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TMI Blog2018 (1) TMI 1415X X X X Extracts X X X X X X X X Extracts X X X X ..... es of natural justice. 2. For that the Learned Commissioner of Income Tax (Appeals) erred confirming, the disallowance of deduction claimed u/s 11 of the Act. 3. For that the Learned Commissioner of Income Tax (Appeals) erred confirming the treatment of income from kalyanamandapam as business income, despite the decision rendered in earlier Assessment Years treating such income as income from property and consequently erred in sustaining the denial of the exemption u/s.11 of the Act, without assigning proper reason and justification. 4. For that the Learned Commissioner of Income Tax (Appeals) erred in presuming that the incidental activities as business activity in page 15 of the impugned order, which is unjust and bad in law. 5. For that the Learned Commissioner of Income Tax (Appeals) failed to appreciate that the misconstruction of the provisions of section 11 (4) and section 11 (4A) of the Act would lead to denying the exemption u/s 11 of the Act 6. For that the Learned Commissioner of Income Tax (Appeals) ought to have considered the test laid down by the Apex Court in the case of Thanthi Trust and the decision of the Jurisdictional High Court including the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... running a diabetic centre. Assessee also had a library at Virugambakkam, Chennai run by the Government. It appears both AVM Rajeswari Educational Trust as well as AVM Medical ENT Research Foundation were trusts having registration under Section 12A of the Act. Assessee's office was located in a building called Sivakami Building at Dr. Radhakrishnan Salai, Chennai. For the impugned assessment years as well as for assessment years 1987-88 and 1991-92, ld. Assessing Officer had denied exemption claimed by the assessee u/s.11 (1) of the Act considering it to be predominantly into business. For assessment years 2008-09 to 2014-15, ld. Assessing Officer also applied proviso to Section 2(15) of the Act for denying such exemption. For all these years, ld. Assessing Officer took a view that income earned by the assessee from its Kalyanamandapam could not be treated as income from house property but only as income from business. 4. Appeals for assessment years 1997-98, 1998-99 and 2006- 07, now before us, are second round of the proceedings since assessee in its first round was successful before this Tribunal with regard to its claim for exemption u/s.11 of the Act. This Tribunal had held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r marriage purposes would be a business income as defined under section 28 of the Act. Nevertheless in so far as this appeal is concerned, the law stood and applicable to the assessment year reads as under : "11.(4A) Sub-section (1) or sub-section (2) or subsection (3) or sub-section (3A) shall not apply in relation to any income, being pro fits and gains of business, unless- (a) the business is carried on by a trust wholly for public religious purposes and the business consists of printing and publication of books or publication of books or is of a kind notified by the Central Government in this behalf in the Official Gazette ; or (b) the business is carried on by an institution wholly for charitable purposes and the work in connection with the business is mainly carried on by the beneficiaries of the institution and separate books of account are maintained by the trust or institution in respect of such business." 7. The consideration for entitlement of exemption under section 11(4A), the provision that stood prior to the insertion of the new provision of section 11(4A) to section 11 with effect from April 1, 1992, shows for the entitlement of exemption income being pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence to the actual profit and the amounts spent towards the object of the trust. In the absence of any of the discussion, we are of the view that we have to only remand the matter after setting aside both the orders of the Commissioner of Income-tax (Appeals) and the Tribunal for fresh consideration. 12. Accordingly, the orders of the Commissioner of Incometax (Appeals) and the Tribunal are set aside and the matter is remanded to the Commissioner of Income-tax (Appeals) for fresh consideration. We may make it clear that the Commissioner of Income-tax (Appeals) should consider the matter afresh by considering both the judgments of this court reported in CIT v. Halai Nemon Association [2000] 243 ITR 439 (Mad) and CIT v. Samyuktha Gowda Saraswatha Sabha reported in [2000] 245 ITR 242 (Mad) with reference to the provision. We may also point out that all the provisions relating to exemption prior to 1989 and thereafter prior to 1992 and after April 1, 1992, have been considered by the Supreme Court in the case of Asst. CIT v. Thanthi Trust reported in [2001] 247 ITR 785 and that judgment also be taken note of by the Commissioner of Income-tax (Appeals). We also make it clear that bot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was no landlord to tenant relationship between the customers who were making one time payment for its use. Hence, the income of the assessee was rightly considered by the ld. Assessing Officer as emanating from business activity. (iv) By virtue of judgment of Hon'ble Apex Court in the case of ACIT vs. Thanthi Trust, 247 ITR 785, assessee might be entitled to claim the benefit of Section 11(1) of the Act on its business income for assessment years 1997-98, 1998- 99, 2006-07 and 2008-2009, subject to it fulfilling other requirements for claiming such benefit. (v) From assessment years 2009-10 to 2014-15, assessee was hit by first proviso to Section 2(15) of the Act, which was introduced by Finance Act, 2008. Assessee being an institution involved in activities of general public utility, it could not be considered as charity. (vi) Details of application of the income earned towards any charitable purpose were not furnished, though assessee claimed expenditure on health centre, medial relief and Avichi School. Further, the object clause of the assessee did not enable it to pursue educational activities. Thus even for assessment years 1997-98, 1998-99, 2006-07 and 