2000 (3) TMI 27 - HC - Income Tax

Tribunal upholds tax exemption for Sabha despite rental income being deemed property, not business.

Commissioner Of Income-Tax Versus Samyuktha Gowda Saraswatha Sabha

The Tribunal upheld the exemption granted to the respondent-Sabha under section 11 of the Income-tax Act. Despite renting out its Kalyana Mandapam for ... Charitable Purposes, Exemption Issues involved: Whether the Appellate Tribunal justified in granting exemption u/s 11 of the Income-tax Act to the assessee-Sabha despite letting out the Kalyana Mandapam for profit.Summary:The respondent-Sabha, a registered society, aimed at the advancement of the United Gowda Saraswata Community and public utility. While providing scholarships and funds for education, the Sabha also rented out its Kalyana Mandapam for marriages and functions. The Income-tax Officer initially denied exemption u/s 11, stating the trust's objects were partly charitable. The Appellate Assistant Commissioner, however, ruled in favor of the Sabha, emphasizing its public utility objective. The Revenue appealed to the Tribunal, which upheld the exemption based on the Sabha's primary purpose of advancing education and aiding the poor.The Tribunal's decision was supported by the Supreme Court precedent in CIT v. Surat Art Silk Cloth Manufacturers Association, as the Sabha's letting out of the hall was deemed a means to further its charitable goals. The Revenue argued that the Sabha's income should be fully taxable due to its profit-making activities. However, the court held that the income from renting the hall was not business income but property income, making section 13(1)(bb) inapplicable. Consequently, the court ruled in favor of the assessee-Sabha, affirming its entitlement to exemption u/s 11 of the Act. No costs were awarded in the case.