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TMI Blog2016 (6) TMI 1351X X X X Extracts X X X X X X X X Extracts X X X X ..... poverty and imparting of sound education with opportunities for research. The assessee filed its return of income on 13.10.2010 for assessment year 2010-11 returning a taxable income of `Nil and claimed exemption u/s.11 of the Act, which is denied by the Revenue Authorities. 3.1. The issue in the grounds of appeal is regarding the treatment of excess receipt over expenditure on the auditorium owned by the assessee. The A.R submitted that it is an educational institution claiming exemption u/s.11 to 13 of the Act. The AO having accepted the assessee trust's predominant objective as educational in nature should have appreciated the fact that its excess income over expenditure will not attract the proviso to sec.2(15) of the Act. The main objective of assessee trust is charitable purpose, which enables the proviso to sec.2(15) of the Act and therefore, the excess of income over expenditure is not liable to tax as per the provisions of the Act.The AO treated the income generated from the auditorium as a separate business of the trust and the excess income over expenditure was attracted by the proviso to sec.2(15) of the Act. Aggrieved, the assessee carried the appeal before the Ld.CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also stated that the main objects of the Trust mentioned in Clause 2(a),(b) and (c) are educational in nature and mentioned in Clause 2(d) is medical relief to poor. 4.1 The ld. AR contended that the AO erred in treating the receipts of "Suguna Auditorium Hall" as business income and denied exemption u/s 11(4A) of the Act. The ld. AR also contended that registration u/s 12AA of the Act was granted to the assessee several years ago and there has been no question of the society indulging in any trade or commerce activities till date. The ld. AR further contended that the objects of the society are mainly education and not general public utility and as such the proviso to sec.2(15) of the Act would not be applicable to it consequently making sec.11 & 12 of the Act inoperative was erroneous and beyond the intention of the legislation. The ld. AR was also contended that the receipt from letting were used towards educational activities, medical relief and relief to the poor which amply provides that such activity has been carried out to accomplish the primary purpose of the society. 4.2. The ld. AR argued that the question as to whether a particular activity is in the nature of busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the benefit of students, maintain agricultural farms for the benefit of the poor.. b. To establish, maintain or acquire library or libraries for the benefit of students community. c. To institute and award scholarships in India, for the study, research and apprenticeship for all or any of the aforesaid educational purposes. d. To establish, maintain, run, develop, improve, extend, grant donations for and to aid and assist in the establishment, maintenance, running, development, improvement and extension of hospitals, clinics, X-ray plants, dispensaries, materinity houses, recreation centres and all similar institutions, as well afford treatment, cure, rest, recuperation and other advantages calculated to alleviate human sufferings. e. To conduct poor feeding and generally give ailment to the poor, needy and disabled persons and to afford relief to people in distress due to natural calamities, accident, earthquake, flood, famine, epidemic and conduct or grant donations for the support of orphanages and welfare institutions. 7. It is to be noted that section 11(1) of the Act grants exemption to the income derived from property held under trust wholly for charitable or reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table objects. The exemption u/s. 11 cannot be granted on the reason that the business itself was not in existence at the time of formation of the trust and the property held under trust at the time of formation of the trust was not spelt out in the Memorandum of Association of the assessee. The running of "Suguna Auditorium Hall" was not at all in existence at the time of formation of the trust so as to say that the business is property held under trust. Thus, the activities relating to running of "Suguna Auditorium Hall" was not even in the contemplation of the Memorandum of Association on the basis of which the Society is formed and, therefore, could not have been settled upon trust. The business carried on behalf of a trust rather indicates a business which is not held in trust, than a business of the trust run by the assessee. In this case, the activities viz., running of community hall, was carried on by the assessee for and on behalf of the trust and it was not business held under trust. Section 11(1) of the Act confers exemption from tax only where the property is itself held under trust or other legal obligation; it does not apply to cases where a trust or legal obligation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res for the business income of a trust or institution to be exempt is that the business should be incidental to the attainment of objectives of the trust or institution. A business whose income is utilized by the trust or the institution for the purposes of achieving the objectives of the trust ...........In any event, if there be any ambiguity in the language employed, the provision must be construed in a manner that benefits the assessee". 13. Prima facie the above observation would appear to support the assessee's case in the sense that even if running of "Suguna Auditorium Hall" is held not to constitute a business held under trust, but only as a business carried on by or on behalf of the trust, so long as the profits generated by it are applied for the charitable objects of the trust, the condition imposed u/s. 11(4A) of the Act should be held to be satisfied, entitling the trust to the tax exemption. 14. In our opinion, these observations have to be understood in the light of the facts before the Supreme Court in the case of Thanthi Trust (supra), wherein the trust carried on the business of a newspaper and that business itself was held under trust. The charitable object of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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