TMI Blog2009 (10) TMI 562X X X X Extracts X X X X X X X X Extracts X X X X ..... Act XII of 1955), allegedly with the main object of setting up of information technology parks in Kerala, among other goals. Pursuant to the said objective, the petitioners acquired lands and constructed buildings which have been let out to various information technology companies for rent. The petitioners' institutions were got registered as a charitable trust under section 12A of the Act and exemption was obtained under section 11 of the Income-tax Act in respect of the income derived by them on letting out the premises. 3. In view of the fact that there was no tax liability in respect of the income derived on letting out the premises as above, having been assigned the status as a charitable purpose, the petitioners submitted application before the Departmental authorities for issuance of a certificate under section 197(1) of the Act for non-deduction of tax at source. While so, section 2(15) of the Act was amended incorporating a "proviso", stipulating that the advancement of "any other object of general public utility" reckoned for giving the charitable status shall not be reckoned as a charitable purpose, if it involves the carrying on of any activity in the nature of trad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business in the activity pursued by the petitioner in letting out the premises for rent and that such an exercise will not take it outside the purview of charity and hence that the "proviso" added to section 2(15) is not at all attracted to the cases in hand. Learned senior counsel also submits that the statute, as it stood still earlier, had clarified the charitable purpose mentioned in section 2(15) by the words "not involving the carrying on of any activity for profit". By virtue of the existence of these clarifying words, if there was any element of profit it was enough liable to be reckoned as charitable purpose right from the inception of the Act in 1961 till April 1, 1984 ; when the words "not involving the carrying on of any activity for profit" were deleted. Thus, the contention is that afterApril 1, 1984, there is no allergy to profit and if the profit feeds charity, it stands cleared for exemption under section 11 of the Act. 8. To analyze the scope and object of the amendment, the learned senior counsel placed reliance on the "Budget Speech" of the Minister for Finance, which stated as follows [2008] 298 ITR (St.) 33, 65 : "`Charitable purpose' includes relief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 454 and by a Division Bench of the Madras High Court in CIT v. Sri Thyaga Brahma Gana Sabha (Regd.) [1991] 188 ITR 160 (Mad) and another decision by the very same court in CIT v. Chennai Properties and Investments Ltd. [2004] 266 ITR 685, the learned senior counsel submits that, to perform charity, income/money is inevitable and contends that the activity being pursued by an institution may constitute a trade or business, if buildings are constructed and sold ; whereas it will not be a trade or business if the activities are construction of the buildings and letting them out for rent. The distinction between the income from business contemplated under section 9 and income from property contemplated under section 10 is also sought to be explained with reference to the dictum laid by the apex court in Karnani Properties Ltd. v. CIT [1971] 82 ITR 547. 11. The respondents have filed a detailed statement in W. P. (C) No. 6899 of 2009 contending that the eligibility for exemption under section 11 has to be evaluated at the time of assessment and hence that the alleged cause of action now projected by the petitioner is rather premature. Reliance is also placed on annexure R1(a) C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initely come within the fourth limb of the amended section 2(15), where the prohibition of activity in the nature of trade, commerce or business or any activity of rendering any service in relation to a trade or commerce or business for a cess or any other consideration, irrespective of the nature of the use or application or retention of the income of such activity is specified and hence not entitled to any exemption. 14. In response to the case put forth by the petitioner, reference is also made to R1(b) "profit and loss account" of the petitioner for the year ending March 31, 2008, as revealed from the latest return available on record. It is stated that the assessee has shown the income from lease rent under schedule A and the other income under schedule B. It is also stated that on the expense side, the assessee has claimed salary and conveyance, administrative and other charges, printing and stationery, staff welfare expenses, promotional expenses, repairs and maintenance and depreciation. From the above, it is revealed that, while claiming that the income from the property the determination has been made by the assessee for the purpose of income and expenditure account, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... array, so as to answer the scope and extent of amendment. 17. Yet another important aspect to be noted in this context is that, after the amendment by incorporating a proviso to section 2(15), the fourth limb as to the advancement of "any other object of general public utility" will no longer remain as charitable purpose, if it involves carrying on of : (a) any activity in the nature of trade, commerce or business ; (b) any activity of rendering any service in relation to any trade, commerce or business for a cess or a fee or any other consideration, irrespective of the nature of use or application or retention of the income from such activity. 18. The first limb of exclusion from charitable purpose under clause (a) will be attracted, if the activity pursued by the institution involves any trade, commerce or business. But the situation contemplated under the second limb (clause (b)) stands entirely on a different pedestal, with regard to the service in relation to the trade, commerce or business mentioned therein. To put it more clear, when the matter comes to the service in relation to the trade, commerce or business, it has to be examined whether the words "any tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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