2008-09, asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived very nominal rented for the health centre, diabetic and ENT centre, School and library. According to him, five acres of property with a building of 40,000 sq.ft, located at a prime area was given out by the assessee for running Avichi School, for an annual rent of H1,00,000/-. As per the ld. Authorised Representative, this by itself was a clear demonstration of charity done in the field of education. According to him, if let out at market rates, this property would have fetched the assessee crores of rupees. Similarly, according to him, health centre as well as diabetic and ENT centre were rented out for nominal rent for use in the medical field. All these as per the ld. Authorised Representative established that the predominant of the object of the assessee was nothing but education and medical relief. Thus, according to him, lower authorities fell in error in holding that assessee as not eligible for exemption claimed by it u/s.11(1) of the Act and hit by proviso to Section 2(15) of the Act. 7. Per contra, ld. Departmental Representative submitted that 96% of the income of the assessee was from renting out the properties. According to him, rental income received by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Authorised Representative, proportion of rental income received by the assessee viz-a-viz its gross receipts could not be taken as a measure for deciding the charitable nature of the assessee. 9. We have considered the rival contentions and perused the orders of the authorities below. Assessee has not disputed the findings of the ld. Commissioner of Income Tax (Appeals) that rentals received from its Kalyanamandapam had to be considered under the head income from business. In fact Hon'ble Jurisdictional High Court while remitting the question back to the ld. Commissioner of Income Tax (Appeals) for assessment years 1997-98, 98-99 etc, had indicated that income of the assessee from the Kalyanamandapam was more in the nature of business income, by virtue of the judgment of their Lordships in the case of CIT vs.Halai Nemon Association, (2000) 243 ITR 439. This view was taken by their Lordships overruling the opinion of this Tribunal in the earlier round, wherein Co-ordinate Bench held the income from Kalyanamandapam as income from house property. For taking this view, in the earlier round, this Tribunal had relied on a judgment of Jurisdictional High Court in the case of CIT vs. Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e land and building was owned by the assessee society, whether it was part of original settlement or not. In our opinion, once income of a trust is used by it to acquire a property, the property so acquired will be property held under trust. Income from such property will be income from property under the trust. Thus, in our opinion, rental income received by the assessee from Kalyanamandapam though it was in the nature of income from business, such income was nothing but income from property held under trust. 10. Now the question is whether assessee can be denied the exemption claimed by it u/s.11(1) of the Act by virtue of Sub Section (4A) thereof. For answering this question we have to see whether renting out the Kalyanamandapams could be considered as incidental to the attainment of the objects of the assessee. Objects of the assessee as it appear in its Memorandum of Association is reproduced hereunder:- 3. The objects for which the Society is established are :- a) to provide for, carry out, and - do all such acts and things as will or are likely or calculated to, promote the objects and purposes of a wholly and society charitable nature. b) To provide medial relief i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it from claiming exemption u/s.11 of the Act. It is true that clause (a) is of a wide amplitude. However what we need to remember is that the assessee was having registration u/s.12A of the Act since 11.04.1975, and such registration still continued. If the main object of the assessee was too wide, as mentioned by ld. Commissioner of Income Tax (Appeals), it would not have been given such registration. Having given such registration, which was alive since 1975, Revenue cannot now turn back and say that the main object was very wide and assessee could not be given benefit of Section 11(1) of the Act. Activity of renting out Kalyanamandapam in our opinion could be construed as only incidental to the attainment of its main object. Assessee therefore could take advantage of Sub Section (4) of Section 11 of the Act. There is no dispute that assessee had maintained separate books for its Kalyanamandapam. The audited accounts filed along with its return clearly show separate income and expenditure for each of the activities, including Kalyanamandapam. Sub Section 4A would not apply to the assessee once its business is considered as incidental to the attainment of its main objects. 11. No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has raised an argument that such donations can at best be treated as donation given by an individual for which benefit to the extent given under Section 80G alone could be claimed. However, a reading of Section 11(1) of the Act clearly show that, types of income mentioned in clauses (a) to (d) therein have to be excluded while computing the total income of a person in receipt of such income. Exclusion is available to any person irrespective of status. Viz whether an individual, HUF, AOP, firm or company. Vide clause (a), income which is applied for charitable purpose or religious purpose is necessarily to be excluded Donations given to a trust having 12A registration which is pursuing an object of medical relief, education or relief to poor, is in our opinion equivalent to using the money for such purpose. Intention remains the same. No doubt, ld. Commissioner of Income Tax (Appeals) has observed that assessee could not produce evidence for the charity done by it. However, it is not disputed that assessee had maintained books of accounts and produced the books and records before ld. Assessing Officer. Such books were subject to audits and assessee had filed Audit reports in form 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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