2024 (2) TMI 45 - AT - Income Tax

Exemption u/s 11 - Charitable activity u/s 2(15) - onus of proof - activity of printing, publishing and distribution of journal and magazines is incidental to the attainment of the objects of the trust as decided by CIT(A) - whether the assessee was carrying on business or charitable activity as per the provisions of the Act? - HELD THAT - As decided in Sai Publication Fund 2002 (3) TMI 45 - SUPREME COURT the onus of proof lies on the Revenue to prove that the assessee was carrying on business in respect of the impugned receipt. Even in the case of the present assessee, the dominant purpose was to spread the message based on preaching s which the above decision has held to be not a business activity. It is also observed that in the said decision the term business and carrying on business has been widely interpreted. To hold the incidental or ancillary activity to be business, the Revenue is put to strict proof. Further the presumptions in these cases are also in favour of the assessee unless rebutted by the department. It is pertinent to point out that earning of profit per se would not be a criteria to decide whether such activity is a commercial activity or not. By respectfully following the above said decision, we hold that the assessee trust is not into the business of publishing, printing and subscription of the said books as the same is not the main object of the assessee trust. We, therefore, deem it fit to dismiss the grounds raised by the Revenue.

Summary

Issues Involved:
1. Whether the activity of printing, publishing, and distribution of journals and magazines is incidental to the attainment of the objects of the trust and qualifies for exemption under Section 11 of the Income Tax Act, 1961.
2. Whether the assessee trust's income from sales and subscriptions is hit by the provisions of Section 2(15) and Section 13(8) of the Income Tax Act, 1961, disqualifying it from exemption under Section 11.
3. Appropriateness of the CIT(A) relying on a judgment related to indirect tax (Sales Tax) for deciding the issue under Section 2(15) of the Income Tax Act.
4. Whether the CIT(A) erred by not assigning reasons for the applicability of the Civil Appeal No. 9445 of 1996 to the assessee trust.
5. Whether the CIT(A) failed to consider the ratio of the Supreme Court judgment in the case of Assistant Commissioner of Income Tax (Exemption) v. Ahmedabad Urban Development Authority before allowing exemption to the assessee trust.

Summary:

Issue 1: Incidental Activity and Exemption under Section 11
The Revenue challenged whether the activities of printing, publishing, and distribution of journals and magazines are incidental to the attainment of the trust's objectives, thus qualifying for exemption under Section 11. The CIT(A) allowed the exemption, relying on the Supreme Court's decision in CIT vs. Sai Publication Fund, which held that such activities were incidental to the trust's main objective and not carried out with a profit motive.

Issue 2: Income from Sales and Subscriptions
The Assessing Officer (A.O.) observed that the assessee trust generated significant income from the sale and subscription of books and magazines, which constituted 63% of its total receipts. The A.O. contended that these activities were in the nature of trade, commerce, or business, thus disqualifying the trust from exemption under Section 11, as per the provisions of Section 2(15) and Section 13(8). However, the CIT(A) ruled in favor of the assessee, stating that the activities were part of the trust's charitable purpose and not commercial in nature.

Issue 3: Reliance on Judgment Related to Indirect Tax
The Revenue argued that the CIT(A) erred by relying on a judgment related to indirect tax (Sales Tax) to decide the issue under Section 2(15) of the Income Tax Act. The CIT(A) referenced the Supreme Court's decision in the Sai Publication Fund case, which dealt with the nature of activities for charitable trusts under the Income Tax Act, thus justifying its relevance.

Issue 4: Applicability of Civil Appeal No. 9445 of 1996
The Revenue contended that the CIT(A) did not provide reasons for applying the facts of Civil Appeal No. 9445 of 1996 to the assessee trust. The CIT(A) referenced this appeal to support the view that the trust's activities were not commercial but incidental to its charitable objectives.

Issue 5: Consideration of Supreme Court Judgment in Ahmedabad Urban Development Authority Case
The Revenue argued that the CIT(A) failed to consider the Supreme Court judgment in Assistant Commissioner of Income Tax (Exemption) v. Ahmedabad Urban Development Authority, which could impact the trust's eligibility for exemption. The CIT(A) did not address this judgment specifically but relied on the broader interpretation of charitable activities provided in the Sai Publication Fund case.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, affirming that the assessee trust's activities of printing, publishing, and distributing journals and magazines were incidental to its charitable objectives and not commercial in nature. Consequently, the trust was entitled to exemption under Section 11 of the Income Tax Act. The appeal filed by the Revenue was dismissed.