ARE NOT COMPARED WITH EDUCATION AND THE PRANIC HEAL ING COURSES ARE NOT CONDUCTED AS A NORMAL SCHOOLING. THE PRANIC HEALER S CONDUCT COURSES AT DIFFERENT PLACES AND PAY ROYALTIES FOR THE COURSES AND THE RECEIPTS ARE EXCEEDING MORE THAN 10 LAKHS. FURTHER. ACTIVITIES ARE IN THE NATURE OF BUSINESS ARE EXCLUDED FROM THE OBJECT OF ADVANCEMENT OF GENERAL PUBLIC UTILITY AND LD. AO HAS DISALLOWED DEPRECIATION ON THE ASSET WHICH WAS CLAI MED AS APPLICATION OF INCOME IN THE EARLIER YEARS AND ALLOWED ONLY THE CURRENT Y EAR DEPRECIATION AND PASSED ORDER U/S. 143(3) OF THE ACT DATED 20.12.2013 WITH ASSESSED INCOME OF RS. 93,59,335/- AND RAISED THE DEMAND. 5. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN A PPEAL WITH THE CIT(A). IN THE APPELLATE PROCEEDINGS, THE LD. AR O F THE ASSESSEE ARGUED THE GROUNDS AND REITERATED THE SUBMISSIONS OF THE ASSES SMENT PROCEEDINGS AND FILED WRITTEN SUBMISSIONS. THE LD. CIT(A), CONSIDERED LD . AO REPORTS, WHERE THE ASSESSING OFFICER EXPRESSED THAT ACTIVITIES ARE NOT CHARITABLE AND DISTINGUISHED THE DECISION RELIED BY THE ASSESSEE. WHERE, THE LD . AR OF THE ASSESSEE :-5-: I.T.A. NO.982/MDS/2014 & C.O. NO. 39/MDS/2015 SUBMITTED THAT THE ACTIVITIES FALL WITHIN THE AMBIT OF 'MEDICAL RELIEF' THE PRANIC HEALING AS AN ALTERNATIVE THERAPY AND RELIED ON THE JUDICIAL DECISIONS. THE ASSESSEE TRUST SUBMITTED OBJECTIONS TO THE AO REPOR T THROUGH LETTER AT 18.12.2013 DEALT AT PAGE 5 TO 7 OF THE CIT(A) ORDER. THE LD. CIT(A) FOUND THAT THE ASSESSMENT WAS COMPLETED BY THE LD. AO WITHOUT VERI FYING WHETHER THE OBJECTS FULFIL THE REQUISITE PURPOSE. THE LD. CIT(A) CONSI DERED THE AO'S REMAND REPORT AND OBJECTS OF THE ASSESSEE, IS OF THE OPINION THAT THE ACTIVITIES OF THE ASSESSEE ARE TO BE VIEWED ON PAR WITH EDUCATIONAL ACTIVITIES . THE DEFINITION OF CHARITABLE PURPOSE IS ONLY INCLUSIVE. FURTHER, THE LD. AO HAS NOT SUPPORTED OR PROVIDED PROOF ON RECORD WITH EVIDENCE THAT THE ASSESSEE IS NOT GENUINELY CARRYING ITS OBJECTS. THE LD. AO HAS CONSIDERED ONLY THE COURSE FEE RECEIPT, ROYALTY RECEIVED, SALE OF BOOKS & CDS AS ACTIVITIES OF THE TRUST BEIN G IN THE NATURE OF TRADE, COMMERCE AND BUSINESS, BUT THESE CANNOT BE TREATED AS BUSINESS AS THE PRANIC HEALING CONDUCTS CERTIFICATION COURSES WITHIN ITS O BJECTS. FURTHER, THE LD. CIT(A) HAS IDENTIFIED THE ACTIVITIES OF THE ASSESSEE TRUST INTO DOMINANT ACTIVITIES WHICH CONFORM THE OBJECTS AND SUBSERVIENT ACTIVITIES BEIN G INCIDENTAL TO THE DOMINANT ACTIVITIES. THIS DISTINCTION IS MADE CONSIDERING T HE ADVANCEMENT OF OBJECTS BEING PRANIC HEALING AS MAIN OBJECTS OF THE ASSESSEE TRUS T AND THERE IS NO DISPUTE ON THE CONDUCT OF ACTIVITIES. WHEREAS, PROFITS