1999 (8) TMI 137 - AT - Income Tax

Summary

Issues:
1. Whether the assessee-trust's income is exempt under section 11 of the Act.
2. Whether the trust was carrying on business activities by letting out its premises and earning rental income.

Analysis:
1. The main issue in this appeal was whether the income earned by the assessee-trust was exempt under section 11 of the Act. The trust, established in 1925, primarily provided medical and educational aid to the poor and needy sections of society. The trust owned a building that was given on hire at nominal rent for various charitable activities. The Assessing Officer contended that the trust was carrying on a regular business of letting out the building and utensils, thus not qualifying for exemption under section 11. The CIT(A) held that the trust was indeed carrying out charitable activities and directed the Assessing Officer to accept the returned income of Rs. NIL. The CIT(A) relied on various legal precedents to support this decision.

2. The second issue revolved around whether the trust was engaged in business activities by letting out its premises. The Revenue argued that the income derived from letting out the premises constituted 'profit and gains of business or profession.' However, the trust's counsel contended that the trust was not engaged in business activities like arranging marriage functions or providing catering services but merely earned rental income from letting out its premises, utensils, and furniture. The ITAT considered the historical context of the trust's establishment in 1925 and concluded that the primary and dominant purpose of the trust was charitable, with letting out its premises being ancillary to this purpose. The ITAT upheld the CIT(A)'s decision, emphasizing that the trust's activities were in line with charitable objectives and not commercial in nature.

In conclusion, the ITAT dismissed the appeal, affirming that the assessee-trust's income was exempt under section 11 of the Act and that the trust was not engaged in business activities but primarily focused on charitable endeavors.