2015 (1) TMI 1381 - AT - Income Tax

Charitable Trust Wins Tax Exemption Battle: Tribunal Backs Relief for the Poor

The Deputy Director of Income Tax (Exemptions) II, Versus M/s. Sri Narayana Guruviah Chetty Estate,

The Tribunal upheld the Commissioner of Income Tax (Appeals)' decision to grant exemption to a public charitable trust under section 11 of the Income Tax ... Section 2(15) applicability - proof of charitable activities - Held that:- The advancement of any other object of general public utility shall not be a charitable purpose if it involves carrying on activity in the nature of trade, commerce or business or any activity of rendering services in relation to any trade, commerce or business. In the present case, the assessee is committed for relief to the poor, education, medical help, etc. The newly inserted proviso to section 2(15) will not apply in respect of the first three limbs i.e. relief of the poor, education or medical relief. So far as running the Kalyana Mandapams are concerned, it is only to achieve the objects of the assessee trust, the funds received from the Kalyana Mandapam are utilized. Thus, the proviso to section 2(15) has no application to assessee’s case. Similar issue in assessee’s own case [( 2008 (9) TMI 528 - MADRAS HIGH COURT] for earlier assessment year and dismissed the appeal filed by the Revenue - Decided in favour of assessee. Issues:Interpretation of section 11 of the Income Tax Act for exemption of a public charitable trust's income under scrutiny.Analysis:The appeal by the Revenue challenged the rejection of exemption under section 11 by the Assessing Officer due to the trust running a Kalyana Mandapam, considered a business activity violating section 2(15) of the Act. The Commissioner of Income Tax (Appeals) allowed the exemption, emphasizing the trust's charitable activities and the incidental nature of the Kalyana Mandapam's income. The Tribunal upheld the CIT(A)'s decision, citing the trust's long-standing charitable objectives and the utilization of Kalyana Mandapam income for charitable purposes.The main contention revolved around the applicability of section 2(15) of the Act, which defines charitable purposes and excludes activities resembling trade, commerce, or business. The Tribunal noted the trust's consistent charitable activities and the CBDT's clarification that commercial activities incidental to relief to the poor, education, or medical aid still qualify as charitable purposes. The trust's registration under section 12A since 1973 supported its charitable nature, rendering the proviso to section 2(15) inapplicable.The judgment referenced the trust's historical charitable deeds, highlighting relief to the poor, education, and medical aid as its primary objectives. The trust's resolution emphasized its irrevocable commitment to charitable and religious activities, with no distribution of funds to trustees. The Tribunal also cited a previous High Court decision in the trust's favor, emphasizing the use of Kalyana Mandapam income solely for charitable purposes, aligning with the trust's charitable nature.In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the trust's eligibility for exemption under section 11 of the Act. The judgment underscored the trust's long-standing charitable activities, the incidental nature of the Kalyana Mandapam income, and the consistent application of funds towards charitable purposes.