2022 (6) TMI 268 - HC - Income Tax

Exemption u/s 11 - printing of News papers to educate the Toiling Masses being its objects is not a Charitable activity in nature - Whether Tribunal was right in law in denying the exemption under section 11 to 13 of the Act by placing a very narrow interpretation to the term charitable activity with respect to amount applied towards the objectives of the Trust? - HELD THAT - From the order passed by the Commissioner of Income Tax (Appeals)- VII, Chennai, we find that the authority had examined the nature and purpose for which the Trust was created and the publication of the newspaper was to educate the toiling masses and having arrived at such a factual conclusion held the denial of exemption under section 11 of the Act was not correct - CIT(A) has also noted as to how the substantial number of people in the country lives in rural areas and about 40% of the population is below the poverty line and the appellant-trust is to educate those daily wage earners in urban areas and industrial workers about the various aspects, which they are bound to know and held that the activity of publishing the newspaper can be covered under ''advancement of any other object of general public utility''. While testing the correctness of the order passed by the CIT(A), the Tribunal had relied upon the decision of the Cochin Bench of this Tribunal in Al-Madeena Charitable Trust -vs- ACIT 1999 (11) TMI 104 - ITAT COCHIN and came to the conclusion that the assessee had not carrying on any charitable activity and therefore, exemption cannot be granted under section 11 of the Act. Tribunal has not rendered any finding on the correctness of the decision of the CIT(A), which examined the factual aspects as to purpose behind which the newspaper was printed and published. Therefore, merely by applying the decision in Al-Madeena Charitable Trust(cited supra), the order passed by the CITA could not have been reversed. Depreciation claim - Tribunal has reversed the finding of the CIT(A) that the claim of depreciation cannot be a double deduction over and above the full value of the assets and with that observation, the Revenue's appeal was allowed. There is no finding rendered by the Tribunal as regards the views expressed by the CIT(A). Before us the assessee would contend that in terms of the decision of the Hon'ble Supreme Court in CIT Vs. Vegetable Products Ltd. 1973 (1) TMI 1 - SUPREME COURT that the view expressed by the High Court in favour of the assessee should be preferred to the views expressed as against the assessee and this aspect has not been considered by the Tribunal. As assessee placed reliance on the decision of the Punjab Haryana High Court in CIT -vs- Market Committee Pipli reported in 2010 (7) TMI 374 - PUNJAB AND HARYANA HIGH COURT and CIT -vs- Tiny Tots Education Society 2010 (7) TMI 377 - PUNJAB AND HARYANA HIGH COURT wherein, it has been held that depreciation allowance on fixed assets of charitable trusts are not double deduction as claimed by the department. Depreciation on fixed assets - As the decisions of this Court in Director of Income Tax (Exemptions) -vs- Medical Trust of the Seventh Day Adventists 2017 (8) TMI 931 - MADRAS HIGH COURT is fully in favour of the appellant-assessee and the question has been answered in favour of the appellant-assessee. This issue also can be raised before the Tribunal. Thus in the light of what we have observed above, we are of the view that the Tribunal should reconsider the case of the appellant-assessee by taking note of all the facts and legal position that may be placed before the Tribunal by and on behalf of the assessee. Tax Case Appeal is allowed and the order passed by the Tribunal was set aside and the matter is remanded before the Tribunal for fresh consideration on all issues

Summary

Issues:
1. Denial of exemption under Sections 11 to 13 of the Income Tax Act.
2. Classification of printing newspapers as a charitable activity.
3. Disallowance of depreciation on fixed assets.

Analysis:
1. The appellant, a charitable trust, filed an appeal against the order disallowing exemption under Sections 11 to 13 of the Income Tax Act for the assessment year 2010-11. The Commissioner of Income Tax (Appeals) allowed the appeal, noting that the trust aimed to educate the toiling masses through newspaper publication, falling under the "advancement of any other object of general public utility." However, the Income Tax Appellate Tribunal reversed this decision, stating that the trust did not engage in charitable activities. The High Court found that the Tribunal did not adequately consider the purpose behind the newspaper publication and remanded the case for fresh consideration.

2. The Tribunal also disallowed depreciation on the trust's assets, contrary to the CIT(A)'s decision that favored the assessee based on conflicting High Court judgments. The High Court observed that the Tribunal did not address the CIT(A)'s reasoning and failed to consider the Supreme Court's directive to prefer views favoring the assessee. The appellant cited Punjab & Haryana High Court decisions supporting depreciation allowance for charitable trusts. Consequently, the High Court directed the Tribunal to reassess the depreciation claim in light of all relevant facts and legal positions presented by the assessee.

3. The appellant raised a third substantial question of law regarding the applicability of certain High Court decisions favoring depreciation allowance for charitable trusts. The High Court noted that this issue could also be presented before the Tribunal for further examination. Ultimately, the High Court allowed the Tax Case Appeal, setting aside the Tribunal's order, and remanded the matter for fresh consideration on all issues, emphasizing the importance of hearing the appellant-assessee. The substantial questions of law were left open, and no costs were awarded in the judgment.