TaxTMI 
TaxTMI 
1999 (11) TMI 104
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....section 250 of the Income-tax Act, 1961 in the status of A.O.P. as against public charitable trust claimed by the assessee. For the assessment year 1990-91 the assessment was completed under section 143(3) on 11-3-1993 in the status of trust. The Assessing Officer noticed as a result of enquiries conducted that the assessee-trust was created by a deed of trust by a Muslim Religious Organisation called 'Jamaithe Islam' which is a prohibited Organisation by the Government of India during the year 1993. He further noted that the trust was created, nourished and maintained by this Organisation for achieving its goals. 3. The assessee formed a charitable trust and got registered under the Income-tax Act, 1961. On a perusal of the deed of trust, the Assessing Officer noted that the assessee was to be engaged in the following activities of charitable nature : (1) Educational -- giving facilities of education for the members of the general public ; (2) To set up educational institutions -- colleges, schools and such other institutions ; (3) To publish educational magazines, periodicals etc.; (4) To set up and run publishing and printing press and other activities ; (5) To....
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.... is used for voicing the policies of the trust authorities as it can be seen from its news items appearing in the daily ; and (d) The paper is found criticising the various State/Central Government policies, political parties, social and religious organisations, individuals etc. due to the policy of the paper following free press journalism. The Assessing Officer held that that the decision of the Hon'ble Supreme Court in the case of Sole Trustee Lok Shikshana Trust v. CIT [1975] 101 ITR 234 is squarely applicable to the facts of the case. In this case, their Lordships held that the activity of printing and publishing of a newspaper is not charitable in nature. 4. The Assessing Officer further held that even if the assessee is to be treated as a charitable trust, the income of the trust will not be exempt under sections 11, 12 and 13 of the Income-tax Act, on the following grounds : "A. It is relevant to note here that the assessee has been printing and publishing the aforesaid newspaper in liaison with other sister concern Ideal Publication Trust since its inception and had never engaged in other activities as mentioned above. Donations were collected by the trust from ti....
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....e income generated out of the business activities should be assessed along with voluntary contributions received by the assessee. He further held that the voluntary contributions received by a non-charitable institution, like the assessee, is to be treated as casual income and, therefore, the same cannot be exempted for the purpose of applying sections 2(15), 2(25)(?), 2(24)(iia), 10(3), 11 and 12 of the Income-tax Act, 1961. The voluntary contributions received from the general public by a trust will not form part of the income of the trust unless it is exempted under section 11 of the Act. The Assessing Officer held that sections 11 and 12 of the Act are not applicable in the case of the assessee since it is not a charitable trust and, therefore, any voluntary contribution received during the course of carrying on of the business activity will have to be treated as the income of the assessee trust. In the light of the decision of the Hon'ble Supreme Court in the case of Dr. K. George Thomas v. CIT [1985] 156 ITR 412 and Dr. K. George Thomas v. CIT [1986] 159 ITR 851, the Assessing Officer held that the contributions received towards the corpus of the trust are to be treated as ca....
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....e admitted that none of the activities of charitable nature as mentioned above, was carried on by the assessee trust as there was no income to be applied for charitable purposes. However, the learned CIT (Appeals) noticed the following items credited in the profit and loss account : --------------------------------------------------------- Year ended Year ended 31-3-1989 31-3-1990 --------------------------------------------------------- Printing charges Rs. 28,51,955.90 Rs. 30,80,074.67 Printing matters Rs. 88,655.00 Rs. 33,512.00 Photo composing Rs. 61,257.45 Rs. 21,234.47 Sales of waste....
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....nting paper and has not been translated into practice. The contributions received towards the corpus were also diverted for acquisition of assets connected with the printing of the newspaper Madhyamam. Therefore, the learned CIT (Appeals) held that neither the income of the trust nor the corpus donations have been utilised for charitable activities as envisaged in the trust deed. Therefore, the learned CIT (Appeals) held that the Assessing Officer was justified in reaching the conclusion by relying on sub-section (4A) of section 11. The learned CIT(Appeals) further held that, if that is so, the question to be considered is whether the voluntary contributions received in the instant case can be treated as income or not. He held that according to section 11(1)(d), income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or the institution, are to be excluded from the total income of the trust. However, after the amendment brought into section 11(1)(d) with effect from 1-4-1989, the law has been substantially changed. The assessment years under consideration are the assessment years 1989-90 and 1990-91 and the am....
