9911796707
TMI Blog2003 (9) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... ings, the AO noticed that the assessee had shown income from printing and publishing of newspapers under the name 'Daily Ajit', 'Taswir' (monthly) and also income from Daily Ajit Printers. Apart from that, the assessee has shown income from other sources to the tune of Rs. 77,282. The total income computed by the assessee after allowing depreciation to the tune of Rs. 3,30,377 was of Rs. 12,64,032. However, the assessee claimed a deduction under s. 11 of the IT Act, 1961, on the total amount by submitting that such exemption was allowable since the nature of Trust was 'Public charitable trust' with the objective of promotion of Punjab, Punjabi and Punjabiath. According to the AO, the provisions contained in s. 11 did not take automatic effect. He opined that the exemption could be allowed by considering fulfilment of conditions specified in other provisions, such as ss. 12, 12A and 13 of the IT Act, 1961. He pointed out that under cl. (a) or (b) of sub-s. (1) of s. 11 only income from property wholly or in part held in trust actually applied or set apart for application for future spending of religious or charitable trust within India was exempted to the extent and under the condit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted "M/s Sadhu Singh Hamdard Trust and Institution" constituted as a public charitable trust for the promotion of Punjab, Punjabi and Punjabiath and its business is incidental to the attainment of the objectives of the institution and separate books of accounts are maintained in respect of the business..." The AO observed that the activity of running business of publication of newspapers and journals carried out by the assessee-trust was pervaded by a profit motive and the charitable purpose was, in fact, submerged by profit making motive. According to him, the purpose of the trust must be essentially charitable in nature and not covered for carrying on activity which had profit-making motive as a predominant object. Reliance was placed on the judgment of the Hon'ble Supreme Court in the case of Dharma Deepti vs. CIT 1978 CTR (SC) 120 : (1978) 114 ITR 454 (SC). The AO also pointed out that the trust deed described the objectives as under: —Promotion and propogation of Punjab, Punjabi and Punjabiath. —Establishment of a chair in any university. —Establishment of Punjab Bhawan. —Prizes on the best books in Punjabi. Holiday homes for writers/poets, etc. The AO s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered incumbent to bring Shri Barjinder Singh as managing editor of M/s Daily Ajit. It was pointed out that newspaper of the trust 'Ajit' had achieved national status and was having largest circulation amongst Punjabi newspapers in the world. It was stated that remuneration being paid to Bibi Parkash Kaur was Rs. 1,000 per month and not Rs. 12,000 per month. It was also submitted that Shri Barjinder Singh was paid Rs. 26,400 as house rent allowance whereas Rs. 40,000 were paid to Smt. Sarabjit Kaur wife of Shri Barjinder Singh as rent for the godown used for keeping papers. It was claimed that these payments could not be taken as benefit for the purpose referred to in s. 13(3) of the Act. It was also brought to the notice of the CIT(A) that there were amendments in s. 2(15) of the Act and words "not involving carrying on of any activity for profit" had been omitted w.e.f., 1st April, 1984. It was further submitted the running of daily newspaper was incidental to the attainment of object of the trust. Reliance was placed on the decision of the Hon'ble Madras High Court in the case of Thanthi Trust vs. CBDT Ors. (1995) 213 ITR 639 (Mad) as well as on the recent decision of the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated balance-sheet and consolidated P L a/c were also being prepared. It was stated that the net profit for the year under consideration was at Rs. 22,99,905. 5.3 After considering the rival submissions, the learned CIT(A) held that as per the provisions of s. 13(1) of the Act, if any income of the trust or property of the trust was used or applied for the benefit of a person then the corresponding income could not be allowed the benefit of deduction under s. 11 of the Act. He also noted that an amount of Rs. 12,000 was paid to Bibi Parkash Kaur w/o late S. Sadhu Singh Hamdard, author of the trust. He further noted that residential house was also provided to Bibi Parkash Kaur for her residential purposes by the trust, although the house was the property of the trust. The learned CIT(A) has also noted that third supplementary deed dt. 2nd May, 1979, also provides that Shri Sadhu Singh Hamdard or his wife have right to get Rs. 1,00,000 to meet the legal as well as social responsibilities and that the said amount shall have the first charge over the trust properties. Accordingly, it was held by the CIT(A) that the trust is hit by the provisions of s. 13(1)(c) of the IT Act and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Supreme Court, such option required to be exercised before the assessment was concluded as held in the case of CIT vs. Nagpur Hotel Owners Association (2001) 165 CTR (SC) 1 : (2001) 247 ITR 201 (SC). He concluded that the assessee has neither utilised its income for charitable purpose nor the system of carry forward as per the Expln. 