In June, 2011 as social activist Anna Hazare had announced that he – along with his supporters – will go on a fast against the endemic and plundering corruption in India, specifically by the ruling Government, he was greeted with a dictatorial threat. Ruling Party, Congress’ General Secretary “advised” him – “Anna saheb says he will again sit on fast. If he does so, he may get the same treatment as the other (Baba Ramdev) got recently.” (Same fate as Ramdev awaits you: Digvijay Singh to Anna Hazare!)
You see, a battalion of Indian security forces had attacked Swami Ramdev and his supporters at Ram Lila grounds as they carried out non-violent protests and were fasting to voice their concern about the same corruption by the Ruling party!
The “treatment” for Swami Ramdev has been ongoing since then.
Recently, came another hard blow against him. His flagship effort, called Patanjali Yogpeeth was denied the “Charitable Organization” status under Section 2(15) of the Indian Income Tax Act, 1961. And with that, went the tax exemption to his organization. Immediately, the Non-Profit Organization was slapped a Rs 58 crores Income Tax. Patanjali Yogpeeth promotes a completely holistic Yogic lifestyle with an Ayurvedic hospital, Yoga Classes, Publications and other facilities.
Ironically, Yoga is being targeted unabashedly in the land of Yoga itself!
Charitable Organization and Tax Exemption
A Charitable Organization gets some benefits from the Government. Many hospitals in India are run as Charitable Organizations, where certain services are offered to the poor and needy for free and some of the patients are charged. Tax Exemption helps them to invest in the top scientific equipment and in the upkeep of the facility appropriately and the revenues from the rich and well to do helps offer these top facilities to even the poor for free.
Section 2(15) of the Income Tax Act, 1961 (‘Act’) defines “charitable purpose” to
include the following:-
(i) Relief of the poor
(iii) Medical relief, and
(iv) the advancement of any other object of general public utility
There was a concern brought in by the Government that some commercial organizations were claiming exemption under this clause, so an amendment was brought in vide Finance Act 2008, to curb such practices. An additional proviso was added:
‘advancement of any other object of general public utility’ shall not be a charitable purpose if it involves the carrying
on of –
(a) any activity in the nature of trade, commerce or business; or
(b) any activity of rendering any service in relation to any trade, commerce or business;
for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention of the income from such activity.
Seems fine. And to further explain the exceptions to this proviso, two situations were cited by the Income Tax Circular No. Circular No. 11/2008 (F. No.134/34//2008-TPL) of the Department of Revenue, Ministry of Finance. These two cases are articulated in the attached circular. The first one is however critical.
The newly inserted proviso to section 2(15) will not apply in respect of the first three limbs of section 2(15), i.e., relief of the poor, education or medical relief. Consequently, where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute ‘charitable purpose’ even if it incidentally involves the carrying on of commercial activities.
Patanjali Yogpeeth is one such example.
Arbitrary Executive Authority of the Government
But since the “treatment” for Swami Ramdev’s audacity to challenge the Government on its corruption was not yet complete, an interesting decision was taken. To tax the activities of the organization for certain activities that were deemed as “Commercial”. Effectively, segregating an organization under Charitable and Commercial and not treating the whole organization as one as per the Income Tax circular’s stated provisos!
The I-T notice, for the assessment year 2009-10, on Haridwar-based Patanjali Yogpeeth Trust, Divya Yoga Mandir Trust and Bharat Swabhiman Trust have been slapped on the income of Rs. 120 crore which the department has held as “commercial activities”, sources said. (link)
When Swami Ramdev’s organization stated the obvious – that they were being specifically targeted to silence them for the audacity to protest – the Income Tax officer in charge gave a rhetorical and “system” answer.
“As far as allegation of harassment of Baba Ramdev, I would like to say that the department has a very well laid out grievance redressal mechanism. If the assessing officer is in any manner perceived to be harassing any assessee, then the next authority in the administration is always available for you to lodge a grievance,” Poonam Kishore Saxena, chairperson, Central Board of Direct Taxes (CBDT), told reporters when asked about the allegations made by Ramdev.
One wonders how many have been able to successfully challenge the Income Tax Authority on their own decision through complaints in their own Grievance cells? Talk of transparency and lack of accountability.
The Income Tax authority then proceeded to seal the properties and bank accounts of Patanjali Yogpeeth, after it failed to pay the first instalment of Rs. 75 lakh out of the total tax of Rs. 34.68 crore, without any prior notice to the organization.
Fortunately, for the Non-Profit Charitable organization got a relief from the Delhi High Court.
A division bench of Justice Badar Durrez Ahmed and Justice RV Easwar said in the order: “We direct the attachment order (of bank accounts) be lifted subject to petitioner (Patanjali Yogpeeth Nyas) paying Rs. 2.10 crore (as Income Tax) by March 15.”
The bench, refusing to stay the recovery proceedings, asked the Income Tax Commissioner (Appeals) to decide the appeal of Patanjali Yogpeeth by 31 March and disposed the plea.
And, with that 11 bank accounts of Patanjali Yogpeeth were defreezed.
The latest battle has been handled, but against the arbitrary might of a dictatorial state, it is anybody’s guess as to how long can one organization last?