TMI Blog1999 (11) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... . as against public charitable trust claimed by the assessee. For the assessment year 1990-91 the assessment was completed under section 143(3) on 11-3-1993 in the status of trust. The Assessing Officer noticed as a result of enquiries conducted that the assessee-trust was created by a deed of trust by a Muslim Religious Organisation called 'Jamaithe Islam' which is a prohibited Organisation by the Government of India during the year 1993. He further noted that the trust was created, nourished and maintained by this Organisation for achieving its goals. 3. The assessee formed a charitable trust and got registered under the Income-tax Act, 1961. On a perusal of the deed of trust, the Assessing Officer noted that the assessee was to be engaged in the following activities of charitable nature : (1) Educational -- giving facilities of education for the members of the general public ; (2) To set up educational institutions -- colleges, schools and such other institutions ; (3) To publish educational magazines, periodicals etc.; (4) To set up and run publishing and printing press and other activities ; (5) To establish and run libraries, reading rooms, lecture hall ; (6) To ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n from its news items appearing in the daily ; and (d) The paper is found criticising the various State/Central Government policies, political parties, social and religious organisations, individuals etc. due to the policy of the paper following free press journalism. The Assessing Officer held that that the decision of the Hon'ble Supreme Court in the case of Sole Trustee Lok Shikshana Trust v. CIT [1975] 101 ITR 234 is squarely applicable to the facts of the case. In this case, their Lordships held that the activity of printing and publishing of a newspaper is not charitable in nature. 4. The Assessing Officer further held that even if the assessee is to be treated as a charitable trust, the income of the trust will not be exempt under sections 11, 12 and 13 of the Income-tax Act, on the following grounds : "A. It is relevant to note here that the assessee has been printing and publishing the aforesaid newspaper in liaison with other sister concern Ideal Publication Trust since its inception and had never engaged in other activities as mentioned above. Donations were collected by the trust from time to time and the same were utilised directly by the trust for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... luntary contributions received by the assessee. He further held that the voluntary contributions received by a non-charitable institution, like the assessee, is to be treated as casual income and, therefore, the same cannot be exempted for the purpose of applying sections 2(15), 2(25)(?), 2(24)(iia), 10(3), 11 and 12 of the Income-tax Act, 1961. The voluntary contributions received from the general public by a trust will not form part of the income of the trust unless it is exempted under section 11 of the Act. The Assessing Officer held that sections 11 and 12 of the Act are not applicable in the case of the assessee since it is not a charitable trust and, therefore, any voluntary contribution received during the course of carrying on of the business activity will have to be treated as the income of the assessee trust. In the light of the decision of the Hon'ble Supreme Court in the case of Dr. K. George Thomas v. CIT [1985] 156 ITR 412 and Dr. K. George Thomas v. CIT [1986] 159 ITR 851, the Assessing Officer held that the contributions received towards the corpus of the trust are to be treated as casual and non-recurring and, therefore, liable to be taxed. Accordingly, the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried on by the assessee trust as there was no income to be applied for charitable purposes. However, the learned CIT (Appeals) noticed the following items credited in the profit and loss account : --------------------------------------------------------- Year ended Year ended 31-3-1989 31-3-1990 --------------------------------------------------------- Printing charges Rs. 28,51,955.90 Rs. 30,80,074.67 Printing matters Rs. 88,655.00 Rs. 33,512.00 Photo composing Rs. 61,257.45 Rs. 21,234.47 Sales of waste Rs. 13,099.20 Rs. 32,790.00 Building rent received Rs. 6,000.00 Rs. 6,000.00 --------------------------------------------------------- The learned CIT (Appeals) noticed that there were expenses like printing expenses, salary and wages, travelling and conveyance, postage, telegram, telephones, rent, taxes, repairs, maintenance, bank charges, advertisement, audit fee and depreciation which were also debited to the account. The net result of the profit and loss account was a loss of Rs. 46,152 for the assessment year 198 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 11(1)(d), income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or the institution, are to be excluded from the total income of the trust. However, after the amendment brought into section 11(1)(d) with effect from 1-4-1989, the law has been substantially changed. The assessment years under consideration are the assessment years 1989-90 and 1990-91 and the amended provisions are, therefore, applicable. Hence the amended provisions of section 11(1)(d), read with section 11(4A) and section 2(24)(iia) are applicable. Accordingly, the CIT (Appeals) held that the assessee cannot be treated as a charitable trust for income-tax purposes, specially in view of the following facts : The conclusion reached by the learned CIT (Appeals) vide para 8 of his appellate order is reproduced below : "8. In this context, it would be worthwhile to reiterate the conclusion reached by the Assessing Officer in the assessment order for the assessment year 1990-91". "7. The point that come to surface from the foregoing are : (a) that the assessee is a charitable trust in nature as per the deed of trust executed by it but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned CIT (Appeals) on the ground that it was granted by the Assessing Officer himself. Coming to depreciation, the Assessing Officer was directed to look into the matter. It is against this order, the assessee is in appeal before the Tribunal. 