2(b) of s. 11(1) was adopted. He has also pointed out that the assessee has also not invested the income as per provisions of s. 11(5) of the Act, as submitted by the AO. 5.4 In view of the above, the learned CIT(A) confirmed the order of the AO holding that the assessee-trust was not eligible for deduction under s. 11 of the Act. 6. Being aggrieved the assessee is in appeal. 7. Shri Prem Singh, advocate, the learned counsel for the assessee, submitted before us that Dr. Sadhu Singh Hamdard created a public charitable trust on 17th Aug., 1977, by settling all his assets consisting of movable and immovable properties including Daily Ajit (a daily Punjabi newspaper) with its contingents. Subsequently supplementary deeds were executed by the founder on 22nd Nov., 1977, 2nd May, 1978, 17th May, 1978, and 6th Sept., 1980. It was stated that the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he work, she would be entitled to Rs. 1,000 per month as honorarium for looking after the affairs of the trust and the other trustees, could also be given suitable honorarium, if required. He further emphasised that cl. 2(c) of fourth supplementary deed dt. 17th Sept., 1988, provided that none of the issues of both S. Sadhu Singh Hamdard the author of the trust and Bibi Parkash Kaur, secretary of the trust shall become a trustee of the said trust. The learned counsel for the assessee argued that the main objection of the Department for denying exemption to the trust was that the objects of the trust were not within the ambit of s. 2(15) of the Act (viz., general public utility). It was stated that s. 2(15) of the Act provides that charitable purposes includes relief to the poor, education, medical relief and the advancement of any other object of general public utility. It was emphasised that the running a newspaper had been found to be an object which would qualify as an object of general public utility and the newspaper can either be run as business with profit motive and it can be run as a means of incidental to the attainment of the objects of the trust, which can be education ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust or legal obligation ? Property of every person or society or AOP is not necessarily held under trust. Registration of a society makes no difference to this point. On the other hand, the fact that property yields a profit will not debar the claim. Actually the fact that property in this context includes a business undertaking necessarily means that there will be profit. During the course of the discussion, some illustrations were given. It was enquired whether Anath Vidyarthi Griha is convered. It obviously, is. It is obvious because it is charitable trust and it is not run for profit. It is run for charity. The point then raised was, will the fact that the Anath Vidyarthi Griha runs a printing press make a difference in this? My answer would be No. Another illustration given was on hospital with some free wards and some paying wards. Again, subject to certain normal assumptions, that would qualify. The fact that the press or the paying wards earn some income will not disqualify them." It was emphasised that the above passage also referred in a number of decisions where different profit making activities came up for adjudication before the Courts and one of the case was ren ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court did not overrule the earlier decision of the Hon'ble Madras High Court in the case of CIT vs. Thanthi Trust (1981) 23 CTR (Mad) 155 : (1982) 137 ITR 735 (Mad) but it explained that sometimes notwithstanding the objective the restriction in the statute may lose the benefit as it happended for some of the years. It reiterated its earlier decision in Surat Art Silk Cloth Manufacturers Association's case but took the view that s. 13(1)(bb) or s. 11(4A) as it stood had to be applied when they were part of the statute. Accordingly, it was submitted that there was absolutely no authority for the view that running a newspaper could ever be questioned as not being an objective of general public utility and the view taken by the AO as well as by the CIT(A) on this point was totally erroneous. 