2010 (2) TMI 146 - HC - Income Tax

Exemption under section 11(4A)- The Assessing Officer found that the income derived by the charities by letting out the kalyana mandapam is a business income and accordingly made the Assessment order. On appeal that order of the Assessing Officer was upset by the Commissioner of Income-tax (Appeals) following the judgment of this court made in the case of CIT v. Samyuktha Gowda Saraswatha Sabha reported in 2000 245 ITR 242 holding that the income from letting out of the kalyana mandapam by the trust did not constitute income from business. On further appeal the Tribunal confirmed the order of the Commissioner of Income-tax (Appeals) apparently following the above judgment of this court. Held that- There is absolutely no discussion about the application of the provision to the trust in question by the Commissioner of Income-tax (Appeals) as well as the Tribunal. In our opinion the entire issue should be reconsidered by the Commissioner of Income-tax (Appeals) as to whether the trust in question is entitled to the exemption in respect of the assessment year by applying the relevant provisions.

Summary

Issues:
1. Determination of whether income derived from letting out a kalyana mandapam by charities should be considered as property income or business income.
2. Examination of the entitlement of the trust to exemption under section 11(4A) of the Income-tax Act.

Analysis:
1. The primary issue in this case revolves around the classification of income derived from letting out a kalyana mandapam by charities as either property income or business income. The Assessing Officer initially treated the income as business income, but this decision was overturned by the Commissioner of Income-tax (Appeals) based on a previous judgment by the court. The Tribunal upheld the decision of the Commissioner of Income-tax (Appeals), citing the same court judgment. The court referred to various precedents, including the case of CIT v. Samyuktha Gowda Saraswatha Sabha, to establish the distinction between property income and business income derived from letting out properties for specific purposes like marriages.

2. The second issue pertains to the entitlement of the trust to exemption under section 11(4A) of the Income-tax Act. The court highlighted the changes in the provision over time and emphasized the need for a thorough reconsideration by the Commissioner of Income-tax (Appeals) regarding the trust's eligibility for exemption. The court noted the absence of a detailed discussion on the application of the provision by the authorities and directed a fresh consideration by the Commissioner of Income-tax (Appeals). The court instructed the Commissioner to assess whether the trust qualifies for exemption and to determine the tax component based on the actual profit and expenditures related to the trust's objectives.

In conclusion, the court set aside the orders of the Commissioner of Income-tax (Appeals) and the Tribunal, remanding the matter for fresh consideration by the Commissioner of Income-tax (Appeals). The court instructed the Commissioner to review the judgments of the court, including CIT v. Halai Nemon Association and CIT v. Samyuktha Gowda Saraswatha Sabha, along with relevant provisions up to 1992. Both the Revenue and the assessee were granted the opportunity to present relevant judgments for consideration during the fresh assessment process.