Trust's publishing activities qualify as charitable under section 2(15) despite profit generation

ITAT Mumbai held that a trust's printing, publishing and distribution of journals and magazines constituted charitable activity under section 2(15), not business activity. Following SC precedent in Sai Publication Fund, the tribunal ruled that Revenue bears the burden of proving business activity. The trust's dominant purpose was spreading religious messages through preaching, making publishing activities merely incidental to charitable objects. The tribunal emphasized that earning profit alone does not determine commercial nature, and presumptions favor the assessee unless rebutted. Revenue's appeal was dismissed, confirming the trust's exemption under section 11.

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Issues Involved:
1. Whether the activity of printing, publishing, and distribution of journals and magazines is incidental to the attainment of the objects of the trust and qualifies for exemption under Section 11 of the Income Tax Act, 1961.
2. Whether the assessee trust's income from sales and subscriptions is hit by the provisions of Section 2(15) and Section 13(8) of the Income Tax Act, 1961, disqualifying it from exemption under Section 11.
3. Appropriateness of the CIT(A) relying on a judgment related to indirect tax (Sales Tax) for deciding the issue under Section 2(15) of the Income Tax Act.
4. Whether the CIT(A) erred by not assigning reasons for the applicability of the Civil Appeal No. 9445 of 1996 to the assessee trust.
5. Whether the CIT(A) failed to consider the ratio of the Supreme Court judgment in the case of Assistant Commissioner of Income Tax (Exemption) v. Ahmedabad Urban Development Authority before allowing exemption to the assessee trust.

Summary:

Issue 1: Incidental Activity and Exemption under Section 11
The Revenue challenged whether the activities of printing, publishing, and distribution of journals and magazines are incidental to the attainment of the trust's objectives, thus qualifying for exemption under Section 11. The CIT(A) allowed the exemption, relying on the Supreme Court's decision in CIT vs. Sai Publication Fund, which held that such activities were incidental to the trust's main objective and not carried out with a profit motive.

Issue 2: Income from Sales and Subscriptions
The Assessing Officer (A.O.) observed that the assessee trust generated significant income from the sale and subscription of books and magazines, which constituted 63% of its total receipts. The A.O. contended that these activities were in the nature of trade, commerce, or business, thus disqualifying the trust from exemption under Section 11, as per the provisions of Section 2(15) and Section 13(8). However, the CIT(A) ruled in favor of the assessee, stating that the activities were part of the trust's charitable purpose and not commercial in nature.

Issue 3: Reliance on Judgment Related to Indirect Tax
The Revenue argued that the CIT(A) erred by relying on a judgment related to indirect tax (Sales Tax) to decide the issue under Section 2(15) of the Income Tax Act. The CIT(A) referenced the Supreme Court's decision in the Sai Publication Fund case, which dealt with the nature of activities for charitable trusts under the Income Tax Act, thus justifying its relevance.

Issue 4: Applicability of Civil Appeal No. 9445 of 1996
The Revenue contended that the CIT(A) did not provide reasons for applying the facts of Civil Appeal No. 9445 of 1996 to the assessee trust. The CIT(A) referenced this appeal to support the view that the trust's activities were not commercial but incidental to its charitable objectives.

Issue 5: Consideration of Supreme Court Judgment in Ahmedabad Urban Development Authority Case
The Revenue argued that the CIT(A) failed to consider the Supreme Court judgment in Assistant Commissioner of Income Tax (Exemption) v. Ahmedabad Urban Development Authority, which could impact the trust's eligibility for exemption. The CIT(A) did not address this judgment specifically but relied on the broader interpretation of charitable activities provided in the Sai Publication Fund case.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, affirming that the assessee trust's activities of printing, publishing, and distributing journals and magazines were incidental to its charitable objectives and not commercial in nature. Consequently, the trust was entitled to exemption under Section 11 of the Income Tax Act. The appeal filed by the Revenue was dismissed.

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