7.1 The learned counsel for the assessee further submitted that the second objection of the Departmental authorities was related to the violation of s. 13(3) as relatives of the author S. Sadhu Singh viz., wife, as secretary and son as managing editor of newspapers were in receipt of salary. It was stated that the salary to Smt. Parkash Kaur was given in view of her services rendered to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gards to another objection of the Department that the trust property is not used for any of the other objects like forming of a chair in any University, establishment of Punjabi Bhawan or holiday home is concerned, it was stated that running of newspaper itself was service, the expectation that there should be other services, which was intended, but could not be done in the year under consideration cannot be a matter of complaint. It was stated that it was neither possible nor necessary that various subsidiary or incidental objects should be carried out every year, since these acts are expected to be carried out in due course and that pending such extension, the primary service of running the newspaper as an organ of educating public information promoting Punjabi language, literature and culture of area being the main purpose is continued to be carried on so that there can be no denial of exemption on the ground that all the purposes were not carried out since the other activities are incidental to the main object of the trust. 7.4 As regards to the another objection, i.e., utilisation for acquiring additional asset or additional stock, the learned counsel for the assessee submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the investments related to the efficient running of daily newspaper for meeting the main objects therefore, the investments should be treated as utilisation of funds to achieve the main objects of the trust. 7.6 As regards to the impugned order of the learned CIT(A), the learned counsel for the assessee vehemently argued that the learned CIT(A) had simply repeated the arguments of the AO at length and had not applied his own mind. It was also stated that the CIT(A) assumed that the decision of the Hon'ble Madras High Court in the case of Thanthi Trust vs. CBDT (1995) 213 ITR 639 (Mad) had been reversed. However, the learned CIT(A) had totally mislead himself because it had not been reversed for the years under consideration. It had been reversed only to the extent that the trust was not eligible for exemption for the asst. yrs. 1984-85 to 1991-92 for the reason that the High Court had not considered the impact of s. 11(4A) which confined the exemption for publication business only to religious trusts during the relevant years. It was stated that the CIT(A) apparently had gone by the Head Notes wherein it was stated that the Thanthi Trust vs. CBDT is reversed without considerin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to its objectives. It was stated that the AO as well as the learned CIT(A) had considered the old section, however, s. 11(4A) of the Act has been amended w.e.f., 1st April, 1992. It was emphasised that there could not be any better mode of propogating the concept of Punjab, Punjabi and Punjabiath other than running of a newspaper, therefore, the assessee-trust was entitled to fulfil the objects which were otherwise charitable in nature with the assets of newspaper and its machinery. 7.8 While concluding the arguments, Shri Prem Singh, advocate, the learned counsel for the assessee, vehemently argued that there was no scope for the Department, in denying the rightful claim of the assessee. The learned counsel for the assessee further relied on the good number of cases viz.: (1) CIT vs. Palghat Shadi Mahal Trust (1999) 153 CTR (Ker) 46 : (1999) 236 ITR 722 (Ker) (2) CIT vs. Shri Ram Education Foundation (2001) 171 CTR (Del) 220 : (2001) 250 ITR 504 (Del) (3) CIT vs. Social Service Centre (2001) 169 CTR (AP) 130 : (2001) 250 ITR 39 (AP) (4) Shri Chandra Charitable Trust vs. ITO (1995) 80 Taxman 300 (Ahd)(Mag) (5) Ghalib Institute vs. Asstt. CIT (1995) 53 ITD 358 (Del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f his own right and started the publication of newspapers. When he created the trust, he kept for himself (1) right to stay in trust property (2) he or his wife in life time Rs. 1 lac for meeting legal and social obligations. However, no such amount had been claimed till now. (3) small salary for work (4) Bibi Parkash Kaur wife of the author got right of Rs. 1,000 per month for her work as secretary and later on as printer and publisher of newspaper. The author prohibited his or his second wife's children from becoming trustees of the trust. The original trust deed which was written on 17th Aug., 1977, was supplemented on 22nd Nov., 1977, for the purpose to give powers to trust to sell, pledge or mortgage properties and to give the properties of Ajit Printers to trust. Again supplementary deed was written 2nd May, 1978, in which it was provided that the author or his wife Smt. Parkash Kaur would be entitled to get Rs. 1 lac in their lifetime. However, no such claim has been made till now. The supplementary deed was again written on 17th May, 1978, wherein it was provided