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2016 (7) TMI 1099 - HC - Income TaxEntitlement to exemption u/s 11 - charitable activities - sale proceeds of the lands by assessee trust - Held that:- The assessee has purchased the lands to an extent of 71.89 Acres, in the year 1986-87, for the purpose of setting up a medical college and old age home. According to the assessee, permission could not be obtained from the competent authorities and thus, the lands purchased for the abovesaid purposes, in the year 1986-87, which fell within the ambit of Section 2(15) of the Income-Tax Act, could not be utilised and thus, they were constrained to sell the same. Merely because the lands were sold from 1994 onwards, which fetched a higher value, it cannot be said that it was only for profit motive. Bumber profit, as held by the Assessing Officer, depends upon the value of the land, sold in the year 2009-10. Though the assessee has started selling the bulk land into plots from 1994-95 onwards, it is not the case of the revenue that there was no bona fide on the part of the assessee, as to why, the assessee was constrained to sell the same. Market value of the land purchased in the year 1986-87, cannot be expected to be static. Naturally, when it is sold after many years, it would fetch a higher value. Law also does not prohibit an assessee to sell the lands, less than the market value. Merely because, lands are sold at a higher rate, after a considerable period of time, that alone cannot be the sole criteria to contend that the activity of the assessee was business activity, not incidental to the principal activity of the trust, which is, otherwise charitable in nature. Whether to gain profit by sale and utilise the sale proceeds, for any other purpose or engage in continuous activity of business or trade or commerce, as the case may be, and to divert the gain, for any other purpose or to spend the same for charitable purpose Findings recorded and extracted supra that the amount is utilised for charitable purpose, is indisputed. Activities for a span of considerable period, may reflect business or commercial activity, but the question to be decided, is whether, it is incidental to carry on the main purpose, charitable , which includes, (i) Relief of the poor, (ii) Education, (iii) Medical relief. What emerges from the reading of the provisions and the Circular is that a trust or institution, whose purpose is advancement of any other object of general public utility, and recognised as charitable, under the fourth limb of Section 2(15) of the Income-Tax Act, and predominantly engages in activities in the nature of trade, commerce or business, should not be permitted to escape from taxability, with the mask, charitable . In the case on hand, the glaring omission on the part of the revenue is to consider, as to whether, sale of lands was necessitated Whether it was incidental towards attainment of the objectives of the trust , and more particularly, when the income was wholly utilised only for achieving the objectives of charitable purpose of the trust. Therefore, mere sale of an immovable property of the trust alone, cannot be the sole factor, to arrive at a conclusion that the income earned should be brought under the head, business income . In the case of trust or institution, whose predominant activity is not business, incidental activity of sales, carried out, in furtherance of and to achieve the main objectives of the trust or institution, should not be construed as business activity, solely with an intention to earn profit, and consequently, to bring the income, under the head, business income. Going through the material on record and in the light of the discussion, we are unable to accept the contention of the Revenue that the substantial questions of law, raised by the revenue, deserve to be answered, affirmatively, in favour of the revenue. Both on facts and law, the revenue has failed to substantiate the contentions raised in the instant appeals. - Decided in favour of assessee.
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