TMI Blog1990 (6) TMI 27X X X X Extracts X X X X X X X X Extracts X X X X ..... a Sabha, a registered society, registered under the Societies Registration Act (Act XXI of 1860). The assessee is the owner of the hall called "Vani Mahal". For the assessment year 1973-74, the Income-tax Officer, after referring to the objects of the sabha, adverted to the different types of membership and, thereafter, proceeded to compute the total income of the sabha. The Income-tax Officer computed the total income at Rs. 20,010 for the reasons stated in his order. The Income-tax Officer denied the exemption claimed by the assessee under section 2(15) of the Income-tax Act, 1961. The assessee appealed to the Appellate Assistant Commissioner and claimed the exemption under section II read with section 2 (15) of the Act. The Appellate Assistant Commissioner held that barring the activity of letting out of the hall on rent, the rest of the income of the assessee would be exempt under section 11 of the Act, provided the other conditions were satisfied. In the matter of letting out of the hall, the Appellate Assistant Commissioner held that there was clearly an activity which resulted in profit and, therefore, the income attributable to such activity would not be exempt under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which would go to show that profit making is the only object of the sabha. Learned counsel also submitted that, while running the sabha, the main object of the assessee was to entertain the audience and thereby make profit out of such entertainment. According to standing counsel, some of the objects as stated by the assessee in the rules and regulations are very vague. Learned standing counsel pointed out that clauses A and B in the objects as stated in the rules and regulations are definitely hit by the provisions of section 2(15) of the Act. Therefore, it was submitted that the Tribunal was not correct in holding that the rental income from Vani Mahal is exempt from taxes under section 11 read with section 2(15) of the Income-tax Act, 1961. On the other hand, learned counsel appearing for the assessee contended that, even according to the Income-tax Officer, the objects of the sabha were primarily for the advancement of music and to conduct musical entertainments, dramas, kalakshepams, dance recitals, bhajans, etc., and, therefore, learned counsel pointed out that this falls within the meaning of the expression "advancement of objects of general public utility". Learned couns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ahma Gana Sabha Music and Dance School" for imparting instruction in music and dance on the correct lines and thus afford facilities for widespread literacy in music. (e) To do all other things as are incidental or conducive to the attainment of the above objects. (f) To organise social gatherings as would foster comradeship among members. (g) To organise dramatic wing called "Sri Thyaga Brahma Gana Sabha Amateurs" to stage dramas. The point for consideration in this reference is whether the assessee is entitled to exemption under section I 1 read with section 2 (15) of the Act with regard to the rental income derived from letting out of Vani Mahal. The first submission of the assessee was that the objects of the sabha were clearly for education and, if that be so, even if there was a profit from letting out of the hall, it would still be a charitable purpose, because whether any activity for profit is carried on or not would have to be examined only in the case of objects of general public utility other than relief of the poor, education and medical relief. The assessee's another submission was that the sabha had only let out the building and letting out of a building wo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich was established to prepare and publish reports of judicial decisions, its income and property being applicable solely towards the promotion of that primary and other ancillary objects, fell within the charitable head of education. Raising the artistic taste of the country by public performances, dramatic, musical, etc., would be an educational purpose. In Royal Choral Society v. IRC [1944] 12 ITR (Suppl.) 13, the Court of Appeal held that cultivation and improvement of public taste in music and other fine arts is education and thus falls within the category of charitable purpose. In such cases, it must be determined on the facts whether the presence of the element of entertainment or pleasure is an inevitable concomitant of a charitable and educational purpose, or whether it is the real fundamental purpose and education is merely a by product. In the former case, the purpose would be charitable in the latter case, not". It remains to be seen whether a plain reading of the objects of the Sabha would reveal that some objects no doubt are to provide education to artistes, etc., through the medium of school. But there are some other objects where through the sabha, other fine art ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of Sri Thyaga Brahma Gana Sabha. A careful consideration of the statement of income and expenditure exclusively relating to this hall for the past 25 years ending with the accounting year relevant to the assessment year under consideration would reveal that the so-called profit earned in each year was very meagre and negligible. But the overall statement of income and expenditure relating to the assessee for all these years would go to show that the assessee was incurring loss in every year. The Tribunal in its order vividly explained various difficulties undergone by the Sabha in constructing the hall and carrying out its objects with a meagre income. This is the factual position in which the Sabha is running and is letting out the hall. Learned standing counsel, in order to support his contentions, relied upon a decision reported in the case of Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC). In that case, it was held as under (headnote) : "The test which has now to be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to subserve the charitable purpose or to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce the exemption would not be available. The intention of the founder was that while the public should have the use of the building, for religious, charitable, educational and social purposes, nowhere in the deed was it stated that the trust had come into being for the purpose of carrying out any social, cultural or religious purposes, and the point of view throughout the trust deed was that of the users of the trust and not the point of view of the founder of the trust." The facts on which the above said decision was rendered are different from the facts appearing in the present case. Therefore, this decision will also not be applicable to the facts appearing in the present case. On the other hand, learned counsel appearing for the assessee relied upon a decision reported in the case of CIT v. Madras Stock Exchange Ltd. [1976] 105 ITR 546 (Mad), in order to support his contention. In the above-said decision, while considering the provisions contained in section 2(15), this court held as under (at p. 556) : "A person who lets out a property and enjoys the income therefrom, is more passive than active. It is not, therefore, reasonable to call it an activity for profit. As rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned counsel for the assessee was that reported in CIT v. Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1, wherein the Supreme Court held as under (headnote) : "The test is 'what is the predominant object of the activity-whether it is to carry out a charitable purpose or to earn profit ?' If the predominant object is to carry out a charitable purpose and not to earn profit, the purpose would not lose its charitable character merely because some profit arises from the activity." As already pointed out, in the present case, Vani Mahal was let out to others whenever the assessee was not utilising it. Even assuming that the net income of the sabha is from an activity, the question is whether it is for profit. In the objects of the society, nowhere it is stated that earning of profit is its object. Therefore, there is no profit motive in running the sabha. It would appear that no specific rate was fixed by the Sabha for letting out the hall and, on several occasions, the hall was let out on concessional rates to various parties. The rates charged are more or less ad hoc and in later stages it was shown as "donations". The rate was usually in the routine of Rs. 100 pe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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