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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 ..... , 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 10A of the Act. In such circumstances, we find no reason to uphold the finding of the lower authorities that predominant activity of the assessee was not charity. Coming to the application of proviso to Section 2(15) of the Act assessee’s charitable activities were directly or indirectly in the nature of relief to the poor or education or medical relief. It was not an organization which was pursuing an activity of general public utility, different from education, medical relief or relief to the poor. First proviso to Section 2(15) is attracted only where an assessee carries on activities which was of general public utility other than those mentioned specifically in the definition of charitable purpose given in Section 2(15). In the circumstances, we are of the opinion that assessee was eligible for the exemption claimed by it u/s.11(1) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of Thanthi Trust and the decision of the Jurisdictional High Court including the decision rendered in the Appellant s own case. 7. For that the Learned Commissioner of Income Tax (Appeals) having stated in para 4.5 of page 28 of the impugned order that the income has been derived from the kalyanamandapams and which shall not be included in the total income of the appellant provided that the income so derived is applied for charitable or religious purposes .. .. erred in denying the exemption u/s 11, without appreciating the fact that the said income was fully utilized for charitable purpose approved by the objects of the trust backed by voluminous data including the audited financial statements. 8. For that the Learned Commissioner of Income Tax (Appeals) finding that there was failure on part of the appellant in furnishing data is perverse and not in accordance with the material available on record. 9. For that the Learned Commissioner of Income Tax (Appeals) ought to have appreciated the fact that the only issue was with respect to treatment of the income derived from kalyanamandapam and there was no dispute on the application of income for ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was successful before this Tribunal with regard to its claim for exemption u/s.11 of the Act. This Tribunal had held that income derived from the two Kalyanamandapams were to be considered as property income and Sub Sections (4) and (4A) of Section 11 of the Act did not apply. Against these orders, the Revenue had moved an appeal before Jurisdictional High Court for assessment years 1997-98 and 1998-99 and their lordships through a judgment reported as 323 ITR 27 remitted the question regarding eligibility of the assessee for claiming exemption u/s.11 of the Act back to the ld. Commissioner of Income Tax (Appeals) with the following observations. 5. For the purpose of consideration, we may refer to the judgment of this court in the case of CIT v. Samyuktha Gowda Saraswatha Sabha reported in [2000] 245 ITR 242 . That was a case where this court was considering the question as to whether the letting out of property as marriage hall by a charitable trust for earning income is a business income or property income and whether such trust is entitled to the benefit of exemption under section 11 of the Act in respect of such income. Of course, the Division Bench held that the sabha l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 profits and gains of business and 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 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. 8. From the reading of both the orders of the Commissioner of Income-tax (Appeals) as well as the Tribunal, we are unable to find as to whether the trust in question would be entitled to exemption in terms of the above provision with regard to the profits and gains of business. 9. It is pertinent to point out that the above provision of subsection (4A) was replaced by insertion of a new provision with effect from April 1, 1992, and that section reads as follows : 11.(4A) Sub-section (1) or sub-section (2) or subsection (3) or sub-section (3A) shall not apply in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 both the Revenue as well as the assessee are entitled to place whatever judgments which they intend to rely before the Commissioner of Income-tax (Appeals) for his consideration . For assessment year 2006-07, this Tribunal itself had set aside the question regarding eligibility of the assessee for claiming exemption u/s.11 of the Act back to the ld. Commissioner of Income Tax (Appeals) for re-consideration, following the above referred judgment of Hon ble Jurisdictional High Court. Appeals for assessment years 2008-09 to 2014-15, are first round. 5. As already mentioned by us, the primary reason, for denying the exemption claimed by the assessee u/s.11(1) of the Act, was that its income consisted of rent received on running of two kalyanamandapam which was run as a business. As per the ld. Assessing Officer these properties were not settled by the settlor as trust property and hence could not be considered as properties held under trust. Further, as per the ld. Assessing Officer, objects of the assessee did not author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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, assessee became ineligible for claiming the benefit under Section 11(1) of the Act. (vii) Details with regard to amount spent on charitable activities were not produced. Effectively, ld. Commissioner of Income Tax (Appeals), held that assessee was not eligible for exemption claimed by it u/s.11(1) of the Act for any of the impugned assessment years. 