9911796707
TMI Blog2015 (12) TMI 898X X X X Extracts X X X X X X X X Extracts X X X X ..... 2) was issued to the assessee. The assessments were completed u/s.143(3) determining total income of Rs. 9,79,71,460/- and Rs. 10,57,29,890/- for the assessment years 2009-10 and 2010-11 respectively. At the time of scrutiny proceedings, the AO found that the assessee expended Rs. 15,67,818/- and Rs. 13,33,979/- towards charitable purpose out of the gross receipts of Rs. 16.04 crores and Rs. 16.05 crores, for the assessment years 2009-10 and 2010-11 respectively. Further, the AO found that by running the newspaper 'murasoli' the trust earned a net surplus of Rs. 9,79,71,460/- in the assessment year 2009-10. According to the AO, the activity squarely falls within the ambit of amended provisions of sec.2(15) of the Act, as the assessee's object is of general public utility and the activities of the assessee are in the nature of trade, commerce or business. Therefore, the AO brought to tax the surplus of Rs. 9,79,71,460/- in the AY 2009-10 and Rs. 10,57,29,890/- in the AY 2010-11 and completed the assessments. While completing the assessment, the AO added the sum of Rs. 1,00,000/- (corpus donation) as income and disallowed the depreciation of Rs. 20,61,256/- on the assets ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age as it shows how the language is to be used and it coaches the reads how the language is to be handled." 4.1 Further, according to the ld. AR, the assessee has spent huge amount to improve the tamil language and conducted Bharathidasan poetry competition every year in which more than 5000 students from schools and colleges throughout the state of Tamil Nadu and Puducherry participated. He submitted that 'murasoli' newspaper is spreading tamil language around the world and publishing of 'murasoli' newspaper cannot be construed as commercial activity. Further, according to the ld. AR, it is not a activity involving commerce, trade or business and it is duly development of education. He submitted that 'murasoli' newspaper was in existence from 1942 and it has become the property of the trust. According to ld. AR, u/s.11(4A) of the Act, the income derived from business held under the trust wholly for charitable or religious purposes shall not be included in the total income of the previous year of the trust or institution, if the business is incidental to the attainment of the objects of the trust. Further, the ld. AR, submitted that issue of violation of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the activities pursued by the assessee in publishing of newspaper will not take it outside the purview of charity and hence, that the "proviso" added to sec.2(15) of the Act, is not at attracted to the case in hand. He also submitted that the statute, as it stood earlier, had clarified the charitable purpose mentioned in sec.2(15) of the Act, had clarified the charitable purpose mentioned in s. 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 1st April, 1984, when the words "not involving the carrying on of any activity for profit" were deleted. Thus the contention is that after 1st April, 1984, there is no allergy to profit and if the profit feeds charity, it stands cleared for exemption under sec. 11 of the Act. 6.2. To analyse the scope and object of the amendment, the learned counsel placed reliance on the "Budget Speech" of the Minister for Finance, which stated as follows [298 ITR (St.) 33, 65] : "'Charitable purpose' includes relief of the po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated and perusal of that activities carried on by the assessee, cannot be oust the involvement of "trade, commerce or business" or "any service in connection with trade, commerce or business" as contemplated under the statute. Further, we note that there is substantial variation in the statutory position as it existed earlier to 1st April, 2009, where the assessee has been given exemption u/s.11 of the Act. and the position available after amendment to sec.2(15) brought into effect from 1st April, 2009. Yet another important aspect to be noted in this context is that, after the amendment by incorporating proviso to s. 2(15), the 4th 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. 6.5. The first limb of exclusion from charitable purpose under cl. (a) will be attracted, if the activity p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure of the activities carried on by the assessee is to say that the assessee is carrying on 'advancement of any other object of general public utility'. When that is the case, the assessee is hit by the proviso given under section 2(15). * The proviso reads that 'advancement of any other object of general public utility' shall not be a charitable purpose, if it involves carrying on any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business for consideration, irrespective of the application of the money. * Therefore, the case of the assessee is hit by proviso to section 2(15) and the assessee is not entitled for the benefit of section 11 for that part of income generated in the hands of the assessee from running its International Guest House and Working Women's Hostel. * Alternatively, one has to look into section 11 (4A). Subsection (4A) provides that exemption shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the assessee and separate book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier years. With these observations, this ground is allowed for statistical purposes. 6.9 Regarding taxability of interest income, it is to be taxed under the head "income from other sources" and it is not an exempted income and there is no reason to exempt the same from taxation as the assessee is not entitled exemption u/s.11 of the Act, in view of the judgment of the Supreme Court in the case of Bangalore Club v. CIT (350 ITR 509). 6.10. To sum up, the income of the assessee for these two assessment years is directed to compute by the Assessing Officer in accordance with law and it is needless to mention herein that when the income is computed in accordance with law as business income in the light of the above findings, usual deductions are allowable under the provisions of the Act while computing the income under the head "business". More so, deduction under sections 30 to 38 of the Act, is to be allowed, if it is not already granted to the assessee. 7. In view of this, all other grounds raised by the assessee in these appeals are only academic and do not require any adjudication. 8. In the result, the appeals of the assessee are allowed for statistical purposes. Order pron ..... X X X X Extracts X X X X X X X X Extracts X X X X
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