TMI Blog2022 (3) TMI 1330X X X X Extracts X X X X X X X X Extracts X X X X ..... and the same was given to long lease for 99 years. Therefore, there is no possibility that the assessee can again revive its main object of carrying out research on Vedas. We find that in the assessment years under consideration, the assessee has only carrying out construction of building and letting out it to the corporate houses. If the assessee has to claim relief under charity, it has to carry out charitable activities of relief to poor or education or medical relief. In the case in hand, the assessee neither carried out any activity relating to relief to poor nor education or medical relief. Therefore, the provisions of section 2(15) of the Act clearly attracts in the case of the assessee, i.e., other object of general public utility. Therefore, the Assessing Officer has rightly decided that the assessee has not carried out any charitable activity and not entitled for claiming deduction under section 11 to 13 - CIT(A), without examining any material documents and provisions of section 2(15) of the Act, simply reversed the order passed by the Assessing Officer. We find that the order passed by the ld. CIT(A) is without any material and any basis. Therefore, the order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR V Sreenivasan, Addl. CIT ORDER PER V. DURGA RAO, JUDICIAL MEMBER: There are three cross appeals filed by the Revenue as well as assessee against different orders of the ld. Commissioner of Income Tax (Appeals) 17, Chennai dated 12.12.2014 relevant to the assessment year 2011-12 and orders dated 05.08.2016 for the assessment years 2010-11, 2012-13 and 2013-14. Since common grounds are involved, these appeals were heard together and being disposed of by this common order for the sake of brevity. I.T.A. No. 586/Chny/2015 [AY: 2011-12] 2. The Revenue has raised the following grounds: Ground No.1 : The order of the learned CIT(A) is contrary to the law and facts of the case. Ground No.2 : 2.1. The learned CIT(A) erred in holding that the assessee is entitled to exemption of all its income, including rental income out of letting, interest income on investments and miscellaneous income, under Secs.11 13 of the I.T. Act, 1961. 2.2. The learned CIT(A) failed to appreciate that letting out of buildings (without any charitable activity carried on, by the assessee) involves activity in the nature of trade, commerce of business, which wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption u/s.11, whereas, the crux of the issue, in the instant case is, whether the, assessee can be said to be eligible for exemption u/s.11, without doing any charitable activity, but only engaged in construction of commercial buildings. In any case, the order of the CIT (A) is under challenge before higher appellate authorities. Ground No.5 : 5.1. The learned CIT(A) erred in rendering his decision on the basis of assurances given by the assessee, that, in future, it may utilise the buildings constructed for research activities, without the support of any concrete evidence. 5.2. The learned CIT(A) failed to appreciate that the moot question when such research activities will commence in the constructed buildings has not at all been answered. 5.3. The learned CIT(A) ought to have noted that the lease deed executed by the assessee with various commercial establishments in respect of the subject building reveals that the lease has been granted by the assessee for 10 years, commencing from 2010, and therefore, there is no scope for the assessee to utilise the constructed building for research activities within 10 years, i.e., up to 2020. 5.4. The learned CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aspect of Yoga and other allied sciences and its effect on psychology and physiology. (f) To establish and maintain research Departments pertain to Vedas, Ayurvedic Sciences and other systems of Indian medicine and to study the scientific basis of religious beliefs and practices existing in India. (g) To award scholarships, stipends and-fellowships to students and scholars in the field of education and research general and for higher studies including the attainment of the objects aforementioned and also to arrange for lectures, seminars and all other activities intended to promote research and expertise in the general field of knowledge including the objects mentioned above and allied objects. (h) To give donations and grants and aids to any trust this is established for charitable purposes ensuring for the benefit of the public in the discretion of the trustees. (i) To obtain grants of lands and buildings and other gifts of property movable and immovable and moneys by way of block-grants, recurring grants, maintenance grants and stipendiary grants from any Government or from any quasi-governmental corporations or bodies or from any municipal and local bodies as may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has earned a huge income from the properties, the income was not used for the purpose of charity. 3.3 The assessee vide Annexure V of its reply states that the trust had some lands near the building already put by it 25 years ago, out of which rent is collected. The remaining vacant land was utilized for the purpose of multi storied buildings. For this purpose it entered into an MoU with The Willington Charitable Trust which also had adjacent lands. Both the Trusts jointly made development of multi storied building out of which 2 Floors were allotted to Indian Cultural Research Trust. For this purpose, the Trust advanced sum of ₹ 6,27,55,000/- till 31.03.2010 to Wellington Charitable Trust. The amount is paid for investment in immovable property which is permitted investment by a Trust under the Income-tax Act 1961.The same has been fully completed and rental income has come to the Trust . 