TaxTMI 
TaxTMI 
2016 (11) TMI 1028
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....ng Officer, Mumbai under section 143(3) of the Act. 3. In this appeal, assessee has raised the following Grounds of appeal :- "1. The learned Commissioner of Income Tax (Appeals) erred in upholding the denial of exemption u/s 11 and 12 by the Assessing Officer, by application of the provisions of section 11(4A). 2. The learned Commissioner (Appeals) failed to appreciate that the transaction with the caterer was in substance a mere passive letting of property, which could in no way be regarded as a business. 3. The learned Commissioner (Appeals) erred in going by the nomenclature of the income, and did not appreciate that the mere nomenclature of an income did not necessarily determine its true character. 4. The learned Commissioner (Appeals) erred in not perusing the various clauses of the agreement, which clearly demonstrated that nothing was to be done by the appellant other than allowing the use of the space by the caterer. 5. The learned Commissioner (Appeals) erred in stating that the Assessing Officer had clearly brought out that it was not mere letting out of property, but also so many facilities had been allowed to the caterer. 6. The learned Commissioner (Appea....
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....agreement provides for increase in the monthly compensation after every three years by 10%. For the year under consideration, assessee received a sum of Rs. 39,00,000/- from M/s. Karishma Catering Services Pvt. Ltd. and such amount has been credited in the Income & Expenditure Account as 'Royalty'. It would also be pertinent to note here itself that prior to the agreement dated 25.8.2008, a similar agreement had been entered with M/s. Karishma Catering Services Pvt. Ltd. which was effective for 10 year period from March, 1997 to July, 2008. In the course of assessment proceedings for Assessment Year 2010-11, the Assessing Officer show-caused the assessee as to why the income credited in the Income & Expenditure Account by way of 'Royalty' be eligible for exemption u/s 11 & 12 of the Act on the ground that the same was 'Business income' not covered by the scope of Sec. 11(4A) of the Act. 6. Before the Assessing Officer, the plea of assessee was that the contract with M/s. Karishma Catering Services Pvt. Ltd. was, in substance, in the nature of a rental contract for use of hall and assessee was receiving a fixed monthly income plus applicable service tax irrespective of the number o....
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.... to the various clauses of the agreement to point out that assessee has no role to play in the activities being carried out by the other concern for providing services to the customers. The assessee was only required to provide the use of space, as the owner of the property, and thus the receipt has to be understood as income by way of rent. On this aspect, it has also been pointed out that even in the earlier years, similar contract/agreement existed with M/s. Karishma Catering Services Pvt. Ltd. and the income received has been held to be eligible for exemption u/s 11 & 12 of the Act and for that matter, reference has been made to the assessment order dated 19.12.2008 passed u/s 143(3) of the Act for Assessment Year 2006-07, a copy of which has been placed in the Paper Book at pages 18 to 20. In the course of hearing, the learned representative also relied upon the following decisions for the proposition that even in the cases where charitable institutions have let out property as marriage hall, etc., same has been held to be eligible for exemption u/s 11 & 12 of the Act and not liable to be treated as 'Business income' :- i) CIT v. Samyuktha Gowda Saraswatha Sabha, 245 ITR 242 ....
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....000/- during the year under consideration. Certain clauses of the said agreement, which are relevant, are being reproduced hereinafter :- "1. The Charities hereby grant to the Caterer and the Caterer herein accepts from the Charities, the exclusive right to cater to all the functions to be held in any of the 3 halls comprised in the said Complex for a period of 10 years w.e.f August 2008 upto July 2018, subject to the terms, conditions, covenants and stipulations herein contained. 2. In this Agreement the words "Exclusive Catering Contract" shall mean : (i) A right, for the duration of this Agreement to use, in common with the Charities all the premises at the said Complex of the Charities. (ii) An exclusive right to cater food and hard and soft beverages in the Complex at the functions held at the said Complex, subject to the rights of the Trust reserved hereunder. (iii) Providing, decorating and other required services at the function to be held at the Complex. 3. In consideration of the Charities having granted to the Caterer the "Exclusive Catering Contract" as aforesaid, the Caterer shall pay to the Charities, as and by way of "Royalty" @ Rs. 3,00,000/- (Rupees t....
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....ility which may be made against the Charities and/or which the Charities may incur or become liable to pay by reason of the non observance or non performance of the requirements of this Clause, to be on the part of the Caterer to be observed and performed. 14. The Caterer shall bear the cost of obtaining/renewing the Licence/s required for the purpose of conducting the activities in pursuance of this Agreement and also of its subsequent renewal or alterations in the terms of the aforesaid licence." "32. The Caterer shall accept full responsibility for every function held in any part of the Complex." "36. The Caterer shall give its own quotation for all catering done on the Complex to its various customers." "46. The Caterer shall be fully responsible for any matters/claims arising out of its catering services and shall maintain sufficient comprehensive insurance cover to meet all claims by the third parties including for accidents and food poisoning and shall indemnify the Charities against any such claims." The aforesaid clauses of agreement clearly bring out that so far as assessee-trust is concerned, it has been paid by M/s. Karishma Catering Services Pvt. Ltd. for pro....
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.... the income earned from M/s. Karishma Catering Services Pvt. Ltd. is a 'Business income' not incidental to the attainment of objectives of the Trust. 11. In the case of Samyuktha Gowda Saraswatha Sabha (supra) the Hon'ble Madras High Court was considering the case of an assessee whose objectives were education and other objects of general utility and it was deriving income by letting out a marriage hall. The income from letting out of the marriage hall was construed as a 'Business income' by the Assessing Officer, which was not upheld by the Hon'ble High Court. As per the Hon'ble High Court, letting out of property was an activity for fulfilling the objectives of the Trust and could not be considered as an activity of business so as to deny exemption u/s 11 & 12 of the Act. In the case of Sahu Jain Trust (supra), the Hon'ble Calcutta High Court was considering the income derived from sub-letting of tenanted properties. The Assessing Officer held that such income was not incidental to attainment of objectives of the Trust and hence applying provisions of Sec. 11(4A) of the Act, exemption u/s 11 of the Act was denied. The Hon'ble High Court held that where the tr....