TaxTMI 
TaxTMI 
TaxTMI 
2010 (2) TMI 1132
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....rust deed as follows : "(a )To establish, run, maintain, promote, aid and help hospitals, Nursing Homes, Clinics, dispensaries, sanatoriums, maternity homes, pathological laboratories, other diagnosis institutions and other institutions of medical relief to the general public. (b )To help the poor patients with blood, natural and artificial limbs, medicine, food, nutrition, resettlement and other aids. (c )To help poor, needy or helpless families, individuals and persons and those displaced and victims of natural calamities. (d )To donate, subscribe, contribute, aid and help persons, associations, institutions and bodies engaged in charitable activities or objects similar to the objects of the Trust." 3. During the year under consideration the assessee-trust spent a sum of Rs. 5,62,917.77 paise towards the construction of a building and the question was whether this account could be said to have been spent by the assessee for charitable purposes within the meaning of section 11(1)(a) of the Act. The Income-tax Officer held that the said amount was not spent for charitable purposes. This finding has been upheld by the learned CIT(A). 4. It may be mentioned here that the as....
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....utomatically vest in the assessee. 5. After the aforesaid Memorandum of Agreement, which is an unregistered document, a deed of perpetual lease was executed between the owner of the land, i.e., the PMT Society on the one hand and the assessee, on the other. This document states that the assessee is a charitable trust established for the purposes of running hospitals, nursing homes etc. and for that purpose it requires building and it is for that purpose that it has agreed to take the building to be constructed on lease. Under this document the building that was to be raised by the assessee on the land granted by the PMT Society was to be with the assessee on perpetual lease. Under the terms of this document the assessee was to pay a sum of Rs. 525 p.m. as rent for the constructions in the ground floor and the first floor. The rent for the second floor that was to be constructed after 10 years was agreed to be Rs. 500 p.m. 6. In pursuance of the aforesaid Memorandum of Agreement and the lease deed, the assessee raised a building on the aforesaid land and spent the following amounts on construction thereof:- Financial year 1983-84 Rs. 3,13,241.90 Financial year 1984-85 Rs. 5,62....
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....ortance on non-communal basis. (c )To provide a Hall, a Library, A Dispensary, Public Workers Room and such other amenities as may be desirable and feasible. (d )To provide facilities for close social and political inter-course and mean for promotion of physical and intellectual culture. (e )To provide for and promote such other activities and objects as may be thought to be feasible and desirable from time to time." The Income-tax Officer considered in detail the objects and the constitution of PMT Society and took the view that it was a society of a political nature and that through the transaction in question the assessee had transferred its funds to the said society. 8. On appeal the learned Commissioner of Income-tax (Appeals) has also proceeded on the same lines and has opined that the assessee-trust's activities in collecting funds for PMT Society and constructing a building for PMT Society cannot by any stretch of imagination be termed as a charitable activity and the appellant firm has actually acted as an agent and a conduit pipe for the PMT Society. He also held that right from its inception it had collected funds from the public in the garb of charitable activities....
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....MT Society. The entire construction which the assessee has raised on its own cost, is with the assessee on perpetual lease. The result is that by raising construction on the land belonging to the PMT Society, the assessee has acquired a building at a nominal rent. In case the assessee had to purchase such land for raising constructions the cost of the land itself would have been much more. It cannot, therefore, be said that by the transaction in question the assessee has siphoned off its funds to the PMT Society. The said Society is deprived of a substantial portion of its valuable land and is receiving only the rent of the 7 shops plus the rent of Rs. 525 p.m. from the assessee. We do not know how in such circumstances it can be said that it was not a transaction which is favourable to both the parties and results in exclusive benefits to the PMT Society with no obligation on it and no corresponding benefits to the assessee society. Instead of selling the land the PMT Society has granted a perpetual lease of the land and building to the assessee trust and since the assessee has raised the construction at its own cost and had also given some constructed area to the PMT Society. The....
