Order in TC No.332 of 2012 (C.I.T., -Vs- Ayur Siddha Health & Research Foundation) dt 13.02.2020 IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 13.02.2020 CORAM HON'BLE DR. JUSTICE VINEET KOTHARI AND HON'BLE MR. JUSTICE R. SURESH KUMAR Tax Case (Appeal) No.332 of 2012 Commissioner of Income Tax, Chennai Appellant Vs. Ayur Siddha Health & Research Foundation 45/11, Konnur High Road, Chennai. Respondent Tax Case filed under Section 260A of Income Tax Act against order dated 02.05.2012 passed in ITA No.1601/Mds/2011 by Income Tax Appellate Tribunal 'D' Bench, Chennai. For Appellant : Mr. J. Narayaswamy, Senior Standing Counsel For Respondent : Mr. N. Devanathan JUDGMENT (Judgment of Court was delivered by DR. VINEET KOTHARI, J) This appeal has been filed by Revenue under Section 260A of Act aggrieved by order of learned Income Tax Appellate Tribunal 'D' Bench, Chennai, dated 02.05.2012, whereby learned Tribunal allowed appeal filed by Assessee, Trust viz., Ayur Siddha Health & Research Foundation, Page 1 of 6 http://www.judis.nic.in Order in TC No.332 of 2012 (C.I.T., -Vs- Ayur Siddha Health & Research Foundation) dt 13.02.2020 Chennai and held that Assessee Trust cannot be said to be engaged in any trading or business activity so as to deny benefit of registration under Section 12AA of Act. learned Director of Income Tax (Exemptions) had rejected said application of Assessee Trust for registration under Section 12AA of Act vide order dated 29.07.2011 on ground that Object Clause 3.3(e) of Trust Deed provides for development of new drugs or medicines, Object Clause 3.6(g) speaks about printing, publishing and selling journals, periodicals, books etc., Object Clause 3.8(f) mentions about establishing financial institutions etc., and therefore learned Commissioner felt that Assessee Trust might itself engage in business activities and therefore not entitled to registration under Section 12AA of Act. Assessee preferred appeal before learned Income Tax Appellate Tribunal, which allowed appeal of Assessee with following observations. 9. In view of above order of Tribunal, we further observe that whether assessee foundation is contravening any provisions of Act relating to charities is matter to be considered subsequent to registration on application of actual area in which assessee is operating and Revenue is having enough safeguard to make such examination from every year to year at time of assessment. Any contravention of provisions in future can well be considered in assessment proceedings. Therefore, while eligibility of assessee for Page 2 of 6 http://www.judis.nic.in Order in TC No.332 of 2012 (C.I.T., -Vs- Ayur Siddha Health & Research Foundation ) dt 13.02.2020 registration u/s. 12AA of Act is examined in declared objects of assessee, we find no reason why registration should not be granted. In light of above judicial pronouncement, we find that assessee foundation is entitled for registration under Section 12AA of Act and direct DIT (Exemptions) to grant registration to assessee society u/s. 12AA of Act. 2. Revenue preferred present appeal against said order and appeal was admitted by Coordinate Bench of this Court on 19.10.2012 on following substantial question of law. Whether on facts and in circumstances of case, Tribunal was right in holding that assessee is entitled to grant of registration under Section 12AA of Income Tax Act? 3. Learned Senior Standing Counsel for Revenue Mr. J. Narayanaswamy urged that definition of 'Charitable Purposes' under Section 2(15) stood amended by Finance Act 2008 and by insertion of Proviso therein by Finance Act 2015 with effect from 01.04.2016, activities in nature of trade, commerce or business are excluded from said definition of 'Charitable Purposes' and therefore, since activities under specified clauses of Trust Deed were found to be in nature of business, which Assessee may engage and therefore, learned Commissioner of Income Tax was justified in Page 3 of 6 http://www.judis.nic.in Order in TC No.332 of 2012 (C.I.T., -Vs- Ayur Siddha Health & Research Foundation ) dt 13.02.2020 rejecting registration under Section 12AA of Act. He further submitted that Revenue authority had genuine apprehension about intended business activity of applicant Trust. 4. On other hand, learned counsel for Assessee supported impugned order of learned Tribunal and urged that Assessee is not engaged in any business activity and Object Clause providing for Research and Development work for new medicines is part of their activity, which is covered by definition of 'Charitable Purposes', which include medical relief, yoga etc., even as per amended definition. 5. Having heard learned counsel for parties, we are of opinion that mere apprehension on part of Revenue authorities that Object Clause of Trust Deed provided for development of new drugs / publication of journals etc., cannot per se amount to any business or trading activity on part of respondent Trust. These activities are prima facie incidental to charitable activity of providing good health and medical relief to affected persons. learned Tribunal however has made it clear in its order that it is even otherwise open to Revenue authorities under provisions of Act to consider factual aspects of matter as to whether Trust is engaged in any business activity or not upon granting annual renewal of such registration Page 4 of 6 http://www.judis.nic.in Order in TC No.332 of 2012 (C.I.T., -Vs- Ayur Siddha Health & Research Foundation ) dt 13.02.2020 under Section 12AA of Act and therefore unless Charitable Trust is found to be engaged in business or trading activity apart from charitable purposes for which Trust is incorporated, benefit of registration under Section 12AA of Act cannot be denied to Trust. 6. Therefore, in our opinion, learned Tribunal was perfectly justified in allowing appeal filed by Assessee and directing Revenue authorities to grant registration under Section 12AA of act to applicant Assessee. present appeal by Revenue is therefore devoid of any merits and is liable to be dismissed and same is accordingly dismissed. question of law is answered in against Revenue and in favour of Assessee. No costs. (V.K.,J.) (R.S.K.,J.) 13.02.2020 Index :Yes/No Internet : Yes/No KST To Income Tax Appellate Tribunal 'D' Bench, Chennai Page 5 of 6 http://www.judis.nic.in Order in TC No.332 of 2012 (C.I.T., -Vs- Ayur Siddha Health & Research Foundation ) dt 13.02.2020 DR.VINEET KOTHARI, J. AND R.SURESH KUMAR, J. KST T.C.A.No.332 of 2012 13.02.2020 Page 6 of 6 http://www.judis.nic.in Commissioner of Income-tax, Chennai v. Ayur Siddha Health & Research Foundation