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TMI Blog2014 (2) TMI 601X X X X Extracts X X X X X X X X Extracts X X X X ..... carried out by the Trust is the publishing of a Daily by the name 'Dainik Saamana'. Over time though, other than this publication, a daily by the name 'Dopahar ka Saamana' and weekly 'Marmik', were also added. The assessee claims that its publishing activity is in national interest and, therefore, must be considered as toward a charitable object inasmuch as the entire activity of publication is an activity intended for the objects of the trust (listed as under) which are charitable in nature: i. To arrange and to sponsor the various programmes and activities for promoting the national interest; ii. To open, found and to establish the libraries and reading rooms and to run the same; iii. To carry on the charitable activities in literacy, cultural, scientific and social fields; iv. Promotion and propagation of ideologies, opinions and ideas for furtherance of national interest and for this publishing of books, annuals magazines, weeklies, dailies, and other periodicals as also establishing and running printing presses for the same. The assessee's alternate contention is that even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -04 (in ITA Nos.292 & 293/Mum/2007 dated 30.03.2009/PB pgs.58-61), the tribunal, after hearing the parties, formulated the issue arising for its consideration as being as to whether the surplus funds utilized for acquiring of assets for business purposes would amount to application of income for charitable purpose/s or not(refer para 6). After reproducing paras 40 and 41 of the tribunal's order for A.Y. 1989-1990 (Prabodhan Prakashan v. Asstt. DIT [1994] 50 ITD 135 (Bom.)), it held as under: '6. We have considered the rival submissions and perused the record of the case. The short point for consideration is whether the surplus funds utilized for acquisition of assets for business purposes would amount to application of income or not for charitable purpose. There is no dispute over the fact that running of Dainik Saamana was a charitable purpose as held by the Tribunal vide order dated 10th February, 1994 for A.Y. 1989-90 in assessee's own case in para 40 of its order which is reproduced here-under: "40. For the above reasons, we hold that the object of running Dainik Saamana was a charitable purpose. The Department has not brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibed as application of income which is not deductible for the purpose of computation of income. Therefore, in the light of these observations, we have to examine whether the acquisition of fixed asset has been claimed as expenditure against the computation of income or not. Admittedly, the amount spent for acquisition of fixed assets is not deductible from the computation of income but only depreciation is allowable in respect of building etc. but not land. Therefore, expenditure in respect of those fixed assets is respect of which depreciation has been claimed and allowed to the assessee, cannot be treated as application of income. However, the balance amount spent for acquisition for fixed assets, on which no depreciation has been allowed, is to be treated as application of income as per the test laid down by the Tribunal in assessee's own case for A.Y. 1989-90 (supra). We, accordingly, restore the issue to the file of the Assessing Officer to decide the same in the light of our above observations in the light of the decision of the Tribunal for A.Y. 1989-90 (supra) and to determine the application of income accordingly.' For A.Y. 2000-01 (in ITA No.8043 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re it for some years, with the said orders also bearing cross reference to each other, have been carefully perused by us. This is, in fact, incumbent as these orders have attained finality inasmuch as they have not been challenged, or successfully so, by either party. Reading the same in conjunction, being also required to be read in harmony, we observe no inconsistency; rather, a consistency and conformity in all the four orders by the tribunal, referred to above, which have come to our notice. In other words, the findings are clear and binding. In fact, the same would apply even for the years before us not covered thereby, i.e., A.Ys. 2007-08 and 2008-09, unless of course the assessee is able to show as to how the same are not applicable for those years. In fact, no material has been brought on record to disturb and/or controvert the findings by the authorities below for all the years, which are also consistent with each other, pursuant to the orders by the tribunal. Findings 4.1 We begin by enumerating the findings by the tribunal in the assessee's case if only for coherence and better comprehension, as under: (a) The activity of publication of 'Daini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been made for three of the five years under reference. For A.Y. 2000-01, the only claim, as reflected per the income and expenditure account, is by way of donation (at Rs.2,000/-) and elocution competition (at Rs.15,000/-). Considering the surplus of Rs.23 lacs for that year, the Revenue found itself unable to hold that the