TMI Blog2016 (4) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... count to be maintained would not be attracted in view of our conclusion that the said amounts as received by the assessee for the assessment year have been received from educational activity which is the dominant activity of the assessee-trust. In our opinion, if this be the case, separate books of accounts cannot be insisted upon as the said activity becomes part and parcel of the educational activities carried out by the assessee-trust. In such a case, the benefit of exemption under section 11 (4A) cannot be denied. An interpretation as urged on behalf of the revenue would render nugatory the very spirit, rationale and the object of the exemption provisions making the same unworkable - Decided in favour of assessee - Income Tax Appeal No. 2307 of 2013 - - - Dated:- 13-4-2016 - S. C. Dharmadhikari And G. S. Kulkarni, JJ. For the Petitioner : Mr. A. R. Malhotra For the Respondent : Mr. Phiroz Andhyarujina Sr.Counsel a/w Mr.A.P. Singh, Mr.Asim Sarode JUDGMENT ( Per G. S. Kulkarni, J ) 1. This appeal of the revenue under section 260A of the Income Tax Act, 1961 (for short 'the Act') challenges the order dated 25th May 2013 passed by the Income Tax Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxation. This was the position right from 1976 till the Assessment year in question (A.Y.2009-10). 5. The Income Tax officer (Exemption) for A.Y.2009-10 forwarded a proposal to the DIT (E) that on verification of the record of the assessee, it was prima facie found that the first proviso to section 2 (15) of the Act as inserted by an amendment to the Act with effect from A.Y.2009-10 was attracted in view of the income earned by the assessee from letting out of the said premises. 6. At this stage, we may note the provision of section 2 (15) of the Act which reads thus: Section 2 (15): Charitable Purpose includes relief of the poor, education, medical relief / preservation of environment (including water sheds, forests and wildlife and preservation of monuments or places or objects of artistic interest and the advancement of any other object of general public utility. Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying out of 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee submitted that the auditorium is also part of the building and used mainly by the colleges as and when is not required for use by the colleges, it is let out. The assessee stated that out of the 365 days the auditorium was used by the colleges for 209 days and it was vacant for 76 days whereas it was let out only for 80 days. It was pointed out that expenses of electricity and Airconditioners were borne by the assessee and that letting out the building was not the main activity but, only incidental to the main activity i.e. promotion of education. It was thus, contended that the proviso to section 2 (15) of the Act is not attracted in the assessee's case. In support of its submissions, the assessee also relied on a CBDT Circular No.11/2008 dated 19th December 2008. 9. The DIT (E) however passed an order dated 15th December 2011, withdrawing/cancelling registration of the assessee under section 12A of the Act. The DIT (E) observed that the claim of the assessee that its activity of letting out the premises is educational cannot be accepted as the assessee by itself was not running the educational institutes but, the educational institutes were being conducted by a differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat this is a case wherein clearly the first proviso to section 2 (15) of the Act had become applicable in as much letting out the premises by the assessee amounted to an activity in the nature of trade, commerce or business and not the object of 'advancement of education' as contended by the assessee. It is submitted that the educational institutes are not being conducted by the assessee-trust but by a separate management. It is contended that the tribunal has failed to appreciate the provisions of section 11 (4A) of the Act that the assessee had not maintained separate books of account as required under the said provision in respect of the amounts received from letting out of the auditorium as also running of the Institution of Management on 6th and 7th floors. On behalf of the revenue it is urged that if the case of the assessee was that these activities are incidental to the 'advancement of education' then as per requirement of section 11(4A) separate accounts ought to have been maintained. It is therefore, contended that the question of law as formulated would arise for consideration of this Court. 13. On the other hand, learned counsel for the assessee supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o to section 2 (15) of the Act as made applicable with effect from Assessment year 2009-10, in as much as case of the assessee could no more be categorized as 'advancement of education' and would fall under the first proviso to section 2 (15) of the Act so as to be any other object of general public utility , which stands excluded to be a charitable purpose as it involved an activity in the nature of trade, commerce or business in exchange for a consideration and the use or application or retention of the income from such activity. The Tribunal however, negatived these findings of the DIT (E). 15. We may observe that the premises of the assessee were let out to Lala Lajpatrai Institute to conduct junior college, senior college, Law College and a management Institution which is indisputedly an educational purpose. This is also in consonance with the objects of the assessee-trust which is to conduct colleges and schools and achieve 'advancement of education.' It is further an admitted position that these premises were let out on a nominal rent. The objection of the DIT (E) that the 6th and 7th floors rendered an income of ₹ 12.00 lacs from the Institution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 11(4A) which require separate account to be maintained would not be attracted in view of our conclusion that the said amounts as received by the assessee for the assessment year have been received from educational activity which is the dominant activity of the assessee-trust. In our opinion, if this be the case, separate books of accounts cannot be insisted upon as the said activity becomes part and parcel of the educational activities carried out by the assessee-trust. In such a case, the benefit of exemption under section 11 (4A) cannot be denied. An interpretation as urged on behalf of the revenue would render nugatory the very spirit, rationale and the object of the exemption provisions making the same unworkable. In this context, we may usefully refer to the observations of the division bench of this Court in the case of Director of Income Tax (Exemption) vs Vile Parle Kelawani Mandal to which one of us (S.C.Dharmadhikari, J) is a member) in which a similar contention as urged on behalf of the revenue was repelled. The division bench observed as under : 5. The Tribunal has held that the Management and Development Program Consultancy Charges' is part and parcel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 2 (15) will not apply in respect of the first three limbs of section 2 (15) i.e. relief of the poor, education or medical relief. Consequently, where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute charitable purpose even if it incidentally involves the carrying on of commercial activities. 3. The newly inserted proviso to section 2 (15) will apply only to entities whose purpose is 'advancement of any other object of general public utility i.e. the fourth limb of the definition of 'charitable purpose ' contained in section 2 (15). Hence such entities will not be eligible for exemption under section 11 or under section 10 (23C) of the Act if they carry on commercial activities. Whether such an entity is carrying on an activity in the nature of trade, commerce or business is a question of fact which will be decided based on the nature, scope, extent and frequency of the activity. (emphasis supplied) 19. In the light of the above discussion, we find no fault in the order of the tribunal. We answer the question accordingly in affirming the view taken by the tribunal and dismiss the appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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