TaxTMI 
TaxTMI 
2013 (2) TMI 380
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.... Tribunal was right in law in allowing the benefit under section 11 of the Income-tax Act, 1961 without appreciating that the object of the trust was not within the ambit of section 2(15) and there was violation of section 11(4A) as well as Section 13(3) of the Income-tax Act, 1961?" 3. The appeal was admitted on 26.4.2004. An application bearing CM No. 7614-CII of 2009 was filed which was allowed on 1.4.2009 whereby the following substantial questions of law were ordered to be included in the original appeal:- (a) Whether in the facts and circumstances of the case, the Ld. ITAT is right in law in holding that the assessee trust is entitled to exemption u/s. 11 to 13 of I.T. Act ignoring the fact that the activities carried out by the trust are not in accordance with the aims and objects of the trust? (b) Whether in the facts and circumstances of the case the Ld. ITAT is right in law in concluding that the activities carried out by the assessee trust within the meaning of Section 2(15) of the I.T. Act, 1961? (c) Whether in the facts and circumstances of the case the Ld. ITAT is right in holding that the assessee trust is eligible for exemption u/s. 11 to 13 of the I.T. Act, 196....
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....or of the trust. It was concluded that the activity of running business of publication of newspapers and journals carried out by the assessee-trust was pervaded by a profit motive and the charitable purpose was, in fact, submerged by profit making motive. The purpose of the trust must be essentially charitable in nature and not cover for carrying on activity which had profit making motive as a predominant object. The trust deed described the objectives as under:- - Promotion and propagation of Punjab, Punjabi and Punjabiat. - Establishment of a chair in any University. - Establishment of Punjab Bhawan. - Prizes on the best books in Punjabi. - Holiday homes for writers/poets etc. 5. It was further held that after a lapse of almost 20 years, none of the aforesaid objectives had been partially fulfilled. Even the profit from publication had not been applied for the charitable purposes. It was also held that the repayment of loans for addition of fixed assets like furniture, camera, scanners, air-conditioner etc. was merely incurred to enhance the commercial prospects of the business and addition to fixed assets under the head 'Building Account' was also accumulation of property....
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.... founder, person, member, trustee or manager as aforesaid. 8. It was argued that no application of income for charitable purposes was made and there was violation of Section 11(1)(a) of the Act as payments have been made to third parties. Referring to the order of the CIT(A), it was submitted that a finding has been recorded by the said authority that as per admission of the assessee itself there was a profit of Rs.2,82,648/- from Daily Ajit and Rs.25,65,199/- from M/s Daily Ajit Printers, whereas after considering a loss of Rs.55,727/- in Tasvir Magazine and loss of Rs. 4,92,215/- of the trust, the net income was Rs.22,99,905/-. Learned counsel further submitted that even the utilization of the receipts was not for charitable purposes within the meaning of Section 11(1)(a) of the Act and under Section 11(4) of the Act in respect of 'property held under Trust' as the business was relating to an activity which was with profit making motive as a predominant object as profit from publication had not been applied for charitable purposes of promotion of Punjab, Punjabi and Punjabiat. Attention of the Court was also drawn towards the amendment made in Section 11 (4A) of the Act w.e.f. 1....
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....port the order passed by the Tribunal. Learned counsel argued that the newspaper is a very important media and medium to circulate and disseminate important information and ideas to the public at large. Explaining the activities of publication of newspapers, learned counsel for the assessee referred to following observations of the Hon'ble Apex Court in Sakal Papers (P) Ltd. v. Union of India AIR 1962 SC 30:- "It is not disputed that every newspaper evolves a plan of its own for carrying on its activities. Bearing in mind factors such as the place of publication, the class of the reading public which may be expected to subscribe to the paper, the conditions of labour, the price of material, the availability of advertisements and so on it decides upon its size, the proportion of different kinds of matter published in the newspaper, such as news, comments, views of readers, advertisements etc., and the price to be charged." 11. It was submitted that the promotion and propagation of Punjab, Punjabi and Punjabiat which is one of the objectives of the Trust forms part of charitable activities and, therefore, the Tribunal had rightly adjudicated the issue in favour of the assessee. It ....
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....hat it could not be said that the mandatory provisions for seeking exemption of income for being utilized for charitable purposes was not available and the Tribunal had not correctly adjudicated the matter in favour of the assessee while reversing the findings of the Assessing Officer and the CIT(A). 13. We have given our thoughtful consideration to the respective submissions made by the learned counsel for the parties. 14. On the basis of submissions made by learned counsel for the parties, broadly, the following issues arise for consideration in these appeals:- (a) Whether the object of the assessee trust is encompassed under the expression 'charitable purpose' falling within the ambit of Section 2(15) of the Act? (b) Whether in the facts and circumstances, the Tribunal was right in reversing the findings of the Assessing Officer and the CIT(A) relating to compliance of provisions of Section 11(1)(a) and 11(4A) of the Act and regarding violation of the provisions of Section 13(1) (c) and 13(3) of the Act? 15. Taking up first issue, we examine Section 2(15) of the Act. Section 2(15) of the Act refers as to what is included in charitable purpose. At the relevant time, it reads....
