TMI Blog2014 (11) TMI 890X X X X Extracts X X X X X X X X Extracts X X X X ..... ust for the purpose of achieving objectives of the trust. As held in Sanjeevamma Hanumanthe Gowda Charitable Trust Versus Director Of Income-Tax (Exemption) [2006 (3) TMI 91 - KARNATAKA High Court] - what the Commissioner has to look into is not the source of income of the Trust but whether such income is applied for charitable or religious purpose - The satisfaction of the Commissioner should be regarding the application of the income of the trust for the aforesaid purposes which only entitles the assessee to claim exemption - Once the trust deed shows the objectives of the Trust is charitable and the material on record, shows that the Trust is carrying on charitable activities, merely because they proposed to carry on the business in future to augment the income to support charitable purposes, the registration cannot be declined - the tribunal was justified in passing the order and directing the Commissioner to grant the certificate – Decided against revenue. - IT Appeal No. 754 of 2007 - - - Dated:- 4-8-2014 - N. Kumar AND MRS. RATHNAKALA, JJ. For The Appellant : K.V. Aravind, Advocate For The Respondent : K.P. Kumar, Sr. Counsel and Smt. Vani H., Advocate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oubtful but has also an attempt to camouflage its business activities disguising itself as a trust. The activity of a business venture in the nature of residential project cannot be held as genuine, since it is not incidental to any of its objectives. Therefore, the assessee's application for registration under Section 12AA of the Act was rejected. Aggrieved by the said order, the assessee preferred an appeal to the Tribunal. 3. The Tribunal on consideration of the several judgments on which reliance was placed by both the parties and also by looking into the objectives clause of the trust deed, after extracting the same and relying on the judgment of this Court in the case of Sanjeevamma Hanumanthe Gowda Charitable Trust Vs. Director of Income-Tax (Exemptions) re[prted om [2006] 285 ITR 327 (Karn) has held that the nature of the business is not the criteria to judge whether the provisions of Section 12A of the Act are complied with or not. The main test as held by the Hon'ble Apex Court is, that, the income of the business is utilised by the trust or institutions for the purpose of achieving the object of trust. There is neither any finding by the Director of Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntal and supporting to the attainment of the objectives of the trust. In that event, a separate books of account have to be maintained. It is in pursuance of this Clause, in order to raise funds for carrying on charitable activity, the assessee has taken up its construction activity and they have maintained separate books and therefore, he submits that the tribunal has rightly granted the benefit of Section 12AA of the Act. The material on record discloses that the proposed amendment of trust is also duly registered and it is awaiting the. approval from the Director of Income Tax. 7. This Court had an occasion to consider the scope of Sections 11, 12, 12A and 12AA of the Act in the case of Sanjeevamma Hanumanthe Gowda Charitable Trust (supra), which has held is as under: 6. Section 11 of the Act deals with exemptions available to income from property held for charitable or religious purposes. Exemption from tax will be allowed only in respect of the income actually applied to the purposes of the trust. Income derived for trust property must be determined on commercial principles. In order to be eligible for the aforesaid exemption the assessee has to get the trust registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded under the Act for cancellation of registration obtained by the assessee, in the event of its misusing those provisions. 8. Reliance is placed by the revenue on the judgment of the Apex Court in the case of Asstt. CIT v. Thanthi Trust reported in (2001) ITR (S.C.) 785, interpreting Sub-section (4) of Section 11 which has held as under: One S.K.Adityan founded a daily newspaper called the 'Dina Thanthi' in 1942. On March 1, 1954, he created a trust called the 'Thanthi Trust'. The property that he settled upon trust was the business of the said newspaper as a going concern. The objects of the trust were to establish the said newspaper as an organ of educated public opinion for the Tamil reading public and to disseminate news and to ventilate opinion upon all matters of public interest through it. On July 9, 1957, Adityan executed a supplementary deed of trust that declared that the trust was irrevocable. On July 28, 1961, Adityan executed another supplementary deed of trust. Thereby, he directed that the surplus income of the trust, after defraying all expenses, should be devoted to the following purposes . In that context, the Supreme Court interpreting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial on record and cannot be accepted. As held by this Court in Sanjeevamma Hanumanthe Gowda Charitable Trust's Case (supra),what the Commissioner has to look into is not the source of income of the Trust but whether such income is applied for charitable or religious purpose. The satisfaction of the Commissioner should be regarding the application of the income of the trust for the aforesaid purposes which only entitles the assessee to claim exemption. For arriving at such satisfaction primarily he has to look at the object of the trust, when the same is reduced into writing in the form of trust deed. If on the date of the application, the Trust has received income from its property, then the enquiry should be to find out how the said income has been expended. If no income has been received on the day of the application is filed, the question of going into the question whether the income generated in future would be applied for charitable purpose would not arise. As and when such income arises, if the income is not utilised for charitable purpose, then he has the power to cancel the registration after hearing the assessee. He cannot assume things without any basis as was done i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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