TMI Blog2016 (8) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... of the I.T. Act. Further, the assessee is not entitled for depreciation on the opening balance of written down value of the assets in the asst. year under consideration, which were purchased in earlier years and the cost of those assets have already considered as application of income in earlier asst. year while granting exemption u/s.11 of the Act. - Decided against assessee - I.T.A.No.2172/Mds./2014 - - - Dated:- 29-6-2016 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER For The Appellant : Mr.R.Meenakshi Sundaram,Advocate For The Respondent : Mr.Durai Pandian, ACIT DR ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER This appeal of the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-I, Coimbatore dated 02.06.2014 pertaining to assessment year 2010-11. 2. Appeal of the assessee is delayed by 7 days for which a condonation petition has been filed. Reasons shown are justifiable and hence delay is condoned and appeal admitted. 2.1 The grievance of the assessee in this appeal is with regard to treatment of income earned from auditorium as business income instead of treating the same as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per the provisions of Section 2(15) of the Income Tax Act, 1961, the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business or any activity or running services in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity. Provided further, that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ₹ 10 Lakhs or less in the previous year. Thus, provisions of sec.2(15) are abundantly clear and does not require any interpretation. The AO has rightly treated the receipts from the running of community hall as income and brought to tax. The addition made by the AO is confirmed. Aggrieved with the order of the Ld.CIT(A), the assessee is in appeal before us. 4. The ld. AR submitted that the AO treated the receipts from letting out of Suguna Auditorium Hall as business income and thereby invoked the provisions of sec.2(15) of the Act. It was also submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tered Trust, having constructed an Auditorium on the land owned by the assessee trust for the said purpose and letting out the same for social and charitable activities collecting only nominal rent as per agreed terms of grant,it sufficiently satisfied the charitable object and, therefore, assessee s claim of exemption u/s.11 could not be rejected more so, when registration under sec.12A was granted to the assessee. He has also filed written submissions and he relied on CBDT Circular No.11/2008 dated 19th December, 2008. 5. On the other hand, the ld. DR relied on the orders of the lower authorities. 6. We have heard both the parties and perused the material on record. The issue before us is whether, on the facts and circumstances of the case and having regard to the terms of the Trust Deed, it can be said that the activities carried on by the assessee in the form of running of community hall, Suguna Auditorium Hall was itself held under the Trust. For this purpose it is proper to go through the objects for which assessee-Trust is formed. The objects for which the Trust established are : a. To spread education and for achieving the said object to establish, maintain, run ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rust, and such property is a business, the case would fall u/s. 11(4) and not u/s. 11(4A) of the Act. Section 11(4A) of the Act would apply only to a case where the business is not held under trust. Thus, there is difference between property or business held under trust and business carried on by or on behalf of the trust. 9. This distinction was recognized by the Supreme Court in the case of Addl. CIT vs. Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1 wherein it was observed that if a business undertaking is held under trust for a charitable purpose, the income therefrom would be entitled to the exemption u/s. 11(1) of the Act. In the present case, the finding of the CIT(A) is that running of Suguna Auditorium Hall was not held under trust, but it was business commenced/carried on by the Society, subsequent to the formation of trust. Though the business was commenced by the Society and it was carried on by the Trust after its formation, it cannot be said to constitute property held under trust. U/s. 11(4), it is only the business which is held under the trust that would enjoy exemption in respect of its income u/s. 11(1) of the I.T. Act and there is a distinc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orium Hall was carried on and the attainment of the objects of the trust. The mere fact that whole or some part of the income from running of Suguna Auditorium Hall is used for charitable purposes would not render the business itself being considered as incidental to the attainment of the objects. We are in agreement with the Department that the application of income generated by the business is not relevant consideration and what is relevant is whether the activity is so inextricably connected or linked with the objects of the trust that it could be considered as incidental to those objectives. 11. It was contended by the Ld. AR that the surplus funds generated from the running of Suguna Auditorium Hall was spent towards charitable activities and therefore, the assessee is entitled for exemption u/s. 11(4) of the I.T. Act. We are unable to accept this contention. Initially, the assessee carried on the business itself which is not at all property held under trust. This activity is a business activity and the provisions of section 11(4A) of the Act is applicable. 12. It was contended that if the profits of the business carried on by the trust are utilized by the trust for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ately to all cases. Being so, we are inclined to hold that the assessee is not entitled for any exemption u/s. 11 of the I.T. Act. 15. Further, the assessee is not entitled for depreciation on the opening balance of written down value of the assets in the asst. year under consideration, which were purchased in earlier years and the cost of those assets have already considered as application of income in earlier asst. year while granting exemption u/s.11 of the Act. In our opinion, this issue is squarely covered by the decision of the Tribunal in the case of M/s. Kongunadu Arts Science College Coubncil in ITA No.2097/Mds/2014 dated 26.6.2015, wherein it was held as under: 5. We have considered the rival submissions on either side and also perused the material available on record. We have also gone through the provisions of section 32 of the Act which provides for depreciation. Depreciation has to be allowed on the cost of the asset. In this case, the cost of the asset was allowed u/s 11 of the Act as application income since the assessee is a charitable institution entitled for exemption u/s 11. Therefore, the cost of the asset becomes NIL. When the cost of the asset becom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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