TMI Blog2013 (2) TMI 380X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness has been employed to achieve its objectives of education and relief to the poor and that it has maintained separate books of account in respect thereof - In favour of assessee Violation of the provisions of Section 13(3) - Any part of income or any property of the trust or the institution is applied directly or indirectly for the benefit of any person referred to in sub-section (3) of Section 13 – Certain payment were made to persons as defined in Section 13(3) - Held that:- Tribunal while reversing these findings had not recorded any definite and clear finding relating to violation of the provisions of Section 13(3). The matter, thus, requires to be remanded to the Tribunal to re-adjudicate the claim of the assessee for exemption of income u/s 11 - Remand back to AO - ITA No. 75 of 2004 - - - Dated:- 26-7-2012 - MR. AJAY KUMAR MITTAL. AND MR. G.S. SANDHAWALIA. JJ. PRESENT: Mr. Yogesh Putney and Mr. Vivek Sethi, Advocates for the appellant. Mr. Pankaj Jain and Mr. D.K. Goyal, Advocates for the respondent. AJAY KUMAR MITTAL, J. 1. This order shall dispose of a bunch of ten appeals bearing ITA Nos. 75 to 77 of 2004,426, 427, 636 of 2005, 495 of 2007, 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l as narrated in the appeal are that the assessee filed its return of income on 29.10.1993 for the assessment year 1993-94 at 'nil' income. During the assessment proceedings, the Assessing Officer noticed that the assessee had shown income from printing and publishing of newspapers under the name 'Daily Ajit', Tasvir (monthly) and also income from Daily Ajit Printers. The assessee had also shown income from other sources of Rs.77,282/-. The total income computed by the assessee after claiming depreciation to the tune of Rs.3,30,377/- was at Rs.12,64,032/-. The assessee claimed deduction under Section 11 of the Act on the total amount claiming that the nature of the trust was 'Public Charitable Trust' with the objective of promotion of Punjab, Punjabi and Punjabiat. The Assessing Officer noticed that for claiming exemption, two conditions should be fulfilled, i.e. (i) purpose of trust must be advancement of object of general public utility and (ii) purpose must not involve carrying on of any activity for profit. The Assessing Officer observed that the exemption could be allowed on fulfilment of conditions specified in Sections 12, 12A and 13 of the Act as provisions of Section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed an appeal before the Commissioner of Income-Tax (Appeals) [in short, the CIT(A) ] who vide order dated 23.3.2001 dismissed the appeal. Thereafter, the assessee filed an appeal before the Tribunal. The Tribunal vide order dated 29.9.2003 allowed the appeal holding that the assessee was entitled to exemption under Section 11 of the Act. Hence, the present appeal by the revenue. 6. We have heard learned counsel for the parties and have perused the record with their assistance. 7. Learned counsel for the revenue submitted that the Assessing Officer had rightly declined exemption under Section 11 of the Act which was confirmed by the CIT(A). According to the learned counsel, the activity of the trust was a business activity as running the business of publication of newspaper and journals carried out by the assessee trust was pervaded by a profit motive and could not be considered as activity for charitable purpose within the meaning of 'charitable purpose' defined under Section 2(15) of the Act. It was further contended that Section 11 of the Act was not automatic and other conditions enumerated in Sections 12, 12A and 13 of the Act were required to be fulfilled. It was urged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 11(1)(a) of the Act and the findings with regard to Section 13(1)(c) and 13(3) of the Act are contrary to the record and not based thereon. Learned counsel referred to judgments in Re the Trustees of the Tribune, (1939) 7 ITR 415 (PC) Sole Trustee Loke Shikshana Trust v. Commissioner of Income Tax, Mysore (1975) 101 ITR 234 (SC), Indian Chamber of Commerce v. Commissioner of Income Tax, West Bengal-II, Calcutta (1975) 101 ITR 796 (SC), Commissioner of Income Tax v. Nagpur Hotel Owners Association (2001) 247 ITR 201 (SC), Assistant Commissioner of Income Tax v. Thanthi Trust (2001) 247 ITR 785 and of the Madras High Court in Auroboutique Trust v. Commissioner of Income Tax (2002) 178 CTR 352 and Commissioner of Income Tax v. Iyya Nadar Charitable Trust (2006) 284 ITR 404 to support his submissions. Much emphasis was put on the judgment of the Kerala High Court in Ideal Publication Trust v. Commissioner of Income Tax (2008) 305 ITR 143 (Kerala) to submit that under similar circumstances, the Kerala High Court had adjudicated the matter in favour of the revenue while dismissing the appeal of the assessee against which Special Leave Petition was also dismissed by the Apex Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes as the claim of exemption was accepted. It was pointed out that for 15 years for the assessment years 1978-79 to 1992-93, the assessee was accepted to be charitable institution and income was held to be non-taxable for all these years and, therefore, the revenue was not entitled to adopt different approach from the assessment years 1993-94 onwards in view of following observations of the Apex Court in Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC):- That in the absence of any material change justifying the Department to take a different view from that taken in earlier proceedings, the question of the exemption of the assessee-appellant should not have been reopened. Strictly speaking, res judicata does