TMI Blog2020 (9) TMI 823X X X X Extracts X X X X X X X X Extracts X X X X ..... ing been utilized for the objects of the trust viz., Running educational institution, providing medical relief to the poor etc., Absolutely there is no discussion of the facts relating to the utilization of earned income from letting out of Kalyana Mandapam and Gnanavapi towards charitable objects such as Education and Medical relief to the poor as given in the objects of the trust. Further, the Assessing Officer has not looked into the fact as to whether the entire income from Community Hall, Kalyana Mandapam and Gnanavapi are utilised for fulfilling the objects of the trust that is being education Medical relief and relief to the poor. The matter is remitted back to the Assessing Officer for de novo consideration as to whether the entire revenue derived from letting out of Kalyana Mandapam, Gnanavapi and Community Hall are utilized for charitable objects of the Trust and also to consider as to whether the income received from the properties of the Trust namely, Community Hall, Kalyana Mandapam and Gnanavapi to be classified as income from House Property or business income since the income there from is utilized for charitable purpose of the trust. The Assessing Officer sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncorrect. 3.2. The Authorized Representative of the appellant society pleaded that the same is an income derived from house property only, relying on the decision of High Court of Madras in the case of Chennai Properties and Investments Ltd., reported in 136 Taxman 202 (MAD) . 3.3 The Assessing Officer pointed out that such reliance is misplaced. There is no such relationship of landlord and tenant subsisting. In case of profitable entities would obviously be in the nature of business income and a different classification in respect of the operations by a non profitable organization appears to be unfair. Therefore, the claim that the income derived from these units is Income from House Property is not entertained. 4. Further, the Assessing Officer rejected the claim of deduction u/s.24(a) of the Act @ 30% stating that the question of allowing statutory deduction will not arise. 5. It is further pointed out by the Assessing Officer that the objects of the Trust fall under the main limbs of charitable purpose being education, medical relief and relief to the poor. The income from Community Hall, Kalyana Mandapam and Gnanavapi are used to offset the cost in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitution is permitted to carry on business activities which are incidental to its objects as long as they maintain separate account for the business activities. The activities of the assessee organization clearly come within the purview of 'Business' related. 'Business' under the Income-tax Act is an inclusive definition and not exhaustive. In paragraph 8.7, it is held as under:- 8.7. The receipts are from the community marriage halls and Gnanavapi have been received throughout the year and there is a systematic and regular carrying on of activity in the nature of trade, commerce or business or an activity of rendering any service in relating to any trade, commerce or business for a cess or fee or any other consideration. Further, the overall receipts during the financial year under the consideration are in excess of the threshold limit of ₹ 10.00 lakhs and therefore, the first and second provisos to Section 2(15) are clearly and distinctly applicable in the case of the assessee's organisation. The very fact that 'Receipts' relating to Kalyana Mandapam and Gnanavapi are received, goes to show that the amended provisions of Section 2(15) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id 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 distinction between the objects of a trust and the powers given to the trustees to effectuate the purpose of the trust. The ITAT thus held that the assessee is not entitled for any exemption u/s.11 of the I.T.Act. 12. Aggrieved against the order of the ITAT, the appellant/assessee filed the present Tax Case Appeals. The present Tax Case Appeals are admitted on the following substantial questions of law:- (i) Whether Section 2(15) of the Income Tax Act, 1961 would be attracted to the assessee case where the earned income from letting out of Kalyana Mandapam, Gnanavapi utilizes the entire revenue derived there from towards charitable objects such as Education and Medical relief to the poor? (ii) Would the activity of letting out Kalyana Mandapam not be incidental to the attainment of the objectives of the trust thereby entitling the assessee to the exemption under Section 12AA by virtue of the exemption carved out under Section 11(4A)? 13. Among various grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so as to include any transaction for a cess, fee or consideration. The Court specifically held that:- -An activity would be considered 'business' if it is undertaken with a profit motive, but in some cases, this may not be determinative. Normally, the profit motive test should be satisfied, but in a given case activity may be regarded as a business even when profit motive cannot be established / proved. In such cases, there should be evidence and material to show that the activity has continued on sound and recognized business principles and pursued with reasonable continuity. There should be facts and other circumstances which justify and show that the activity undertaken is in fact in the nature of business. 49. In Bureau of Indian Standards (supra), this court, while considering whether the activities of the Bureau of Indian Standards (supra) in granting licences and trading certificates and charging of fee amounted to carrying on business, trade or commerce, held as under:- 73. ... In these circumstances, -rendering any service in relation to trade, commerce or business? cannot, in the opinion of the Court, receive such a wide construction as to enfold r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries on its activities is material to determine whether the same is business or not. The purport of the first proviso to section 2(15) of the Act is not to exclude entities which are essentially for charitable purpose but are conducting some activities for a consideration or a fee. The object of introducing the first proviso is to exclude organizations which are carrying on regular business from the scope of -charitable purpose?. The purpose of introducing the proviso to Section 2(15) of the Act can be understood from the Budget Speech of the Finance Minister while introducing the Finance Bill 2008. The relevant extract to the Speech is as under:- .......Charitable purpose? includes relief of the poor, education, medical relief and any other object of general public utility. These activities are tax exempt, as they should be. However, some entities carrying on regular trade, commerce or business or providing services in relation to any trade, commerce or business and earning incomes have sought to claim that their purposes would also fall under -charitable purpose?. Obviously, this was not the intention of Parliament and, hence, I propose to amend the law to exclude th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from Kalyana Mandapam, Gnanavapi and Community Hall cannot be treated as business of the trust. The trust has not conducted any business. Whatever income earned from the Kalyana Mandapam, Gnanavapi and Community Hall, is utilised for the educational purpose and the society is running Educational Institution, which is the primary object of the trust; on the other hand, running Kalyana Mandapam, Gnanavapi and Community Hall is not a primary object. The question is whether the entire income derived from Kalyana Mandapam, is utilized for the primary object of the Society. In this regard, it is necessary to look into the object of the Trust. The objects of the Trust as given are as under:- (a) To promote and encourage Bharathiya Culture, Art and Philosophy and to conduct periodical meetings and functions. (b) To establish and maintain well equipped library to promote Bharathiya culture, Art and Philosophy. (c) To organize conferences, lectures, meetings, classes, receptions competitions, discourses to promote Bharathiya culture, Art and Philosophy. (d) To establish, maintain and subsidise dispensaries to give or aid in giving free medical treatment to peer a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether the entire income from Community Hall, Kalyana Mandapam and Gnanavapi are utilised for fulfilling the objects of the trust that is being education Medical relief and relief to the poor. In such circumstances, the order dated 06.04.2016 passed by the Income Tax Appellate Tribunal, Chennai D Bench in ITA.Nos.665 and 664/Mds/2015 for the Assessment year 2010-11 and 2011-12 is set aside. The matter is remitted back to the Assessing Officer for de novo consideration as to whether the entire revenue derived from letting out of Kalyana Mandapam, Gnanavapi and Community Hall are utilized for charitable objects of the Trust and also to consider as to whether the income received from the properties of the Trust namely, Community Hall, Kalyana Mandapam and Gnanavapi to be classified as income from House Property or business income since the income therefrom is utilized for charitable purpose of the trust. The Assessing Officer shall consider the above said questions and decide the matter on merits. 24. With the above observation, the Tax Case Appeals stand allowed and the order passed by the Income Tax Appellate Tribunal, Chennai 'D' Bench, in ITA.Nos.665 664/Mds/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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