TaxTMI 
TaxTMI 
2010 (10) TMI 153
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....lower authorities to hold that a joint reading of section 11(1), 11(4) and 11(4A) would mean to give exemption of the income from the business of the trust irrespective of the nature of the business, if the income derived from the business is applied to the objects and purposes of the trust in the light of the fact by the Tribunal holding that there is no finding regarding the application of the income derived from the business can the Tribunal allow the appeal of the assessee instead of remanding the same for want of finding as to the applicability of the income ?" 3. Facts in brief 3.1. A trust was started in the year 1924, by name "The Willington". The said trust acquired a property bearing Door No. 1/4,Marshalls Road, Egmore, Chennai-600 008. Thereafter, a resolution was passed by the trust onFebruary 27, 1971, to constitute a charitable trust in the name of "The Willington Charitable Trust". The assessee's trust deed mentioned the objects such as, to establish, run or maintain educational, technical or technological institutions of all kinds inIndiafor the benefit of the public, to award scholarships and stipends for education, to institute lectureships and....
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....lding as marriage halls and auditoriums, apart from using the same for rental purposes and running a ladies hostel, such commercial activities cannot be termed as incidental to the objects of the trust. Secondly, the Assessing Officer has held that the second condition required under section 11(4A) of the Act of maintaining separate books of account is not satisfied. It was held by the Assessing Officer that the assessee is maintaining the books of account relating to the activities of letting out the auditoriums owned by it and it has been crediting the income of rent from Indian Bank and interest on fixed deposits, etc., in the said account. The assessee has kept separate accounts only in respect of other activity of running the hostel for ladies and, therefore, it has to be held that the second condition that the assessee should maintain separate books of account in respect of its income assessable under head "Business" is not satisfied. The Assessing Officer has also found that the assessee has filed an application under Form 10B as required under section 11 of the Act for accumulating of the income for specified charitable purposes towards the establishment ofLadiesCollegeand ....
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....property held in trust is purely incidental to the objects more so when the same is utilized for the above said purposes. Hence, by holding so the Tribunal has allowed all the appeals filed by the assessee and dismissed the appeals filed by the Revenue. The Revenue has filed the present appeals, challenging the said orders of the Tribunal by raising the above referred substantial questions of law. 7. Heard Shri Patty B. Jeganathan, learned counsel appearing for the appellant/Revenue and Shri V. Ramachandran, learned senior counsel for Mrs. Dr. Anita Sumanth appearing for the respondent assessee and perused the written arguments filed by the counsel. 8. Submissions of the Revenue 8.1. Shri Patty B. Jeganathan, learned counsel appearing for the Revenue submitted that when it is not in dispute that the income of the institutions derived by commercial activities such as running marriage halls, auditoriums and receiving rent is augmented by commercial activities, the said business cannot be held to be incidental to the attainment of the objects of the trust. In other words, it is submitted that a business whose income is utilized by the trust for the purpos....
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....ted that inasmuch as the Assessing Officer has not gone into the break-up figure of various heads of accounts given by the assessee, considering the scope of section 11(4A) of the Act as well as section 11(4) of the Act, the appeals will have to be allowed by remanding the cases to the Assessing Officer to decide the eligibility of the assessee to get the actual income exempted under section 11(4) of the Act. The learned counsel has relied upon the judgment of the honourable Division Bench in Director of Income-tax (Exemptions) v. AVM Charities [2010] 323 ITR 27 (Mad) in support of the above said contention. 9. Submissions of the assessee 9.1. Shri V. Ramachandran, learned senior counsel appearing for the assessee submitted that the property has been held in trust by the assessee after its purchase and an order to that effect has been passed by this honorable High Court in C. S. No. 76 of 1973 in and by the order datedMarch 8, 1973. The assessee has been registered as a charitable trust under section 12A(1)(a) of the Act. There is no dispute regarding the object of the assessee-trust which pertains to educational institutions, health, etc. The income derived from the b....
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....account for the income derived from the business is concerned, the learned senior counsel submitted that the Commissioner of Income-tax (Appeals) and the Tribunal have given clear factual findings that the same has been complied with through three separate accounts maintained by the assessee. Similarly, for the contention of the Revenue that inasmuch as the authorities have mainly concentrated on the entitlement of the exemption under section 11(4A) of the Act and consequently the quantum of the exemption has not been gone into, the learned senior counsel submitted that the assessee has produced all those particulars in the written arguments submitted and in support of the same, he has also produced the relevant records before this court. The learned senior counsel also submitted that the judgment in Director of Income-tax (Exemptions) v. AVM Charities [2010] 323 ITR 27 (Mad) is distinguishable on facts, since there is no finding regarding the compliance with the conditions mentioned under section 11(4A) of the Act. The learned senior counsel therefore submitted that the appeals deserve to be dismissed. 10. Whether profits and gains of the business would be incidental to ....
