1995 (2) TMI 112 - AT - Income Tax

Charitable Or Religious Trust Earned Income Income From Property Let Out Profits And Gains Of Business

Summary

Issues:
1. Whether income from hiring of auditorium and fixtures should be treated as income from business for the purpose of exemption under section 11.
2. Whether the assessee is entitled to exemption under section 11 in respect of the income from rent of auditorium and fixtures.

Analysis:

Issue 1:
The primary issue in this case was whether the income derived by the assessee from the hiring of an auditorium and furniture should be considered as income from business for the purpose of exemption under section 11. The Assessing Officer (AO) treated the income as business income and denied the exemption under section 11(4A). The CIT(A) upheld the AO's decision, leading to the appeals before the ITAT. The assessee contended that the hiring out of the auditorium and furniture was for promoting the object of the trust and not a business activity. The ITAT analyzed the relevant provisions of section 11(4A) introduced by the Finance Act, 1983, which restricts exemption for income from business activities. The ITAT examined the trust deed's object clause, which focused on cultural and literary programs, and concluded that letting out the auditorium and furniture was in furtherance of the trust's objectives and not a business activity. The ITAT referred to various judicial precedents supporting the view that income derived for charitable purposes should not be considered as income from business. Consequently, the ITAT held that the income from hiring of auditorium and fixtures was not income from business, and section 11(4A) was not applicable, allowing the assessee's appeal on this ground.

Issue 2:
The secondary issue revolved around whether the assessee was entitled to exemption under section 11 for the income from rent of the auditorium and fixtures. The ITAT, having determined that the income was not from business, held that the assessee was entitled to exemption under section 11 for this income. The ITAT allowed the assessee's appeal on this ground as well. Consequently, the ITAT dismissed the other grounds in the appeals since they did not survive in light of the findings on the primary and secondary issues. Ultimately, all the appeals were allowed in favor of the assessee.

In conclusion, the ITAT ruled in favor of the assessee, holding that the income from hiring of the auditorium and fixtures was not to be treated as income from business, and the assessee was entitled to exemption under section 11 for such income. The judgment provided a detailed analysis of the trust's objectives, relevant legal provisions, and judicial precedents to support its decision, ensuring a comprehensive examination of the issues involved.