ON SAL E OF CDS, BOOKS ARE ARISES IN THE COURSE OF CARRYING OUT DOMINANT ACTIVITIES FOR THE PURPOSE OF FULFILLING THE MAIN OBJECTS OF THE ASSESSEE. THE LD. CIT(A) FIND, AFTE R AMENDMENT BY THE FINANCE ACT, 2008, THE PRANIC HEALING IS VERY IMPORTANT SOU RCE FOR PHYSICAL, MENTAL, SPIRITUAL WELL-BEING OF HUMAN BEINGS AND THIS ACTIV ITIES ARE NOT ONLY IN INDIA BUT :-6-: I.T.A. NO.982/MDS/2014 & C.O. NO. 39/MDS/2015 CONDUCTED AND ACCEPTED IN WESTERN COUNTRIES WHERE L ARGE NUMBER OF PEOPLE FEEL THAT THE PRANIC HEALING IS A GREAT SOURCE OF SPIRIT UAL WELL BEING AND IN THE NATURE OF ACTIVITY FOR ADVANCEMENT OF GENERAL PUBLIC UTILI TY AND RELIED ON SUPREME COURT DECISION OF THE SURAT ART SILK CLOTH MANUFACTURERS ASSOCIATION (1980) 121 ITR (1) (SC) AND FOUND THAT THE OBJECTS OF THE ASSESSEE ARE CHARITABLE WITHIN THE DEFINITION OF SECTION 2(15) OF THE ACT AND ELIGIBLE FOR EXEMPTION U/S. 11 OF THE ACT AND ALLOWED THE APPEAL. 6. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE R EVENUE HAS FILED AN APPEAL TO THE TRIBUNAL. THE LD. DR ARGUED THE GROU NDS AND SUBMITTED THAT THE CIT(A) ERRED IN ALLOWING THE ASSESSEE TRUST EXEMPTI ON U/S. 11 OF THE ACT AND THE ACTIVITIES OF THE TRUST ARE NOT IN THE NATURE OF CH ARITABLE AND IRRESPECTIVE OF THE FACT OF SALE OF BOOKS AND CDS, THE RECEIPTS EXCEEDS THE THRESHOLD LIMIT PRESCRIBED U/S. 2(15) OF THE ACT. THE DECISION RELIED BY THE CIT(A) WAS PRIOR TO AMENDMENT AND ACCOUNTS ARE AUDITED U/S. 44AB OF THE ACT AND P RAYED FOR SET ASIDE OF THE ORDER OF THE CIT(A). CONTRA, THE LD. AR OF THE ASSE SSEE RELIED ON THE ORDER OF THE CIT(A) AND SUPPORTED WITH THE JUDICIAL DECISIONS TH AT THE ACTIVITIES ARE IN THE NATURE OF CHARITABLE PURPOSE AND PRAYED FOR DISMISS AL OF THE REVENUE APPEAL. 7. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MAT ERIAL ON RECORD AND JUDICIAL DECISIONS. THE SOLE CRUX OF ARGUMENTS OF THE LD. DR THAT THE ACTIVITIES CONDUCTED BY THE PRANIC HEALING TRUST ARE IN THE NA TURE OF TRADE AND BUSINESS. WHEREAS, THE LD. AR SUBMITS THAT THE TRUST CONDUCTS COURSES AND ISSUE CERTIFICATE :-7-: I.T.A. NO.982/MDS/2014 & C.O. NO. 39/MDS/2015 TO THE HEALERS TO PURSUE OBJECTS IN OTHER PARTS OF INDIA AND SUPPORTED HIS ARGUMENTS WITH HIGH COURT DECISION OF 'CIT VS ST. M ARY'S MALANKARA SEMINARY (2014) 48 TAXMANN.COM 387 (KERALA)'. THE MAIN OBJE CTS OF THE ASSESSEE TRUST AS INVESTIGATED BY THE ASSESSING OFFICER IS IMPARTING PRANIC HEALING CERTIFICATE COURSES AND SALE OF BOOKS/ CDS AND OTHER ACTIVITIES AND SAME CANNOT BE TREATED AS RENDERING OF SERVICES IN RELATION TO TRADE COMME RCE OR BUSINESS. WE FOUND THE LD. CIT(A) HAS CONSIDERED THE ASSESSING OFFICER VIE W ON THE PROFIT