7. The learned counsel for the assessee objecting to the observations of the Revenue authorities, first submitted that the assessee is not a publisher of the daily called Madhyamam. Madhyamam is published by a trust, viz., Ideal Publication Trust, Silver Hills, Calicut. Ideal Publication Trust has been already held as a charitable trust by the Tribunal vide its order dated 14-8-1998 in ITA No. 570 (Coch.)/1993 relating to the assessment year 1990-91. In view of the above, the learned counsel submitted, the observations of the CIT(Appeals) concurring with the findings of the Assessing Officer in para 8 of his appellate order, which is reproduced above, that the assessee is engaged in the business of printing and publishing Madhyamam is incorrect. The learned counsel submitted that the assessee has not done any charitable nature of services is true, but for the assessee having no income to apply for that. The assessee has undertaken job work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive income. When the matter was sent back to the Assessing Officer for fresh consideration, for the first time, the officer was influenced by the subsequent facts that came into the picture as a result of the prohibition of the Organisation which published the daily. The learned counsel submitted that it is not at all relevant factor. As a matter of fact, the assessee was running a press doing job works in the process of generating income and the business done by the assessee was the business held in trust. The assessee, in fact, when the matter was remitted back to the Assessing Officer, satisfied the Assessing Officer by furnishing confirmation letters from the persons who had donated more Rs. 6,000 and all of them categorically stated in their confirmation letters that it was towards the corpus that they were donating and this, the counsel submitted, cannot be treated as the income of the assessee-trust. The counsel invited our attention to page 21 of the paper book, which is a letter from the Assessing Officer to the assessee calling for certain details regarding the new loan creditors. He also specifically strees the matter that it was getting time-barred and therefore the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned income but has not applied the income for any charitable purpose. The assessee was, in fact, doing business by way of printing the newspaper and doing job works and generating therefrom. The learned departmental representative specifically placed reliance on para 7 of the order of the learned CIT (Appeals) which reads as under : "7. On careful consideration of the evidence on record and the submissions made by the learned representative of the appellant, I find that the appellant has not conclusively proved its claim to be a charitable trust eligible for exemption under the provisions of section 11 of the Income-tax Act, 1961 since all the conditions specified in that section have not been complied with. It is an admitted position that none of the charitable activities as mentioned in the Trust Deed was carried out by the trust during the relevant period on the ground that there was no income to be applied. However, undertaking job works for printing newspaper and other printing jobs cannot be construed as carrying out charitable activities because of the fact that the appellant has collected printing charges and fee for other services on a regular basis. As mentioned earlie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctives said to have been contemplated by the assessee for which it was registered under section 80G. The job works said to have been undertaken by the assessee are nothing but business and since the assessee is not a charitable trust the income generated from the business carried on by the assessee cannot be said to be an income generated from a business held under trust. It is not correct to say that the Assessing Officer and the CIT (Appeals) were prejudiced as pointed out by the learned counsel because of some later developments. The decision of the learned CIT (Appeals) was after taking into consideration all the facts upto date and, therefore, the learned departmental representative submitted, the decision of the Revenue authorities may be upheld. 9. We have heard rival submissions and gone through the orders of the Revenue authorities. A perusal of the assessment order and the CIT (Appeal)'s order leads to the conclusion that between the period 1985 and 1994, the year in which the assessment order, the assessee has not carried on any activity of charitable nature as contemplated under the trust deed except running the business of printing a newspaper called Madhyamam. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Act, 1961, read with section 2(15) for the assessment year 1962-63 ?" Their Lordships of the Apex Court held that the publication of the newspaper is not a charitable activity and the profits generated therefrom are taxable. 10. The case of the assessee before us is that one of the objectives is to set up and run printing presses, publishing houses and imparting knowledge. In the case relied on by the learned counsel for the assessee in Dharmodayam Co.'s case the jurisdictional High Court held that if the business is held in trust, the income therefrom would not be governed by sub-section (4A) of section 11 of the Income-tax Act. 11. The finding of the Assessing Officer that the voluntary contributions towards the corpus of the trust have been diverted for acquisition of the assets connected with the printing of newspaper and for advances to the concern publishing the newspaper has not been successfully met with. In other words, the finding of the Revenue authorities that not only the assessee, as claimed, utilised the donations received towards the corpus to establish or to improve the printing press, but has also diverted a portion of it for the publication of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the printing press and publishing house, if meant for generating income so as to achieve the objects of the trust, then it should be treated as a business held in trust. The printing work done also should be held in trust. From the records before us, it is difficult to accept the claim of the assessee that it was not publishing the daily, Madhyamam, but was only doing printing work for payment. The reason is the voluntary contributions received towards the corpus was used by the assessee not only for improving the printing press but for making advances to M/s Ideal Publication Trust. This finding of the Revenue authorities has not been controverted. Therefore, it appears that the establishment of the printing press itself was an object for nothing else, but to run the newspaper. Otherwise, there is no reason why the assessee should have made advances from the corpus to M/s Ideal Publication Trust. 