not apply to income-tax proceedings. Though, each assessment year being a unit, what was decided in one year might not apply in the following year; where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 12. The findings of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be charitable in nature. The exemption from tax is available to the charitable trusts/institutions subject to the conditions enumerated under Sections 11 to 13 of the Act. The object of running a newspaper would not fall under the head 'education' but the primary object to create an organ of educated public opinion would be an object of general public utility. Every newspaper evolves a plan of its own for carrying on its activities. Court must interpret a provision in a manner which would enable the assessee to have the benefit sought to be provided therefrom, subject of course, to permissible restrictions. Where the purpose by analogy falls within the spirit and intendment, it would be charitable within the meaning of the statute. But every benevolent purpose may not necessarily be charitable. The Allahabad High Court in U.P. Forest Corporation v. Deputy Commissioner of Income Tax 2003(183) CTR 191 had culled out the following propositions:- (a) Even if the object or the purpose may not be regarded as charitable in its popular significance as not tending to give relief to the poor or for advancement of education or medical relief, it would still be included in the expressio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry. 20. The Constitution Bench in Additional Commissioner of Income Tax, Gujarat, Ahmedabad v. Surat Art Silk Cloth Manufacturers Association, Surat (1980) 121 ITR 1 (SC), after considering its earlier judgments in Sole Trustees, Loke Shikshana Trust and Indian Chambers of Commerce's cases (supra) had held that where the main or primary objects are distributive, each and every object must be charitable in character to enable the trust or the institution to be held to be valid charity. Where the primary and dominant purpose of the trust is charitable, another object which by itself may not be charitable which is in the nature of ancillary or incidental to the primary or dominant purpose, shall not disentitle the trust or the institution to be for charitable purpose. The Hon'ble Apex Court had disapproved the majority view in Sole Trustee, Loke Shikshana Trust's case (supra) and had overruled its earlier decision in Indian Chamber of Commerce's case (supra). 21. Wherever, the terms of the trust permit its operation 'for profit' they become, prima facie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Hotel Owners Association,, Auroboutique Trust, P. Iyya Nadar Charitable Trust and Ideal Publication Trust's cases (supra) being on individual fact situation involved therein, do not advance the case of the revenue. 25. Adverting to second issue, we may examine the relevant provisions of the Act which are material. Section 11(1)(a) of the Act excludes income derived from property held under trust for charitable purposes from the computation of taxable income. Section 11(1)(a) of the Act provides that the income derived from the property held in trust wholly for charitable or religious purpose will be exempt to the extent it is applied to such purposes. The provision at the relevant time reads thus:- 11 (1). Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart fro application to such purposes in India, to the extent to which the income so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome of the persons in receipt thereof, the Assessing Officer shall have power to determine the income of such undertaking in accordance with the provisions of this Act relating to assessment; and where any income so determined is in excess of the income as shown in the accounts of the undertaking, such excess shall be deemed to be applied to purposes other than charitable or religious purposes. 28. Section 11(4A) of the Act was introduced into the Act with effect from Ist April, 1984. Section 11(4A) was substituted with effect from Ist April, 1992 as under:- (4A). Sub-section (1) or sub-section (2) or subsection (3) or sub-section (3A) shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business in 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. 29. It was interpreted by the Hon'ble Apex Court in the aforesaid judgment as under:- The substituted sub-section(4A) states that the income derived from a business held under trust wholly for charitable or rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account are maintained by the trust or the institution in respect of such business. The Tribunal recorded that the only activity of the assessee was running newspaper to attain the main object of promoting Punjab, Punjabi and Punjabi at and the conditions of Section 11(4A), thus, automatically stood satisfied. However, the CIT(A) had recorded that there was net income of Rs.22,99,905/- from publication of newspaper and there was nothing to show that this amount had been utilized for charitable purpose for claiming exemption under Section 11 of the Act. The Tribunal while allowing the appeal of the assessee had not adverted to this aspect with reference to any material on record. 31. Now, we would delve into the objection relating to noncompliance of provisions of Section 13(1)(c) read with Section 13(3) of the Act. It would be expedient to reproduce the relevant portion of the aforesaid provisions, which reads thus:- 13(1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof- (a) XX XX XX (b) XX XX XX (c) in the case of a trust for charitable or religious purpo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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