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2015 (12) TMI 898 - ITAT CHENNAI

2015 (12) TMI 898 - ITAT CHENNAI - [2016] 48 ITR (Trib) 472 - Non-granting of exemption u/s.11 - DR submitted that activity of publishing of newspaper carried on by the assessee is a commercial one - Held that:- Giving a purposive interpretation to the statute, it may have to be read and understood that the second limb of exclusion under cl. (b) in relation to the service rendered by the assessee, the terms "any trade, commerce or business" refers to the trade, commerce or business pursued by th .....

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ranted on written down value of the assets. In other words, if the assessee has already claimed capital expenditure on acquisition of assets as application of income in earlier years and the value of the assets on which depreciation claimed has been fully allowed as expenditure or application in the earlier years that cannot be any claim of depreciation once again. The present claim of depreciation cannot be a double deduction over and above the fully value of the assets, if it was granted as ap .....

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211/Mds/2014 - Dated:- 6-11-2015 - Chandra Poojari, AM And Challa Nagendra Prasad, JM For the Appellant : Shri A Kanakaraj, CA For the Respondent : Shri M Srinivasa Rao, CIT ORDER Per Chandra Poojari, Accountant Member These appeals by the assessee are directed against the common order of the Commissioner of Income-tax(Appeals) dated 22.11.2013 for the assessment years 2009-10 and 2010-11. Since, common issues are involved in these appeals, these are clubbed together, heard together and dispose .....

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see. The assessments were completed u/s.143(3) determining total income of ₹ 9,79,71,460/- and ₹ 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 ₹ 15,67,818/- and ₹ 13,33,979/- towards charitable purpose out of the gross receipts of ₹ 16.04 crores and ₹ 16.05 crores, for the assessment years 2009-10 and 2010-11 respectively. Further, the AO found that by runn .....

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he AY 2010-11 and completed the assessments. While completing the assessment, the AO added the sum of ₹ 1,00,000/- (corpus donation) as income and disallowed the depreciation of ₹ 20,61,256/- on the assets purchased in earlier years. Accordingly, the AO denied the exemption u/s.11 of the Act. Aggrieved, the assessee went in appeal before the CIT(Appeals). However, the CIT(Appeals) observed that the activity carried on by the assessee cannot be considered as charitable and denied the .....

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activities, which are given below : (i) to improve and spread tamil language, literature and culture and also to take steps to make tamil as effective medium of communication for the modern age and to create and enhance public awareness among the common man so as to make them as good and effective citizens of an enlightened democratic society by inculcating general knowledge. (ii) To utilize modern equipments, innovations and technologies like television, audio, video and radio and other electr .....

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ssist generally everyone in regard to providing scholarship for education and also financial assistance for the needy and indigent towards medical aid. The trust achieves the objects clause (i), in the following two ways: (a) The Trust is authorized to run newspaper as per clause (iii) of the above objects. Hence the trust is running "Murasoli" and this is used as a tool to achieve the main object of improving and spreading tamil language by inculcating general knowledge among the comm .....

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rry 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, th .....

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at the CIT(Appeals) is not justified in not considering the newspaper running expenses as charitable. Regarding interest on fixed deposits in the name of trust, the ld. AR submitted that the same cannot be brought to tax. Similarly, he submitted that depreciation on assets to be granted. For this purpose, the ld. AR relied on various decisions, which are kept on record. 5. On the other hand, the ld. DR submitted that activity of publishing of newspaper carried on by the assessee is a commercial .....

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ned under the statute; but for the inclusive nature of the term as specified under s. 2(15) of the Act, which as existed before the amendment is as follows : "Sec. 2(15) : "Charitable purpose" includes relief of the poor, education, medical relief and the advancement of any other object of general public utility." As per s. 2 of the Finance Act, 2008, the said provision was amended adding a 'proviso' w.e.f. 1st April, 2009 as follows : "Provided that the advancem .....

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is not entitled to exemption u/s.11 of the Act. 6.1 The ld. AR submitted that, the idea and understanding of the Department with regard to the scope of amendment to sec.2(15) is thoroughly wrong and misconceived. There is no trade or business in 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 s .....

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ing 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 poor, educatio .....

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charitable organizations will not in any way be affected" (para 180). 6.3 The learned counsel pointed out that, the amendment was brought about as a measure of rationalization and simplification, streamlining the definition of charitable purpose and not as a measure of taxation. It is also stated that the concept of charity in India is wider, simultaneously adding that, by virtue of the amendment, the position that existed prior to 1st Feb., 1984 has been brought back and that is all. This .....

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that though the object of the assessee is to carry on charitable activities, but it does not carry those charitable activities, and it was only carrying on publishing of newspaper in a commercial manner, which cannot be construed as charitable activity. In other words, it was contended by the ld. DR that the assessee carried on activities in a business oriented manner, it will definitely come within the fourth limb of the amended sec.2(15) of the Act, where the prohibition of activity in the nat .....

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e, 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 ame .....

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activity. 6.5. The first limb of exclusion from charitable purpose under cl. (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 [cl. (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 .....

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any trade, commerce or business, is already excluded from the charitable purpose by virtue of the first limb [cl. (a)] itself, there is no necessity to stipulate further, by way of cl. (b), adding the words "or any activity of rendering any service in relation to any trade, commerce or business ..................". As it stands so, giving a purposive interpretation to the statute, it may have to be read and understood that the second limb of exclusion under cl. (b) in relation to the s .....

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ally speaking, the activities carried on by the assessee such as running orphanages, old age homes, rehabilitation centres, day care centres for elderly, vocational training to girls from slums, etc. cannot be considered as activities of medical relief or education or relief of the poor. • It is true that the activities carried on by the assessee take care of the poor people also. But those activities cannot be classified under any of the specific activities of relief of the poor; education .....

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de, 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 .....

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e (IGH) and Working Women's Hostel (WWH). The assessee is maintaining separate accounts for the above business activities. But, the crucial question is whether running of IGH and WWH is a business incidental to the attainment of the objectives of the trust or not. • By any stretch of imagination, it is not possible to hold that the business of running IGH and WWH are incidental to the above stated objectives of the assessee-trust. "Incidental" means offshoot of the main activi .....

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, medical relief and education, it was not possible to conclude that running of business in the form of IGH and WWH were business incidental to the carrying on of main objective of the assessee-trust. Therefore, the assessee is not protected by the provision stated in section 11 (4A), either." 6.7. Thus, as observed earlier, publishing of newspaper is a commercial line which cannot be considered as charitable activity, so as to grant exemption u/s.11 of the Act. Accordingly, we are in agree .....

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