15. In the light of the above facts, if we apply the decision of the Hon'ble Supreme Court in Sole Trustee, Loka Shikshana Trust's case wherein the Apex Court has held that the publication of newspaper itself does not constitute a charitable purpose, we have to hold that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. J. K. Charitable Trust [1992] 196 ITR 31, we are unable to agree with the contention of the learned counsel. In this case, the Hon'ble Allahabad High Court held that 'a charitable purpose may be served in more than one way. One is to directly contribute for the promotion of that cause; the other is to contribute money to another charitable organization which advances that cause. In the absence of allegations of device and/or mala fides, the amount contributed to other charitable institutions out of the income accumulated under sub-section (2) is outside the mischief of sub-section (3) of section 11 of the Income-tax Act, 1961. In other words, such contribution does not amount to application of the income for purposes other than charitable or religious ones." We have already noted that the mere printing of the newspaper, if it is not for generating income will not constitute a charitable object in the light of the observations of the Supreme Court in the case in Sole Trustee Loka Shikshana Trust. 16.1 Coming to the decision relied on by the learned counsel for the assessee in the case of Thanthi Trust v. CBDT [1995] 213 ITR 639 (Mad.), we are of the view that this decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in Sole Trustee Loka Shikshana Trust's case as not constituting a charitable activity. The assessee has not established that it has undertaken any charitable work other than setting up the printing press. It is the case of the assessee that by setting up the printing press the assessee is imparting technical knowledge to its staff. There is nothing on record to suggest that any of the trained personnel has gone out. The assessee has not brought on record any case to show that it has, in fact, taken in any person as trainee, trained and sent him out as one of its objectives. 17. We have noted in section 2(15) of the Income-tax Act, 1961, that charitable object includes relief of the poor, education, medical relief and advancement of any other object of general public utility, not involving the carrying on of an activity for profit. The last 10 words 'not involving the carrying on of an activity for profit' are no more in the statute. The Hon'ble Supreme Court in the case of Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 1 observed that "the law has been development by analogy upon analogy and it is to be found in the large mass of case-law that has been built ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome generated from the business carried on by the assessee, if at all, parted to with M/s Ideal Publication Trust, for the benefit of publication of the daily, Madhyamam, the same cannot be held as application of income for charitable purposes. Still the question remains whether the mere running of the printing press itself will constitute an object of charitable activity, Coming to the definition of 'charitable purpose' in section 2(15) the most important words are "advancement of any other object of general public utility". In the case of East India Industries (Madras) (P.) Ltd. v. CIT [1967] 65 ITR 611, the Supreme Court held that the mere carrying on of a business of manufacture, sale and distribution of pharmaceutical, medicinal and other preparations conducive to public health alone is not sufficient to constitute a charitable activity. In the case of Addl. CIT v. Gangabai Charities [1983] 142 ITR 718, the Hon'ble Madras High Court held that 'the proper way to understand the scope of the exemption is to find out what precisely are the objects, the income devoted to which are entitled to exemption. In this task it is essential to scrutinise the objects of the trust at least ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities of the trust are as follows : (a) running of newspaper called 'Madhyamam'; (b) the income is used for business purposes only; (c) the paper Madhyamam is used for voicing the policies of the trust authorities as it can be seen from its appearing in the daily; and (d) the paper is found criticising the various State/Central Government policies, political parties, social and religious organizations, individuals etc. due to the policy of the paper following free press journalism." From the above it can be easily inferred that the nature of the work done by the assessee is not charitable. This view has been duly recognised by the Supreme Court in the case of Sole Trustee, Loka Shikshna Trust, and the same squarely applies to the case of the assessee. We also note here the argument of the learned counsel for the assessee that the Revenue authorities were swayed away by the subsequent events which for income-tax purposes had no relevance at all. The Assessing Officer observed. "It is pertinent to note that trust was formed by a deed of trust executed on 19-9-1985 and between the period 1985 and 1994 it is seen that the assessee has not carried out any of the charitabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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