1994 (2) TMI 97 - AT - Income Tax

Assessment Year, Carry Forward, Charitable Trust, Income From Other Sources, Income From Property, Religious Trust, Set Off

Summary

Issues Involved:
1. Exemption of income under sections 11 and 12 of the Income-tax Act, 1961.
2. Classification and taxability of donations towards the corpus of the Trust.
3. Tax treatment of the loss incurred from the publication of "Dainik Saamana."
4. Set-off of business loss against income from donations.

Issue-wise Detailed Analysis:

1. Exemption of Income under Sections 11 and 12 of the Income-tax Act, 1961:
The primary issue was whether the assessee trust was entitled to exemption of income under sections 11 and 12 of the Income-tax Act, 1961. The assessee claimed that the income from the publication of "Dainik Saamana" resulted in a loss and that donations were made towards the corpus of the Trust, making them exempt under section 11(1)(d). The CIT(A) and Assessing Officer observed that the activity of publishing the newspaper was a systematic and organized business activity, thus taxable under the Act. They also noted that the publication was not solely for charitable purposes but included advertisements and other commercial activities.

2. Classification and Taxability of Donations Towards the Corpus of the Trust:
The assessee argued that the donations were specifically directed towards the corpus of the Trust and hence exempt under section 11(1)(d). The CIT(A) and Assessing Officer required specific written directions from donors, which were not provided for the entire amount. Only donations amounting to Rs. 3,90,277 had such directions, while Rs. 9,86,188 were treated as ordinary contributions and taxed. The Tribunal upheld this view, stating that there must be evidence showing the donor's specific direction, which was absent for the disputed amount.

3. Tax Treatment of the Loss Incurred from the Publication of "Dainik Saamana":
The assessee contended that the publication of "Dainik Saamana" was a charitable activity and operated on a "No Profit No Loss" basis. The CIT(A) and Assessing Officer classified the activity as a business due to its systematic nature and commercial elements like advertisement revenue. The Tribunal agreed, noting that the loss from the publication was a business loss and not an application of income for charitable purposes.

4. Set-off of Business Loss Against Income from Donations:
The assessee sought to set off the business loss from "Dainik Saamana" against the income from donations. The CIT(A) and Assessing Officer did not allow this, stating that voluntary contributions were income derived from property held under trust and could not be adjusted against business loss. The Tribunal partially allowed this contention, permitting the set-off of business loss against taxable voluntary contributions but not against those exempt under section 11(1)(d).

Conclusion:
The Tribunal upheld the CIT(A) and Assessing Officer's decisions that the publication of "Dainik Saamana" was a business activity and not solely for charitable purposes. Donations without specific written directions from donors were taxable, and the business loss from the publication could be set off against taxable income from donations but not against exempt contributions. The appeal was partly allowed, affirming the taxability of the Trust's income and the classification of its activities.