2006 (10) TMI 182 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of additions by CIT(A) on the grounds of the trust existing for charitable purposes.
2. Whether the trust was carrying on business activities under the guise of charitable activities.
3. Application of income for charitable purposes and eligibility for exemption u/s 11 and 12 of the IT Act, 1961.

Summary:

Issue 1: Deletion of Additions by CIT(A)
The Revenue contended that the CIT(A) erred in deleting the additions, arguing that the trust was receiving fees for letting out the wedding hall under the guise of donations. The CIT(A) observed that the trust was created with clear charitable aims and objects and that the activities carried out, including meditation camps, medical aid, and eye camps, were charitable in nature. The CIT(A) concluded that the trust was not charging money from a business perspective but accepting voluntary donations for the use of the Celebration Hall.

Issue 2: Business Activities vs. Charitable Activities
The AO disallowed exemptions u/s 11 and 12, concluding that the trust was carrying on business activities by letting out the Celebration Hall for social functions and camouflaging business receipts as donations. The CIT(A) clarified that the trust's activities were independent of the business activities conducted by the main trustee and his associates, who were running separate businesses within the same campus. The CIT(A) noted that the trust's receipts were utilized for its charitable aims and objects, and even if business activities were assumed, the income was applied for charitable purposes, thus entitling the trust to exemption.

Issue 3: Application of Income for Charitable Purposes
The Tribunal emphasized that for exemption u/s 11, the application of income for charitable purposes is crucial. It was undisputed that the trust's income was utilized for charitable activities. The trust was registered u/s 12A and had been granted exemption u/s 80G, affirming its charitable character. The Tribunal found no merit in the AO's inference that the meditation activities were not part of the trust's charitable activities. The Celebration Hall, leased from Mrs. Sulekha Sondhi, was used for charitable purposes, and the income from its use was applied accordingly.

Conclusion:
The Tribunal upheld the CIT(A)'s order, finding no infirmity in the deletion of additions and confirming that the trust was existing for charitable purposes. The appeal filed by the Revenue was dismissed.