TaxTMI 
TaxTMI 
2014 (7) TMI 87
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....ailed to apply the income in accordance with section 11(3) and assessed the income of the assessee at Rs. 22,33,737 for A.Y. 2007-08, Rs. 26,21,098 for A.Y. 2008-09 and Rs. 27,93,956 for A.Y. 2009-10. 3. On appeal before the CIT(A), the assessee raised the jurisdictional ground that the AO erred in making the assessment u/s. 143(3) without there being a valid return of income in response to notice u/s. 148 of the Act. The CIT(A), after elaborate discussion at paras 5.1 to 5.11 of her order, dismissed the ground raised by the assessee. 4. The second ground raised by the assessee before the CIT(A) is that the AO erred in holding the activity of 'Deep Mela' as a business activity without appreciating the fact that it is only service rendered to generate funds for the educational institution and thereby erred in taxing the income from such activity. The CIT(A) after enumerating the objects of the assessee trust observed that the assessee had conducted a commercial exhibition under the name 'Deep Mela' for sale of handicrafts, handlooms, jewellery, home accessories, art and crafts. For this purpose, the assessee called for advertisement inviting people from India and a....
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...., while the decision was no doubt rendered in the context of a business that was settled upon the appellant trust as a going concern, as opposed to a business activity carried on by the appellant, the observations of the court are categorical in their implication; so long as the income from the business is utilised for the objects of the trust, the business can be said to be incidental to the attainment of its objects." 7. The CIT(A) further held that there are two related aspects that need to be considered in this contest. The first relates to the utilisation of income from business, as required in the light of the decision in the case of Thanthi Trust (supra). The surplus earned by the assessee during the three years in appeal is as follows: Financial Year Deep Mela Profit (Rs.) Surplus (Rs.) 2006-07 11,75,187 13,89,030 2007-08 16,06,155 13,70,729 2008-09 18,20,241 7,73,690 8. The CIT(A) pointed out as follows. Thus, the assessee failed to utilise the entire income from the business of conducting the 'Deep Mela' exhibition for A.Y. 2007-08 while the utilisation was only partial for the other two years. The assessee has failed to satisfy the condition laid do....
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....both the parties. Ground no. 1 is general in nature and needs no adjudication. 14. Ground Nos. 2 and 3 are not pressed by the learned counsel for the assessee and the same are dismissed as not pressed. 15. With regard to the remaining issue the learned counsel for the assessee submitted that receiving funds by conducting one annual Mela for not more than three days cannot be considered as a business activity and the funds raised through such activity though not spent in entirety in the current year were set off for building infrastructure to run educational institution. Since the activity of conducting Mela is not a commercial activity and, therefore, there is no need to maintain separate books of account. 16. The learned counsel for the assessee further submitted that the receipts of the Mela are receipts which fall under the head "income from house property" or at the most "income from other sources". He submitted that the receipts from 'Deep Mela' cannot be considered as commercial and falling under the head "income from business or profession". The assessee's counsel relied on the judgement of Madras High Court in the case of CIT vs. Samyuktha Gowda Saraswatha Sa....
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....urther submitted that the CIT(A) erred in confirming the action of the AO in making addition of Rs. 3,93,496 as accumulated funds not spent instead of appreciating the fact that it is not possible to identify funds when once all of them are in the same kitty and it is not correct to hold that particular amount spent is out of current years income and not from accumulated funds. 22. The learned counsel for the assessee further submitted that the funds spent by the assessee during the relevant assessment year should be considered as funds spent from the amounts accumulated and thereafter from the current year's income. 23. The AR without, prejudice to above submission, pointed out to table at pages 105 and 106 of Paper Book - 2 wherefrom it is submitted that the assessee in respect of assessment years 2007-08 onwards has not considered the amounts spent for capital expenses to be application of income as required under the provisions of section 11 of the Act. It is submitted that once the capital expenditure is considered as application of income in respect of the assessment years starting from A.Y. 2007-08 then there would not be any amount left in the accumulated amounts brou....