CBDT Notifies 'Patanjali Research Foundation Trust' as 'Research Association' for Claiming IT Deductions

New Delhi, July 13: In a shot in the arm for yoga guru Ramdev's Patanjali group, the Income Tax Department has extended tax deductions on donations made to Patanjali Research Foundation Trust for five years.

Businesses making donations to Patanjali Research Foundation Trust during 2021-22 to 2026-27 can claim tax deduction on such contributions, according to a Central Board of Direct Taxes (CBDT) notification.

Patanjali Group, which sells products ranging from toothpaste to instant noodles and toilet cleaner, is among the fastest growing consumer goods companies in the country.

The exact linkage between Patanjali Research Foundation Trust and Patanjali Ayurved Ltd – the multibillion dollar corporation – is not known.

"... the Central Government hereby approves M/s Patanjali Research Foundation Trust, Haridwar under the category “Research Association” for Scientific Research for the purposes of clauses (ii) of sub-section (1) of section 35 of the Income-tax Act, 1961...," the Central Board of Direct Taxes (CBDT) said in a notification.

This shall be applicable for Assessment Year(s) 2022-23 to 2027-28, it added.

Under Income Tax rules, in computing the income under head business and profession, a taxpayer is permitted to deduct therefrom, any amount paid to an 'approved scientific research association' for undertaking scientific research.

Patanjali Research Foundation Trust, Haridwar, has been notified as the 'approved research association', accordingly, a business entity that pays any amount to the Foundation for scientific research shall be eligible to claim the said expense as deduction from business income under section 35 of the Income Tax Act, thereby reducing their tax outgo.

Nangia Andersen LLP Director Neha Malhotra said India understood that investment in research and development is the key to economic growth and a step towards self-reliance. Therefore, in addition to increasing government funding on research associations, the government wants to encourage the private sector participation in R&D spending as well.

"Tax breaks in the form of deduction of expenses incurred for specified purposes, channelizes the funds of the taxpayers in the desired area of investment, that is scientific research in this case. Such provisions serve as tax incentive for the taxpayer spending on scientific research and source of funds for the research association," Malhotra added.

Ramdev on Tuesday announced that Patanjali group's turnover touched Rs 30,000 crore last fiscal on the back of the acquisition of Ruchi Soya, and said it is being evaluated when to list his flagship firm Patanjali Ayurved.

Ruchi Soya, which the Patanjali group acquired through the insolvency process, contributed more than half to the overall turnover of the group. "Last year Patanjali group had a turnover of over Rs 30,000 crore and Rs 16,318 crore was from Ruchi Soya," said Ramdev while addressing a virtual press conference. The manner in which Ruchi Soya was acquired  had raised eyebrows.

In FY2019-20, the group had a turnover of around Rs 25,000 crore, of which around Rs 12,000 crore came from the Patanjali group companies and Rs 13,117 crore from Ruchi Soya.

The group is aiming to make its companies debt-free in the coming three to four years, and a substantial portion of the follow-on public offer (FPO) of Ruchi Soya, which has a debt of around Rs 3,330 crore, will be diverted to pare its debt, said Ramdev.

For FY'21, Patanjali Ayurved posted a turnover of Rs 9,783.81 crore, according to a statement issued by the Haridwar-based group.

While Patanjali Natural Biscuits reported a turnover of Rs 650 crore, Ayurveda arm Divya Pharmacy Rs 850 crore and food processing arm Patanjali Agro Rs 1,600 crore during the fiscal 2020-21, it added. Transportation wing Patanjali Parivahan reported a turnover of Rs 548 crore and Patanjali Gramoudyog Rs 396 crore during the fiscal.

For FY 2019-20, Patanjali Ayurved had reported its revenue from operations at Rs 9,022.71 crore.

When asked about the dilution of Patanjali's stake in Ruchi Soya, Ramdev declined to comment on the matter. "We have filed DRHP (with SEBI) and expect to get (the) nod soon," he added.

He also hinted towards the listing of Patanjali Ayurved very soon.

"We would soon share some news about Patanjali. How much we have to demerge and when to list Patanjali Ayurved," he said.

According to Ramdev, Ruchi Soya has a debt of around Rs 3,300 crore. However, he did not share the debt figures of Patanjali Ayurved and other group companies.

In 2019, Patanjali acquired Ruchi Soya, which is listed on the stock exchanges, through an insolvency process for Rs 4,350 crore.

Ruchi Soya primarily operates in the business of processing of oilseeds, refining of crude edible oil for use as cooking oil, manufacturing of soya products and value-added products.

Earlier on May 11, Ruchi Soya had announced the acquisition of the biscuits business from Patanjali Natural Biscuits Pvt Ltd (PNBPL) in a slump sale at Rs 60.02 crore.