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....al Charity Trust [2008] 300 ITR 365 (Mad) and CIT v. Janakiammal Ayyandar Trust [2005] 277 ITR 274 (Mad) and also by a recent judgment of this court in CIT v. Sri Narayana Guruviah Chetty's Estate and Charities [2010] 326 ITR 662 (Mad). The honorable apex court in Asst. CIT v. Thanthi Trust [2001] 247 ITR 785 (SC) has observed as follows (page 796) : "The substituted sub-section (4A) states that the income derived from a business held under trust wholly for charitable or religious purposes shall not be included in the total income of the previous year of the trust or institution if `the business is incidental to the attainment of the objective of the trust or, as the case may be, institution' and separate books of account are maintained in respect of such business. Clearly, the scope of sub-section (4A) is more beneficial to a trust or institution than was the scope of sub-section (4A) as originally enacted. In fact, it seems to us that the substituted sub-section (4A) gives a trust or institution a greater benefit than was given by section 13(1)(bb). If the object of Parliament was to give trusts and institutions no more benefit than that given by section 13(1)(bb), the ....
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....rged. In a system which has a hierarchy of judicial forums it is incumbent on the lower forums to follow the dictum of the higher forum. In Sundarjas Kanyalal Bhathija v. Collector, Thane [1990] 183 ITR 130 ; AIR 1990 SC 261, the honorable Supreme Court has observed as follows (page 137 of 183 ITR): "17. It would be difficult for us to appreciate the judgment of the High Court. One must remember that pursuit of the law, however glamorous it is, has its own limitation on the Bench. In a multi judge court, the judges are bound by precedents and procedure. They could use their discretion only when there is no declared principle to be found, no rule and no authority. The judicial decorum and legal propriety demand that where a learned single judge or a Division Bench does not agree with the decision of a Bench of co-ordinate jurisdiction, the matter shall be referred to a larger Bench. It is a subversion of judicial process not to follow this procedure." 10.7. Similarly, in Suganthi Suresh Kumar v. Jagdeeshan [2002] 110 Comp Cas 133 ; AIR 2002 SC 681, 684, the honorable apex court has observed as follows (page 136 of 110 Comp Cas) : "9. It is impermissible....
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.... utilization of a property held in trust is not used towards the object of the trust then no exemption can be sought for such income. 11.3. It is a well established principle of law that provisions contained in enactment should be read together by making a harmonious construction. Therefore, we are of the view that section 11(4) and 11(4A) of the Income-tax Act will have to be read together. Further, by holding that section 11(4A) would override section 11(4) would make the very provision contained under section 11(4) otiose and redundant. While making a construction, the court will have to see the intention behind the provision and should avoid an interpretation which would defeat the very provision itself. 11.4. Justice G. P. Singh in Principles of Statutory Interpretation, 12th edition at page 298 says thus: ". . . a statute must be read as a whole as words are to be understood in their context. Extension of this rule of context permits reference to other statutes in pari materia, i.e., statutes dealing with the same subject-matter or forming part of the same system." 11.5. The said observations of the Justice G. P. Singh were quoted with ....
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....able Supreme Court in a recent judgment rendered in Vijaya Bank v. Shyamal Kumar Lodh [2010] 7 SCC 635 has observed as follows (page 641) : "19. But this does not end the controversy. The power to adjudicate money claim is to theLabour Court`as may be specified in this behalf by the appropriate Government'. Every word used by the Legislature carries meaning and therefore effort has to be made to give meaning to each and every word used by it. A construction brushing aside words in a statute is not a sound principle of construction. The court avoids a construction, if reasonably permissible on the language, which renders an expression or part of the statute devoid of any meaning or application. 20. The Legislature never wastes its words or says anything in vain and a construction rejecting the words of a statute is not resorted to, excepting for compelling reasons. There does not exist any reason, much less compelling reason to adopt a construction, which renders the words `as may be specified in this behalf' used in section 33C(2) of the Act as redundant. These words have to be given full meaning. These words in no uncertain terms indicate that there has to be s....
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....condition of maintaining the accounts. The said findings being findings of fact, we are of the opinion that the contention of the Revenue that no separate books of account are maintained by the assessee in respect of his income assessable under the said business cannot be countenanced. Hence, the same is also rejected. 13. Whether orders of remand are required 13.1. However, substantial arguments have been made by the learned counsel appearing for the Revenue as well as the assessee regarding the entitlement of the assessee's actual income towards exemptions. The learned counsel for the Revenue submitted that inasmuch as the Assessing Officer and the other authorities have not gone into and made any break up of the separate heads of account maintained and utilized towards the objectives of the trust, the matter will have to be remanded to the Assessing Officer to decide the same. Per contra, the learned senior counsel appearing for the assessee submitted that the records produced would show that the assessee has placed the entire material before the authorities which were found to be satisfactory and therefore no order of remand is required. 13.2. We find con....
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.... one being the entitlement of the income as eligible for exemption. In order to satisfy himself the Assessing Officer has to necessarily go through the relevant records like the application, accumulation, deployment of income in specified assets, utilization of income, etc. Therefore, it is the duty of the Assessing Officer to find out that the income is wholly and exclusively applied to the object of the trust. In other words, if the Assessing Officer finds that the income as shown in the return is not actually utilized for a charitable purpose as claimed by the assessee then the exemption claimed for the said income goes. It would also mean that in such a case the profit making is the real object and therefore the doctrine of "feeding the charity" would have no application whatsoever. 13.5. In Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234, 256 (SC), the honorable apex court has held as follows : "If the profits must necessarily feed a charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit will not alter charitable character of the trust. The test now is, more clearly than in the past, the gen....