Trust's Drama Profit Not Tax Exempt: Tribunal Rules No Charitable Purpose

Maharaja Shivchatrapati Pratishthan Versus ITO (Exemptions), Ward-2, Pune

Maharaja Shivchatrapati Pratishthan Versus ITO (Exemptions), Ward-2, Pune - TMI Issues:
- Denial of exemption u/s.11 of the Income-tax Act, 1961.

Detailed Analysis:

Issue: Denial of exemption u/s.11 of the Income-tax Act, 1961
The appeal was against the denial of exemption u/s.11 of the Income-tax Act, 1961 by the CIT(A) for the assessment year 2013-14. The assessee, a Trust engaged in organizing the drama 'Janta Raja,' claimed to be imparting education and thus eligible for exemption u/s 11. However, the Assessing Officer (AO) observed that the drama was organized on a commercial basis, leading to the denial of exemption. The AO held that the activity did not fall under the definition of 'education' u/s.2(15) of the Act as per the judgment of the Hon'ble Supreme Court in a previous case. The AO concluded that the activity was for the 'advancement of any other object of general public utility,' and denied exemption for the profit element. The CIT(A) upheld this decision, leading to the appeal before the Tribunal.

The Tribunal analyzed the facts and submissions. It noted that the assessee was organizing the drama for profit, not for educational purposes. The term 'education' as per section 2(15) was interpreted by the Hon'ble Supreme Court to involve the process of training and developing students' knowledge through normal schooling, which the assessee was not doing. The Tribunal agreed that the activity did not qualify as 'education' under the Act.

The assessee argued that its activity fell under the last clause of 'charitable purpose' in section 2(15), i.e., 'the advancement of any other object of general public utility.' However, the Tribunal referred to the proviso attached to this provision, which restricts activities involving trade, commerce, or business from being considered charitable unless certain conditions are met. The Tribunal cited a recent Supreme Court case to emphasize that if the receipts from business activities exceed 20% of total receipts, the activity loses its charitable purpose. In this case, the profit element in the drama performance exceeded 40% of the gross receipts, indicating a significant mark-up and a business activity, leading to the denial of exemption.

The Tribunal rejected the argument that a pending review petition in a related case should influence the decision, stating that the binding force of the judgment remains. Consequently, the Tribunal dismissed the appeal, affirming the authorities' decision to deny exemption under section 11 of the Income-tax Act, 1961.