that none of the issues of author. S Sadhu Singh Hamdard and his wife Smt. Parkash Kaur shall be trustees and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jabiath. The word 'Punjab' is not related to only State of Punjab but relates to the people who have any link with the present Punjab or the State of Punjab, which was in existence before the partition, which took place in 1947. Similarly, the word 'Punjabi' denotes the Punjabi people i.e., the people who have their origin from the Punjab. It is not essential that the people are residing in Punjab only but the people residing all over the world who have any cultural link with the State of Punjab. Similarly, the word 'Punjabiath' relates to the Punjabi culture. Therefore, it can safely be held that the object of the assessee is not related to any particular caste, region area or community. In that view of the matter, it can safely be held that the running of newspaper is a better mode of propogating the concept of Punjab, Punjabi and Punjabiath and it could be considered as object of general public utility. 9.1 We may further add here that in the case of Laxman Basant vs. Charity Commissioner, Bombay (1963) 2 SCR 625, it has been held that running of newspaper "Kesri" and "Mahratta" to propogate the ideas of Lok Manya Tilak were charitable in nature. Similarly the decisions of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of s. 13(3) of the Act. However, no finding has been given in what manner the provisions of s. 13(3) were attracted to the facts of the present case. However, it is not the case of the Department that the payments made by the assessee-trust by way of salary, etc. were excessive in any manner. As such, the provisions of s. 13(3)(c) are not applicable to the facts of present case. 9.4 As regards to the application of provisions of s. 11(4A) is concerned, it is noticed that the authorities below had considered the provisions which were applicable before the amendment, i.e., w.e.f., 1st April, 1992. The amended provisions of sub-s. (4A) of s. 11 read as under: "(4A). Sub-s. (1) or sub-s. (2) or sub-s. (3) or sub-s. (3A) shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the trust or, as the case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business. From the above provisions of s. 11(4A), it would be clear that the exemption can be granted if the activities of the trust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department that all the aforesaid items were utilised for any purposes other than the printing of the newspapers. Therefore, the investments made by the assessee were related to its business of running the newspapers, which was incidental to attain the main object of the assessee-trust. 9.5 In view of the aforesaid discussion, we are of the view that the assessee was entitled to exemption under s. 11 of the Act. In this manner, grounds Nos. 1 to 17 had been disposed of. 10. Ground Nos. 18 to 21 read as under: "18. That position regarding income from the other sources at Rs. 77,282 has wrongly been considered. 19. That the learned authority below has wrongly held that grounds Nos. 3, 4, 5, 6, 7 and 8 were not argued. 20. That the learned authority below should have appreciated that no proper opportunity was allowed by the learned AO in regard to issues mentioned in the assessment order. 21. That ground Nos. 10, 11, 12, 13, 14 and 16 should have been properly disposed of." The above grounds of appeal were not pressed before us and accordingly the same are dismissed as not pressed. 11. Ground No. 22 relates to the charging of interest under s. 234B of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en taken into account. 14. That no adverse inference should have been drawn from maintaining separate books of accounts which were maintained in accordance with law. 15. That observations in para 24 that the appellant had deliberately not incorporated the income as part of income and expenditure a/c were devoid of any merit and were arbitrary. In fact account was properly maintained as provided by law. There was no discrepancy whatsoever. 16. That the learned CIT(A) has failed to appreciate that income was properly utilised for charitable purposes and public utility. 17. That it is incorrect to hold that income was not properly applied in accordance with law. 18. That the learned CIT(A) has erred in holding that option in writing was not exercised by the appellant. 19. That the authorities quoted by the learned CIT(A) were irrelevant on the point at issue. Indeed the Supreme Court judgment in Thanthi Trust case, should have been considered in the right context. 20. That the interpretation of Board circular has not been properly taken into account. 21. That the authority below should have appreciated the realities and should not be influenced by imaginative c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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