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TMI Blog2023 (1) TMI 611X X X X Extracts X X X X X X X X Extracts X X X X ..... in assessment year 2012-13 and 141 days in assessment year 2013-14. Even the rental earned from renting out of auditorium in relevant AY 2010-11 is Rs.40,84,433/- minus expenditure of Rs.15,77,851/- and the net income receipts is declared at Rs.25,06,582/- as against gross total income from educational activity at Rs.2,03,13,541/-, which is only to the extent of 12.5% of total receipts. Once the assessee falls under the category of education in term of section 2(15) of the Act, assessee is eligible for exemption u/s.11 of the Act because letting out of auditorium is incidental to fulfilment of the object of the trust i.e., education. Hence, we allow the appeal of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs, the AO required the assessee to give the details of miscellaneous receipt declared by assessee's trust in its books of accounts. The assessee responded that the major portion of miscellaneous receipts pertain to income generated from let out of auditorium hall and for that purpose he submitted the details to whom the auditorium was let out and for what purpose it was let out. The AO has reproduced the details of receipts earned by assessee by letting out the auditorium. The AO noted that the auditorium has been let out to general public for a total of 227 days during the relevant financial year 2009-10 relevant to assessment year 2010-11. The AO noted that the income generated by the assessee by letting out the auditorium was to the tune of Rs.40,84,433/-. The AO noted in his assessment that auditorium has been let out to general public for conduct of dance programme, music programme, corporate meetings, corporate conference, corporate get together and family functions. According to him, the auditorium has been allowed for general public utility for their private functions and this letting out has been done with a profit motive and accordingly, net income was declared at Rs.25 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO assessed the net receipt of Rs.25,06,582/- as taxable and denied exemption u/s.11 of the Act. However, the AO allowed exemption u/s 11 of the Act on the receipts of school holding the same from educational activity. Aggrieved, assessee preferred appeal before the CIT(A). 3.1 The CIT(A) by common order for all the four years noted the details of gross receipts minus expenditure incurred on auditorium and total taxable income computed by AO u/s.143(3) of the Act as under:- 2010-11 2011-12 2012-13 2013-14 Rs. Rs. Rs. Rs. Auditorium Hall Let out income 40,84,433 25,50,104 30,75,820 40,30,066 Less: Auditorium expenditure 15,77,851 10,79,801 17,20,622 27,34,628 Total Income 25,06,582 14,70,303 13,55,198 12,95,438 Taxable Income (Rounded Off) 25,06,580 14,70,300 13,55,200 12,95,440 The assessee before CIT(A) claimed that the school campus includes an auditorium for conducting conferences, lecture meetings, etc., for its students. The auditorium is also used for letting out to institutions for promotion of fine arts, educational purposes, etc., for which the assessee receives rent. The assessee also maintains separate books of accounts for the auditorium. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which the assessee is not paying any rent or compensation. The assessee before us filed the details how the auditorium as part of its infrastructure is used and the details he filed is as under:- (i) conducting weekly meetings by the Educational Advisor / Principal and staff; (ii) monthly meetings of the parents and teachers. This is usually on all Saturdays in the fore-noon by dividing the students into 3 groups; (iii) Holding lecture meetings on school related subjects by inviting Guest Lecturers; (iv) Conducting Annual Day, Children's Day celebrations, etc. in batches; (v) Conducting inter-school competitions on various subjects, quiz, music, etc; and (vi) Conducting inter-school competition in memory of the Founder of the Organisation. (vii) Using the Auditorium by students during leisure hours for studies, etc. The assessee also filed written submissions giving the details of factually incorrect mistakes committed by AO that the auditorium has a separate gate and exclusive car parking for providing access by outsiders and general public and it is letting out to general public for corporate meetings, corporate conferences or family functions. It was also conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 ITR 1. The ld.Senior DR argued that in view of the decision of Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority, supra, the idea of predominant object among several other objects is discarded by Hon'ble Supreme Court in view of the proviso to section 2(15) of the Act after its amendment by the Finance Act, 2008 w.e.f. 01.04.2009 and as it stands today. He contended that the prohibition is relieved to a limited extent, by the proviso which carves out the condition by which otherwise prohibited activities can be engaged in by charities carrying out objects of general public utility. He contended that the proviso to section 2(15) of the Act, the conditions are (i) that such activities in the nature of trade, commerce, business or services (in relation to trade, commerce or business for consideration) should be in the course of actual function to attain the object of general public utility and (ii) the quantum of receipts from such activities should not exceed the limit prescribed of Rs.10 lakhs or Rs.20 lakhs, as the case may be depending on the year of assessment. He argued that both parts of the proviso i.e., (i) & (ii) have to be read conjunctively for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hna and Sri T. M. Srinivasan shall constitute the Board of Trustees. 3) The Settlors hereby transfer a sum of Rs.15,000/- (Rupees fifteen thousand) to the Board of Trustee s made up of a sum of Rs.5,000/- contributed out of each of the three Trusts. The Board of Trustees shall hold the said funds and any other funds or assets that may hereafter be transferred by the Settlors or any other persons and all income from such funds or assets and all accumulations thereof or the objects and purposes hereinafter mentioned, namely (a) to construct a hospital in the premises belonging to the Thirupani Trust and known as "Rama vilas", situated in Luz Church Road, Mylapore, Madras, and maintaining and managing the said hospital, and for such purpose to prepare a scheme and carry it out as expeditiously as possible; (b) to repair, renovate, re-construct and/or expand sir M.ct. Muthiah Chettiar High School, Lady Muthiah Chettiar Girls High school and M.Ct. M. Chidambaram Chettyar Memorial Boys Hostel, all situated in Madras and expand M. Ct.M. Chidambaram Chettyar Memorial Higher Elementary School, Kanadukathan, (c) to meet all expenses necessary and incidental for carrying out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d been amended last in 1983, was again amended, by Finance Act, 2008, w.e.f. 01.04.2009. Some other amendments too were made, with effect from the same date by the Finance Act, 2009 and Finance Act, 2010. With the said amendments, as on 01.04.2009, the provision read as follows: (15) "charitable purpose" includes relief of the poor, education, medical relief, [preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility: Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity:" Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is [ten lakh rupees] or less in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to reduce the overheads, the assessee had to let out the auditorium for conducting meetings, conferences, for music, dance, etc. The ld.counsel for the assessee also relied on the decision of Hon'ble Supreme Court in the case of Ahmedabad Urban Authority, supra and drew our attention to placitum 126 at page 88 of the ITR, wherein Hon'ble Supreme Court has observed as under:- 126. As observed at the beginning of this judgment, GPU charities have been recognized as distinct from the 'per se categories' of charity (education, medical relief, relief to the poor; and later - preservation of water sheds, monuments, environment, and yoga). The judgment of this court in Dharmadeepti (supra) has clarified that the per se categories - are not subjected to the restrictive condition of eschewing activities of profit. This enunciation of the principle has been endorsed in all later decisions - starting with Surat Art Silk (supra). Therefore, (1975) 3 SCR 783 (1960) 3 SCR 837 (1991) 1 SCR 938 the restriction imposed by Parliament against charities - prohibiting them from carrying on activities of profit do not apply to the first six categories. Although the occasion did not so arise in Surat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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