EARNING ACTIVITIES IN CONDUCTING COURSES SALE OF BOOKS, CAS SETTES AND POSTERS. WHEREAS, ALL THESE ACTIVITIES FALL WITHIN INCIDENTAL ACTIVIT IES FOR ACHIEVING THE MAIN OBJECTS. THE ACTIVITIES DOES NOT FALL IN THE AMBIT OF COMMER CE AND BUSINESS, FURTHER THE MAIN ACTIVITY IS NOT BUSINESS AND THE TRANSACTIONS ARE INCIDENTAL TO DOMINANT ACTIVITIES AS THE TRUST WAS ESTABLISHED FOR SPREAD OF PRANIC HEALING COURSES IN TAMILNADU. THE LD. CIT(A) HAS CONSIDERED THE ELABO RATE ASPECTS OF THE ACTIVITIES AND THE JUDICIAL DECISIONS AND FINALLY CONCLUDED TH AT THE ACTIVITIES ARE NOT IN THE NATURE OF BUSINESS BUT CHARITABLE. WE ARE OF THE O PINION THAT THE ASSESSEE HAS COMPLIED WITH THE PROVISIONS OF LAW AND THE ACTIVIT IES ARE CHARITABLE IN NATURE AND THE CIT(A) DISCUSSED ON THE EXPLANATIONS OF THE ASSESSEE AND THE FINDINGS OF THE ASSESSING OFFICER. FURTHER, THE LD. AR SUBMITT ED THAT THE DEPARTMENT HAS ACCEPTED ASSESSEE'S CONTENTION IN EARLIER ASSESSMEN T YEARS AND DISTURB THE WORKING SYSTEM OF THE ASSESSEE'S ORGANISATION FOR T HIS ASSESSMENT YEAR AND WHICH HAS THE EFFECT ON THE ACTIVITIES AND ALSO JUDICIARY DISCIPLINE REQUIRES CONSISTENCY IN ITS PROCEEDINGS. THEREFORE, CONSIDERING THE APPARENT FACTS AND MATERIAL ON RECORD, WE INCLINED NOT TO INTERFERE :-8-: I.T.A. NO.982/MDS/2014 & C.O. NO. 39/MDS/2015 WITH THE ORDER OF THE CIT(A) AND UPHELD THE SAME. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. 8. THE ASSESSEE FILED THE CO NO. 39/MDS/2015 WITH THE DELAY OF 304 DAYS AND FILED THE AFFIDAVIT. THE LD. AR EXPLAINED THE C IRCUMSTANCES FOR DELAY WHICH ARE NOT DELIBERATE. FURTHER, LD. DR OF THE ASSESSEE HA S NO SERIOUS OBJECTIONS FOR CONDONATION OF DELAY. AFTER HEARING THE SUBMISSION S, WE ARE SATISFIED WITH THE REASONABLE CAUSE EXPLAINED IN AFFIDAVIT FOR FILING THE BELATEDLY AND THE DELAY IS CONDONED AND CO IS ADMITTED. THE LD. AR ARGUED TO ALLOW THE ALLOW THE DEPRECIATION ON THE ASSETS WHICH WAS CLAIMED AS APP LICATION OF INCOME IN THE EARLIER YEARS. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN TH E MUSIC ACADEMY MADRAS VS. DDIT (EXEMPTION) ITA NO. 1098/MDS/2015 DATED 22.04. 2016 HELD ONCE INVESTMENT IN FIXED ASSET IS CLAIMED AS APPLICATION OF INCOME, DEPRECIATION CANNOT BE ALLOWED, AND WE APPLY THE DECISION AND DISMISS THE CROSS OBJ ECTION. 9. IN THE RESULT, THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 22 ND DAY OF DECEMBER, 2016 AT CHENNAI SD/ - ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER SD/ - ( . ) (G. PAVAN KUMAR) /JUDICIAL MEMBER /CHENNAI, 1 /DATED: 22 ND DECEMBER, 2016 JPV ' *#34 54 /COPY TO: 1. & /APPELLANT 2. *+& /RESPONDENT 3. 6 ( )/CIT(A) 4. 6 /CIT 5. 4 *## /DR 6. 9 /GF