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....es. On the contrary it will continue to be the owner not only of the land but also the constructions over it, of course in return of certain grants that it is going to allow to the hospital Trust." In para 4(v) of his order the learned Commissioner of Income-tax (Appeals) has stated that the District Judge's order shows that the transaction will benefit the PMT Society. The learned CIT(A)'s impression appears to be that the transaction was to the detriment of the assessee-trust. This is not so. It is patently a transaction entered into by two persons across the table and it is patently for the benefit of both as any other proper transaction has to be. While the PMT Society got 7 shops constructed free of cost and rental income therefrom plus the small amount of rent from the assessee, the assessee in its turn got a large built-up area in a prime locality suitable for its purpose on a negligible rent of Rs. 525 only and the lease is perpetual. It cannot be doubted that the acquisition of a suitable building was necessary for the assessee-trust to be able to carry out its objects of providing medical relief etc. and it is nobody's case that the building so constructed by the assess....
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....e PMT Society to conclude that it is of a political nature. The learned counsel for the assessee has filed in the paper book a copy of the assessment order of the said Society to show that it has been recognized as a charitable institution. A copy of the assessment order and the appellate order are at pages 7 and 9 of the paper book and support the assessee's contention. However, in our view, the question about the nature of the PMT Society was entirely irrelevant. It is not a case in which the assessee donated anything to the PMT Society so that a question may arise whether donation to an institution, which is not a charitable one, amounts to application of income for charitable purposes or not. As demonstrated above, it is a case of two parties contracting with each other for their respective benefits. The assessee on its side has acquired a decent building built according to its own needs and specifications on a paltry or rather negligible rent, the building having been built on land that was even more costly than the cost of the construction raised. The PMT Society, on the other hand, has acquired the whole building as owner, out of which it got 7 shops which it could let out a....
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....for the claim of exemption under section 11 of the Act and the object of other Society is wholly irrelevant. He submitted that the object of the assessee is to establish, run, maintain, promote, aid to hospitals and to donate, subscribe, contribute, aid and help persons, associations, institutions and bodies engaged in charitable activities. For running a hospital or dispensary a building is a basic necessity and, therefore, a piece of land has been taken on lease from the Society known as Pt. Pyare Lal Sharma Memorial Trust Society. He submitted that the assessee's trust is registered as charitable trust under section 12A of the Act. After the construction of the building the assessee-trust is running hospital for the benefit of general public. He submitted that the object of the PMT Society was also found charitable by the appellate authority in their assessment case and the said order is valid till date. He submitted that on these facts the amount received towards donation and spent for the construction of building required for running the hospital was the application of such money for charitable purposes. He submitted that the Tribunal having regard to the entire facts and circ....
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.... property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of fifteen per cent of the income from such property; (b )income derived from property held under trust in part only for such purposes, the trust having been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India; and, where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of fifteen per cent of the income from such property; (c)income derived from property held under trust- (i )created on or after the 1st day of April, 1952, for a charitable purpose which tends to promote international welfare in which India is interested, to the extent to which such income is applied to such purposes outside India, and (ii )for charitable or religious purposes, created before the 1st day of April, 1952 to the extent to whi....
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....ccountant as defined in the Explanation below sub-section (2) of section 288 and the person in receipt of the income furnishes along with the return of income for the relevant assessment year the report of such audit in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed. (c)[*****] (2) Where an application has been made on or after the 1st day of June, 2007 the provisions of sections 11 and 12 shall apply in relation to the income of such trust or institution from the assessment year immediately following the financial year in which such application is made." 17. According to section 2(15) of the Act expression "charitable purpose" has been defined by way of inclusive definition so as to include relief to the poor, education, medical relief and advancement of any other object of general public utility. Under section 11 of the Act, income derived from property held under trust only for religious purposes to the extent to which such income is applied to such purposes is exempt from tax. Section 12A of the Act contemplates the registration of the trust for the purposes of section 11 of the Act. 18. Admittedly the....
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....o promote or protect the interest of a particular trade or industry that object becomes an object of public utility, but not so, if it seeks to promote the interest of those who conduct the said trade or industry. 21. In the case of Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 11(SC), it has been held by the Apex Court that if the primary or predominant object of an institution is charitable, any other object which might not be charitable but which is ancillary or incidental to the dominant purpose, would not prevent the institution from being a valid charity. 22. In the case of Bar Council of Uttar Pradesh (supra), the Division Bench of the Allahabad High Court has held that the object of the Bar Council to safeguard the interests of its advocates, to assist disabled advocates, to see that advocates who misbehave are taken to task, to promote law reform etc.; a Bar Council constituted under section 6 of the Advocates Act, 1961 to benefit the public at large by having on its roll, advocates who are not only competent in law but who are respectable and proper persons to belong to the noble profession of lawyers; the said activities have been held for the adva....