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....) on the ground that "once the appellant is established to be a trust for charitable purposes, all voluntary contributions received by it are treated as its income and in order to enjoy the benefit of exemption under section 11, the trust has to fulfil all the conditions mentioned in that section read with all other relevant sections of the Act, such as sections 12A and 13. In this view of the matter, the appellant's claim for basic exemption of Rs. 5,000 under section 10(3) in respect of casual and non-recurring receipts also does not merit consideration because such exemption is not applicable in the case of voluntary contributions received by a trust established for charitable purposes". The assessee's plea for depreciation was also rejected by the learned CIT (Appeals) on the ground that it was granted by the Assessing Officer himself. Coming to depreciation, the Assessing Officer was directed to look into the matter. It is against this order, the assessee is in appeal before the Tribunal. 7. The learned counsel for the assessee objecting to the observations of the Revenue authorities, first submitted that the assessee is not a publisher of the daily called Madhyamam. Madhya....
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.... other odd jobs was only a means to generate income and, therefore, it cannot be treated as assessee's business. It is an activity done in trust and not a business done by the trust. The learned counsel objected to the observations of the Assessing Officer contained in para 8(d) on the ground that in so far as the assessee is concerned, section 11(4A) is not applicable to its case. It is a business incidental to the attainment of the objects of the trust and it was not a business independent of the objects of the trust. As far as the assessee is concerned, the counsel submitted, the section relevant was as it was in force upto 31-3-1992. 8. The learned counsel further submitted that in the instant case of the assessee for both the years there was a negative income. When the matter was sent back to the Assessing Officer for fresh consideration, for the first time, the officer was influenced by the subsequent facts that came into the picture as a result of the prohibition of the Organisation which published the daily. The learned counsel submitted that it is not at all relevant factor. As a matter of fact, the assessee was running a press doing job works in the process of generati....
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....g press is income from property held under trust for charitable purposes and therefore entitled to exemption under section 11A. The counsel also placed reliance on the decision of the Kerala High Court in CIT v. Dharmodayam Co. [1997] 225 ITR 686 wherein the Hon'ble High Court of Kerala held that if the business is held in trust, the income therefrom would not be governed by sub-section (4A) of section 11. 8.1 Opposing the above contentions, the learned departmental representative supported the order of the Assessing Officer and submitted that the reliance placed by the assessee's counsel that the Tribunal has already held M/s Ideal Publications Trust, as a charitable trust, is not at all relevant as far as the assessee is concerned. The assessee has earned income but has not applied the income for any charitable purpose. The assessee was, in fact, doing business by way of printing the newspaper and doing job works and generating therefrom. The learned departmental representative specifically placed reliance on para 7 of the order of the learned CIT (Appeals) which reads as under : "7. On careful consideration of the evidence on record and the submissions made by the learned ....
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....n established wholly or partly for such purposes. The words, not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution' have been removed from clause (iia) of sub-section (24) of section 2 with effect from 1-4-1989. On the other hand, these words appear in clause (d) of sub section (1) of section 11 as per the amendment with effect from 1-4-1989. Here we are concerned with the assessment years 1989-90 and 1990-91. Therefore, the provisions of the amended section 11(1)(d) read with section 11(4A) and section 2(24)(iia) are applicable to the facts of the present case." There were other receipts other than the corpus contributions which have not been spent by the assessee for achieving the objectives said to have been contemplated by the assessee for which it was registered under section 80G. The job works said to have been undertaken by the assessee are nothing but business and since the assessee is not a charitable trust the income generated from the business carried on by the assessee cannot be said to be an income generated from a business held under trust. It is not correct to say that the Assessing Officer and t....
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....so noted that one of the objects of the trust is to establish printing press etc. etc. Therefore, in the light of the decision of the Hon'ble Kerala High Court in Dharmodayam Co.'s case, we hold that the business of printing the newspaper itself was held in trust and, therefore, it is held to be a charitable activity. In the decision relied on by the learned departmental representative in Sole Trustee, Loka Shikshana Trust's case, the question was whether the publication of the newspaper was entitled to exemption under section 11 of the Income-tax Act, read with section 2(15). The question referred was as follows : "Whether, on the facts and circumstances of the case, the income of the Loka Shikshana Trust was entitled to exemption under section 11 of the Income-tax Act, 1961, read with section 2(15) for the assessment year 1962-63 ?" Their Lordships of the Apex Court held that the publication of the newspaper is not a charitable activity and the profits generated therefrom are taxable. 10. The case of the assessee before us is that one of the objectives is to set up and run printing presses, publishing houses and imparting knowledge. In the case relied on by the learned c....