3.4 The Assessing officer further noted on perusal of the approved building plan submitted by the assessee that the building was constructed in a land belonging to the assessee, M/s. Willington Charitable Trust and M/s. Tamil Nadu Educational Trust in R.S.No.1629/1, 1629/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er than charitable or religious purposes as aforesaid or ceases to be accumulated or set apart for application thereto, or (b) ceases to remain invested or deposited in any of the forms or modes specified in sub-section (5), or] (c) is not utilised for the purpose for which it is so accumulated or set apart during the period referred to in clause (a) of that sub-section or in the year immediately following the expiry thereof, [(d) is credited or paid to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or subclause (v) or sub-clause (VI) or sub-clause (via) of clause (23C) of section 10,] shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart or ceases to remain so invested or deposited or credited or paid or], as the case may be, of the previous year immediately following the expiry of the period aforesaid.] 3.8 The Assessing Officer further noted that for the assessment year under consideration, the assessee has sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income and expenditure account for the year ended 31.03.2011 reveals that except donation of ₹.36,06,166/-, entire expenditure was towards maintenance of buildings to earn income. How it is termed as charitable activity? c. Nature of endowment fund of ₹.2,23,24,34,274/-. d. Under the head sundry creditors and other liabilities, the sum of ₹.4,13,18,145/- represents what? And how it was quantified? e. Raja Annamalai Building (Annexure) 2nd and 3rd floor belongs to the assessee. Other floors belong to whom/ f. Raja Muthiah Centre 4th floor belongs to the assessee. Other floors belong to whom/ g. Willingdon Estate Building (3rd floor) belongs to assessee. Other floors belong to whom? h. Details of rates and taxes of ₹.31,87,720/- paid to whom and to which property. 4.2 The assessee has given reply vide letter dated 04.12.2014 as under: a) The purpose of construction of Sigapi Achi Building, to earning of rental income and use the income for objects of the Trust. An activity for generating income for pursuing the approved object and there should not be any attempt in approving such activities as commercial in as much as the finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5.2 The Hon'ble High Court of Madras in the Appellant's sister concern viz., The Willingdon Charitable Trust case reported in 330 ITR 24 has approved the activities pursued and continuously pursued. It has observed that the amendment in the statue i.e., the newly inserted proviso below section 2(15) of the Income Tax Act 1961 would not nullify the principles laid down by the Jurisdictional High Court especially in view of the non-applicability of the said proviso to the factual matrix of the case, due to the fact that running of the kalyana mandapams was not the objects mentioned in the Memorandum of Association of the Appellant and the surplus generated from the kalyana mandapams was admittedly ploughed back for pursuing the objects of the trust and relief was granted. This has not been reversed so far. The AO's contention that the Appellant's objectives are only towards advancement of the object of general utility is not totally correct. 5.3 Moreover, in the case of Willingdon Charitable Trust case, the Jurisdictional High Court held that when a business income was used towards the achievement of the object of the trust it would be incidental to the .achi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on no. 1132 dated 5.1.1978 as extracted from CIT Vs. Sarladevi Sarabhai Trust 172 ITR 698 Guj., and the AO's finding that the Appellant had not applied or applied minimum of the gross receipts is factually not correct. A Charitable Trust can make donation to another Charitable Trust having 12A registration and 80G and such amount of donation will be application of income. 5.5 The A.O's action in exhibiting the revenue of the Appellant Trust as Income from House Property is not correct, since the main objects of the trust remain intact. Also, the Income accumulated and applied for the construction of the building amounting to ₹ 14,02,12,514/- had been disallowed by the A.O is also not correct, in view of the Hon ble High Court decision in the case of CIT Vs. St. George Forana Church in 170 ITR 62 Ker which lends support to the Appellant wherein, it was decided that the word applied is of wider import than the word expenditure . The sum spent on the construction of additions to the buildings owned by a religious institution, which were let out, and the income where from was used for religious purposes, can be said to be an application of income for religious or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. Even if an excess amount had been given to the another charitable trust having 12A registration and 80G, it would amount to application of income as per the instruction of CBDT vide Instruction No1132 dated 05/01/1978 as reported in CIT Vs. Saraladevi Sarabhai trust (172 ITR 698) and also as per the decision in the case of CIT Vs Hindustan Charity Trust (139 ITR 913) wherein it was held that donation to another trust is also application of income. 5.8 The A.O had brought out the case of Info Parks Vs. DCIT reported in 329 IIR 104 Ker, wherein it was held that letting on rent commercial building to software companies was an activity of commercial in nature and cannot be treated as income from properties and in the case of the Appellant multistoried commercial complex constructed and let out to various corporate houses. The Appellant has countered it saying that it is a charitable trust and it is permitted to put up buildings and let it out and use proceeds for charitable purposes. Hence, the case of Info Parks is not applicable since Info Parks is not a charitable trust and its objectives are totally different from that of the Appellant trust. 