2019 (1) TMI 1411 - HC - Income Tax

Charitable activity - letting out of premises for Technical education to the trainees of Jet Airways, Tata Sky only and not to the public in general - charitable activity v/s business activity - Held that - The main object of the Trust is to impart education. For better utilization of its infrastructure, Assessee allowed the training programme of Jet Airways and Tata Sky, to be conducted at its premises and in the process, also participated in imparting training. It cannot be stated that the Assessee had undertaken any activity in the nature of commercial venture. As decided in assessee own case Assessee, was engaged in imparting education in the area of presea and postsea training to seamen and was not carrying out activity in nature of running coaching class. The first question as proposed by the Revenue is, therefore, not entertained. Accumulation u/s 11(2) - loan to other Trust of same objects without investing in modes specified in section 11(5) of the Act even though there is specific provision in section 13(1)(d) - Held that - Delhi High Court in Director of Income Tax (Exemptions) v/s. ACME Educational Society 2010 (7) TMI 159 - DELHI HIGH COURT held that grant of interest free loan by the Assessee Society, to another society for carrying on same activity, does not amounts either investment or deposit. Assessee would be entitled to exemption under the Act. This question, therefore, also is not required to be entertained.

Summary

Issues:
1. Whether letting out premises for technical education to specific entities is a charitable activity or a business activity.
2. Whether accumulation under Section 11(2) of the Income Tax Act can be used as a loan to other Trusts without investing in specified modes under Section 11(5) despite the provision in Section 13(1)(d) of the Act.

Issue 1:
The first issue involves the Revenue's objection to the activities of the Respondent-Trust, arguing that letting out premises for technical education to employees of specific companies like Tata Sky and Jet Airways does not qualify as a charitable activity. The Revenue contended that the Assessee might be running coaching classes rather than imparting educational training. However, the Tribunal ruled in favor of the Assessee, emphasizing that the property was let out for efficient utilization and technical training purposes, making it a charitable activity. The Tribunal highlighted the participation of the Assessee in the training programs and the utilization of income for trust activities, leading to the exemption of income from tax. The High Court concurred with the Tribunal's findings, stating that no error was committed in reaching the conclusion.

Issue 2:
The second issue pertains to the Revenue's objection regarding the Assessee Trust advancing loans to other Trusts with similar charitable objectives. The Assessee cited a judgment from the Delhi High Court, which stated that providing interest-free loans to another society for the same activities does not constitute an investment or deposit, thus entitling the Assessee to exemption under the Act. The High Court, considering the Delhi High Court's judgment, concluded that this issue did not warrant further consideration. Consequently, the Appeal was dismissed based on the findings related to both issues, affirming the charitable nature of the activities undertaken by the Respondent-Trust and the validity of advancing loans to other Trusts with similar objectives under the Income Tax Act.