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....come of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the trust or, as the case may be.. . .". 14. From the above section it is clear that even to get the exemption by treating the donations towards the corpus as coming from the donors, the business should be incidental to the attainment of the objectives of the trust. The case of the assessee is that setting up and running the printing presses, publishing houses and other facilities for imparting knowledge is one of the objectives of the trust. In the instant case, there is no case for the assessee that it was engaged in any charitable activity except printing the newspaper, Madhyamam for M/s Ideal Publication Trust, Calicut. Setting up of the printing press and publishing house, if meant for generating income so as to achieve the objects of the trust, then it should be treated as a business held in trust. The printing work done also should be held in trust. From the records before us, it is difficult to accept the claim of the assessee that it was not publishing the daily, Madhyamam, but was only doing printing work for payment. The reas....
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....activity if that activity was carried on to generate income for the advancement of the other charitable objectives as contemplated under section 2(15) of the Income-tax Act, 1961 such as " relief of the poor, education, medical relief and advancement of any other general public utility'. The decision relied on by the learned counsel in Dharmodayam Co. 's case is distinguishable on facts. In that case, their Lordships of Kerala High Court came to the conclusion that the business of conducting Kuries itself was held in trust for charitable purposes and for generating income. In the case before us, though the assessee claims the same, from the facts and circumstances, we arc unable to hold so. 16. Looking from another angle, in the light of the decision of the Allahabad High Court in CIT v. J. K. Charitable Trust [1992] 196 ITR 31, we are unable to agree with the contention of the learned counsel. In this case, the Hon'ble Allahabad High Court held that 'a charitable purpose may be served in more than one way. One is to directly contribute for the promotion of that cause; the other is to contribute money to another charitable organization which advances that cause. In the absence o....
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....to acquire, accept or receive all endowments, gifts, grants or donations, movable or immovable made to this trust etc., the power to sell and purchase the movable and immovable properties for the benefit of the trust etc. and the power to set up any industry or business for and as part of the aforesaid charitable purposes, we find that the establishment of the printing press was only a means to achieve the end of charitable purposes and though the above objects are meant for charitable purposes, as we have already held, the facts in the case of the assessee speaks otherwise. The assessee-trust has not undertaken any activity of charitable nature except setting up the printing press and doing publishing work for M/s Ideal Publication Trust which we have held in the light of the decision in Sole Trustee Loka Shikshana Trust's case as not constituting a charitable activity. The assessee has not established that it has undertaken any charitable work other than setting up the printing press. It is the case of the assessee that by setting up the printing press the assessee is imparting technical knowledge to its staff. There is nothing on record to suggest that any of the trained personn....
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....crupulous person. The thief who removes your wallet and the swindler who cheates you, teach you a lesson and in the process make you, wiser though poorer. If you visit a night club, you get acquainted with and add to your knowledge about some of the not much revealed realities and mysteries of life. All this in a way is education in the great school of life. But that is not the sense in which the word 'education' is used in clause (15) of section 2". As far as Indian law is concerned, in view of the clear definition of 'education', the scope is narrower and limited especially in the ratio of the decision of the Hon'ble Supreme Court in Sole Trustee, Loka Shikshana Trust. We have to hold that in the light of the clear observations of the Assessing Officer that some of the corpus or the income generated from the business carried on by the assessee, if at all, parted to with M/s Ideal Publication Trust, for the benefit of publication of the daily, Madhyamam, the same cannot be held as application of income for charitable purposes. Still the question remains whether the mere running of the printing press itself will constitute an object of charitable activity, Coming to the definiti....
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....rtaken any activity of charitable nature other than the running of the printing press. 19. Here we record the argument of the learned counsel for the assessee that the Revenue authorities were prejudiced by the fact that the orgainization which is said to have set up the trust, viz., 'Jamaithe Islam' is an organisation prohibited by the Government of India during the year 1993. The assessment years involved in these appeals are assessment years 1989-90 and 1990-91. The subsequent development has no relevance. We also note the contention of the learned counsel that the Assessing Officer was prejudiced against the assessee because of the fact mentioned above and he brought to our notice the observations of the Assessing Officer at page 3 of the order, which are reproduced below : "Actual activities of the trust are as follows : (a) running of newspaper called 'Madhyamam'; (b) the income is used for business purposes only; (c) the paper Madhyamam is used for voicing the policies of the trust authorities as it can be seen from its appearing in the daily; and (d) the paper is found criticising the various State/Central Government policies, political parties, social and....