6. Now before us, ld. Authorised Representative strongly assailing the orders of the lower authorities submitted that main object of the assessee society, as contained in its Memorandum of Association indicated carrying out any activity, calculated to promote any object which was wholly charitable in nature, apart from doing medical relief. According to him, the charitable activity allowed by the main object did not exclude education. As per the ld. Authorised Representative, assessee had no grievance in so far as, income from the Kalyanamandapams being treated as business receipts by the lower authorities. However, according to him, the Kalyanamandapams were noth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 assessee from RTK and Mena for previous year ending 31st March, 2014 came to H6,70,01,000/-. As per the ld. Departmental Representative, assessee was clearly running a business in the guise of charity. According to him, object clause of the assessee did not have any education in it. As per the ld. Departmental Representative, donations given by the assessee to other trusts having 80G registration could at best be considered as equivalent to contribution given by an individual on which 50% deduction was available, that too to the extent allowable under Section 80G of the Act. Relying on a survey conducted by the Department in the premises of the assessee on 16.07.2018, ld. Departmental Representative submitted that results of such survey clearly indicated that assessee had leased out its property at Dr. Radhakrishnan Salai, Mylapore to a firm called M/s. Cine Film Distributors for a sum of H4,80,000/- which was less than its market rate. As per the ld. Departmental Representative the said film distributors h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alyanamandapam 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. Samyuktha Gowda Saraswatha Sabha, (2000) 245 ITR 242, which was also duly considered by their Lordships when the question was remitted back to the ld. Commissioner of Income Tax (Appeals). Obviously, assessee cannot now raise a plea against the finding of the ld. Commissioner of Income Tax (Appeals) that income of the assessee from renting out Kalyanamandapams were business income, and it has wisely done so. However, it is peeved on the view taken by the ld. Commissioner of Income Tax (Appeals) that such business income could not be considered as income earned from a property held under the Trust, thereby disentitling the assessee from taking advantage of Sub section (4) of Section 11 of the Act. Section 11(4) and 11(4A) of the Act, as it was stood in the period covered by the appeals before us and which are apposite are reproduced hereunder:- Section 11(4) of the Act:- For the purposes of this section property held under trust includes a business undertaking so held, and where a claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 in its most comprehensive sense and other relief whatsoever, but of a wholly charitable nature to the public irrespective of nationality caste, creed, colour, sect or any other distinction whatsoever. c) without prejudice to the above comprehensive objects expressed in general terms and, without limiting, in any way, the scope or extent thereof, to establish, promote, provide for and maintain maternity homes nursing homes, hospitals, general and for the treatment of children s diseases, provide facilities for surgical operations. out-patient. Dispensariessupply of medicines and after-treatment care and to take care of and provide for orphans, the aged, the infirm and the destitute d) for any of the purposes of the Society i. to acquire, by accepting as gift, purchase, lease, exchange or otherwise, lands, buildings and structures of any tenure or description, to sell, mortgage, exchange, lease, let out, hire or otherwise deal with such property; and to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. Now coming to the question whether the predominant activity of the assessee was charity and if so what was the nature of charity. It is not disputed that apart from the two Kalyanamandapams, assessee was having properties from which a school, a health centre and a library were run. It might be true that the school was run by another trust. However, rental received by the assessee for running the school called Avichi school was nominal. We find great strength in the argument of the ld. Authorised Representative, that property from which the School was run, if given out on market rates, would fetch tens of crores in income, and forgoing such income for educational purpose, was nothing but charity in the nature of education. Especially so, since the school was run by a trust which was undisputedly having registration u/s.12A of the Act. Apart from this assessee had earned little revenue from its diabetic centre. It had also given out a premi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentative 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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