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....tivity but with a predominant object of applying it for charitable purpose." 18. The Privy Council dealing with the case of The Tribune in In Re The Trustees of 'The Tribune' case (supra), whether the trust in respect of The Tribune Press was for charitable purposes and exempt from income tax had noted as under:- "They think that the object of the paper may fairly be described as 'the object of supplying the Province with an organ of education public opinion' and that it should prima facie be held to be an object of general public utility. Having regard to the particular circumstances of the time, directions of the testator and the evidence as to the contents of the paper before 1898, their Lordships think that the present case is nearer on its facts to In re Scowcroft (supra) than it is to the case of the Bonar Law Memorial Trust (supra) or to the case put by Russell, J., in In re Tetley (supra), of a newspaper subsidised for the promotion of particular political or fiscal opinions. They do not think that in these circumstances the case can be regarded as outside the ambit of the exemption clause of the Indian Act." 19. The Apex Court in Gujarat Maritime Board's case (supra) no....
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.... profit would not alter the charitable character of the trust. 22. We may now examine the factual matrix involved herein. The assessee is engaged in the business of publishing Ajit Punjabi. According to the assessee, this is to propagate Punjab, Punjabi and Punjabiat. The objectives of the trust deed described thereunder are: - Promotion and propagation of Punjab, Punjabi and Punjabiat. - Establishment of a chair in any University. - Establishment of Punjab Bhawan. - Prizes on the best books in Punjabi. - Holiday homes for writers/poets etc. 23. In the Trust Deed dated 17.8.1977 which was supplemented on 22.11.1977, 2.5.1978, 17.5.1978 and 6.9.1980, it was mentioned that the properties of the owner were inclusive of all assets of Ajit Newspaper including goodwill and these assets were bequeathed by him to the said trust. The assessee-trust was running a newspaper to promote Punjab, Punjabi and Punjabiat and, thus, the running of newspaper was incidental to the main objective of the trust and would fall as an advancement of any other object of general public utility. For that purpose, the trust was made available by the Founder. Further, the trust was allowed registration a....
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....trust for the purposes of Section 11 to include a business held under trust. Sub-section(4A) restricts the benefit under Section 11 so that it is not available for income derived from business unless;- (a) the business is carried on by a trust only for public religious purposes and it is of printing and publishing books or any other notified kind or (b) it is carried on by an institution wholly for charitable purposes and the work in connection with the business is mainly carried on by the beneficiaries of the institution, provided, in both cases, that separate books of account are maintained by the trust or the institution in respect of such business. Trusts and institutions are separately dealt with in the Act (Section 11 itself and Sections 12, 12A and 13, for example). The expressions refer to entities differently constituted. It is thus clear that the newspaper business that is carried on by the Trust does not fall within sub-section (4A). The Trust is not only for public religious purposes so it does not fall within clause (a). It is a trust not an institution, so it does not fall within clause (b). It must, therefore, be held that for the assessment years in question the T....
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....fit than that given by Section 13(1)(bb), the language of Section 13(1)(bb) would have been employed in the substituted sub-section (4A). As it stands, all that it requires for the business income of a trust or institution to be exempt is that the business should be incidental to the attainment of the objectives of the trust or institution. A business whose income is utilized by the trust or the institution for the purposes of achieving the objectives of the trust or the institution is, surely, a business which is incidental to the attainment of the objectives of the trust. In any event, if there be any ambiguity in the language employed, the provision must be construed in a manner that benefits the assessee. The Trust, therefore, is entitled to the benefit of Section 11 for the Assessment Year 1992-93 and thereafter. It is, we should add, not in dispute that the income of its newspaper business has been employed to achieve its objectives of education and relief to the poor and that it has maintained separate books of account in respect thereof. 30. Under Section 11(1)(a) of the Act, the income derived from property held under trust only for charitable or religious purpose is exe....
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....rust or the founder of the institution; (b) any person who has made a substantial contribution to the trust or institution that is to say, any person whose total contribution upto the end of the relevant previous year exceeds twenty five thousand rupees; (c) where such author, founder or person is a Hindu undivided family, a member of the family; (cc) any trustee of the trust or manager by whatever name called of the institution; (d) any relative of any such author, founder, person, member, trustee or manager as aforesaid; (e) any concern in which of the persons referred to in clauses (a), (b), (c), (cc) and (d) has a substantial interest. XX XX XX XX XX XX" 32. According to these provisions, wherever, any part of income or any property of the trust or the institution is applied directly or indirectly for the benefit of any person referred to in sub-section (3) of Section 13, the provisions of Section 11 shall not operate granting benefit of exemption to the trust. The Assessing Officer had recorded that certain payments were made to Bibi Parkash Kaur (trustee), S. Barjinder Singh and also to Smt. Sadjit Kaur wife of S. Barjinder Singh which were made to persons as defined ....