5.9 The A.O had again stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rest income on investments and miscellaneous income u/s 11 to 13 of the Income Tax Act, 1961. 6. In view of the above discussion, I am of the considered view that the appellant is entitled to exemption u/s 11 to 13 of the Act. The Assessing Officer is directed to accept the income returned by the assessee as per the return filed for the Assessment Year 2011-12. 5. Aggrieved, the Department carried the matter in appeal before the Tribunal. 5.1 The ld. DR has submitted that the initial object of the assessee trust was to establish Research Institute for learning and research and study in depth of all Vedas and effect of Vedic chants on human life, nature and universe and since they are not successful in conducting the research all the buildings were given on rental for a period of 99 years. Therefore, the intention of the assessee is only running a commercial institution and no charitable activity was carried out by the assessee. Only a small amount was given to another charitable society and claim exemption under section 11 of the Act. 5.2 The ld. DR further submitted that the original object of the assessee trust to carry on research on Vedas are no more carried by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concern, DIT(E) v. Willington Charitable Trust [2010] 195 Taxman 232 (Mad), the ld. DR has submitted that in that case, the assessee has carried out its main objects and therefore, the Hon ble Madras High Court has granted exemption under section 11 to 13 of the Act and thus, the case law has no application in the present case. The ld. DR strongly relied on the decision of the Tribunal in the case of Investors Financial Education Academy v. ITO (E) in I.T.A. No. 2565/Chny/2017 dated 11.06.2018 and pleaded that the same may be followed. 8. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below including paper book. The assessee trust has been created mainly for the purpose of research and study in depth of all Vedas and effect of Vedic chants on human life, nature and universe. Since the assessee was not able to carry out the activities for which it has obtained 12A registration, started construction activities and letting out to corporate houses and getting rental income out of which some portion of amount was donated to educational institution. The assessee has not carried out any activity relating to medical an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ves the carrying on 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, 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, unless (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities of that previous year]] From the above, it is clear that if the assessee has to claim relief under charity, it has to carry out charitable activities of relief to poor or education or medical relief. In the case in hand, the assessee neither carried out any activity relating to relief to poor nor education or medical relief. Therefore, the provisions of section 2(15) of the Act clearly attracts in the case of the assessee, i.e., other object of general public utility. Therefore, the Assessing Officer has rightl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he present case for the reason that the assessee has carried out construction activity and by letting out it to the corporate houses, earned rental income without carrying any charitable activity. 8.6 We have also gone through the other decisions placed in the form of paper book. None of the case law relied on by the assessee speaks that the assessee is eligible for claiming deduction under section 11 to 13 of the Act just because the assessee is having 12A registration and carrying out only construction of multi-storied buildings the rental income earned by letting it out to corporate business houses without carrying out any charitable activity such as relief to poor or education or medical relief. Thus, the case law relied on by the assessee are rejected. 8.7 Further, as relied on in the CIT(A) s order in the case of Willington Charitable Trust 330 ITR 24, the Jurisdictional High Court held that when a business income was used towards the achievement of the object of the trust it would be incidental to the achievement of the object of the trust notwithstanding the profit and gain involved therein. That section 11(4A) of the Act did not exclude section 11(1)(a). The exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds condoned and the appeal is admitted for adjudication. 9.1 The only effective common ground raised in the assessment years 2010-11, 2012-13 and 2013-14 relates to confirmation of disallowance of depreciation claimed by the assessee. The ld. Counsel for the assessee has relied on the decision of the Hon ble Supreme Court in the case of CIT v. Rajasthan and Gujarati Charitable Foundation 402 ITR 441 and prayed that the same may be followed. 9.2 We have heard the rival contentions. The Assessing Officer disallowed the claim of depreciation of the assessee in the above assessment years on the ground that the depreciation claimed by the assessee cannot be allowed since the cost of the asset was already claimed as application of income and concluded the assessment under section 143(3) r.w.s. 147 of the Act for the assessment year 2010-11 and section 143(3) of the Act for the assessment years 2012-13 and 2013-14, which was confirmed by the ld. CIT(A) on appeal. 9.3 We have perused the decision of the Hon ble Supreme Court in the case of CIT v. Rajasthan and Gujarati Charitable Foundation (supra), wherein, the Hon ble Supreme Court has held that even though the cost of asset was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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