business of the publication was being, firstly, run incidental to the attainment of the objectives of the trust and, secondly, of having been actually utilized for those objects. For A.Y. 2007-08, the only other year for which some expenditure was claimed toward application of income, the claim, made at Rs.24.93 lacs (detailed at para 4 of the assessment order), was found to be in fact comprising expenses relating to publication of the newspaper and not toward the other objects of the trust, being in the nature of finance charges and sundry balances written off. The claim of application of income for another sum of Rs.17.39 lacs also did not pass muster as the same was toward acquisition of fixed assets of the said business and, consequently, for the expansion of the said business. The assessee having also raised a specific ground (Gd. No.2) in this regard for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, both in its subsequent orders (as dated 30.03.2009, supra) as well as by the orders by the authorities below (refer para 3.2/pg.4 of the order). The distinction between the two is basic, conceptual and quintessential. The two expenses, as explained by the tribunal, are in contradistinction to each other, while one is for carrying of the business activity (of publication, in the instant case), for which separate books are to be maintained, to be adjusted in computing the business income, the other is toward the application of the income so determined. Accordingly, the tribunal also directed allowance of depreciation u/s.32 on the sums expended toward acquisition of fixed assets of the business, where depreciable, and which we find to have been allowed by the Revenue. The said assets, as also land, form part of the fixed assets/capital of the assessee's business undertaking. No claim qua these sums as towards the application of business, thus, survives, so that the assessee's relevant ground/s, apart from being without merit, is not maintainable at the threshold; the Revenue's action being only in conformity with the order/s by the tribunal, which have since attained finality. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property; (1A)..........................; (b) where a capital asset, being property held under trust in part only for such purposes, .... Explanation.-In this sub-section,- (i) to (iii) and (2) & (3) ........................ (4) For the purposes of this section "property held under trust" includes a business undertaking so held, and where a claim is made that the income of any such undertaking shall not be included in the total income of the persons in receipt thereof, the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes is that derived from property held under trust. The property held under trust being not specifically defined would, therefore, have to be read as without limitation. The only limitation stipulated is per sub-sections (4) and (4A) of section 11, and is in respect of a business undertaking. The same stipulate that only where the business is incidental to the attainment of the objective/s of the Trust, that, separate books of accounts being maintained in its respect, could a business undertaking be considered as a property held under trust. Section 11(1) is to be read in conjunction and harmony with ss. 11(4) and 11(4A). It is, thus, only the business undertaking which qualifies as a property held under trust whose income would be eligible for exemption 11(1). In the instant case, the principal objects of the trust are as stated at para 2.1. Clause (iv) could only be considered as an extension of clause (i) inasmuch as there is no constraint on the amplitude of the word 'activities' in clause (i). Clause (iv) only states the modalities per which the objective of national interest can be furthered, i.e., by promoting ideologies, opinions and ideas, and toward the same undertak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee not pressing its ground challenging the computation of income of the said business under Chapter IV-D; rather, having claimed and been allowed depreciation u/s.32 and set off u/s.71. The question of the said business being incidental to the other objective/s of the assessee, as would be evident, is a pure matter of fact. We find no basis, nor any material on record, to justify the same, which also forms the basis of the orders by the Revenue. It's findings for AYs 1992-93, 1995-96 & 1996-97, which may also have attained finality, are also very relevant, though have not been brought on record. An elocution contest, even the subject of which is not known, as also the total expenditure involved, appears to be the only activity sponsored by the trust over the years, which again does not imply undertaking any activity per se. That is, there is no charitable activity being undertaken, much less a regular activity toward charitable purposes, for the said business to be considered as an adjunct or incidental to the attainment thereof or any specific objective. Rather, if at all, the claim of business expenses as or toward application of income would suggest non-maintenance of separate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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