TMI Blog2016 (6) TMI 1351X X X X Extracts X X X X X X X X Extracts X X X X ..... e cause of charity, mission activities, welfare, employment, diffusion of useful knowledge, upliftment and education and to create an awareness of self-reliance among the members of the public etc. We are therefore, of the opinion that the observations of the Supreme Court must be understood and appreciated in the background of the fact in that case and should not be extended indiscriminately 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. Depreciation u/s 32 - HELD THAT:- Also 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. This issue is squarely covered by the decision of the Tribunal in the case of M/s. Kongunadu Arts & Science College Council [2015 (11) TMI 1119 - ITAT CHENNAI] - Decided against assessee. - I.T.A.No.2172/Mds./2014 /Assessment year :2010-11 - - - Dated:- 29-6-2016 - Shri Chandra Poojari And Shri G.Pavan Kum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e income from the auditorium is directly hit by the provisions of Section 11(4A) and also Section 2(15) of the Act. In the case of the appellant Trust, the predominant objective are educational in nature. Running an Auditorium in the name of Community Hall is in no way incidental to the objects of educational, medical and relief to the-poor. It is a fact that the surplus of income from the Community Hall is used for the objectives of the Trust. However, running of the Community Hall on commercial principles of business which is not incidental to the objectives of the Trust does not qualify for the advancement of any other public utility. 3.3 As 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... commercial rate of fees charged for Auditorium of similar dimensions. It was emphasized that the Trust has been running the educational institution simultaneously with the medical relief to poor. The surplus from the other activities was only going to meet the shortfall in the income of the educational institution. The other activities are not run on commercial lines with the objective of earning a profit and hence the surplus from these activities should be exempted from tax. It was urged that sec.2(15) of the Act has no application in the case of the assessee and plea was made to delete the additions made. He submitted that the assessee being a registered 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds Property held under trust includes a business undertaking so held . Subsection (4A) as it stands amended by the Finance (No. 2) Act, 1991, with effect from April 1, 1992, is in the following terms: (4A) Sub-section (1) or sub-section (2) or subsection (3) or sub-section (3A) 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 trust or, as the case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business. 8. Thus, if a property is held under trust, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, was not property held under trust since the property from which the surplus was generated was itself not held under trust. In other words, merely carrying on business for and on behalf of the trust and applying the profits of the same for the object of the trust does not entitle for exemption u/s. 11(4) of the Act unless the business is incidental to the attainment of the objects of the trust. 10. We now proceed to consider the question whether the said activities carried on by the assessee were incidental to the attainment of the objects of the trust. We fail to see any connection between the activities relating to running of Suguna Auditorium 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 tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e utilized by the trust for achieving the object of imparting education. In this case, there is no such nexus between the activities carried on and the objects of the assessee that can constitute an activity incidental to the attainment of the objects, namely, to promote cause of charity, mission activities, welfare, employment, diffusion of useful knowledge, upliftment and education and to create an awareness of self-reliance among the members of the public etc. We are therefore, of the opinion that the observations of the Supreme Court must be understood and appreciated in the background of the fact in that case and should not be extended indiscriminately 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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