TaxTMI 
TaxTMI 
2017 (5) TMI 679
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....evance of the Revenue in this appeal is with regard to granting exemption u/s.11 of the Act by the CIT(Appeals), though the assessee was earning income from letting out of Kalayana Mandapam for marriage and other functions, which are business activities and hit by the amendment of sec.2(15) of the Act. 3. The assessee, herein is a registered charitable trust u/s.12AA of the Act, which is running schools and also running a community hall in Chennai in the name and style called "Chennai Kamawar Kalyana Mahal". The assessee claimed exemption u/s.11 of the Act. The same was denied by the AO, as the assessee was hit by the provisions of sec.2(15) of the Act. Against this, the assessee went in appeal before the CIT(Appeals), who granted exempt....
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....2.2008, the assessee's case falls within the first three limbs of sec.2(15), namely, relief to the poor, education or medical relief and fall within 'charitable purpose' and therefore, the assessee is not hit by the provision 13(1)(bb) of the Act. The ld. AR placed reliance on the judgment of the Gujarat High Court in the case of DIT v. Ahmadabad Mgt. Association, 366 ITR 85 (Guj) and the judgment of the Delhi High Court in the case of ICAI v. DGIT (Exemption), 260 CTR 001 (Del) and DIT(Exemption) vs. Sabarmati Ashram Gaushala Trust [362 ITR 539 (Guj.)] to support his view. 6. We have heard both the parties and perused the material on record. The issue before us is whether, on the facts and circumstances of the case and having regard to ....
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.... which such income is applied to such purposes in India. There is no exhaustive definition of the words "property held under trust" in the Act; however, sub-section (4) says that for the purposes of section 11, the words "Property held under trust" "includes a business undertaking so held". Subsection (4A) as it stands amended by the Finance (No. 2) Act, 1991, with effect from April 1, 1992, is in the following terms: "(4A) Sub-section (1) or sub-section (2) or subsection (3) or sub-section (3A) shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the trust or, as the case may be, institution, and separat....
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....n the trustees to carry on the business and the profits from such business would benefit the charitable objects. The exemption u/s. 11 cannot be granted on the reason that the business itself was not in existence at the time of formation of the trust and the property held under trust at the time of formation of the trust was not spelt out in the Trust Deed of the assessee. The running of " Community Hall" was not at all in existence at the time of formation of the trust so as to say that the business is property held under trust. Thus, the activities relating to running of "Community Hall" was not even in the contemplation of the Trust Deed on the basis of which the Society is formed and, therefore, could not have been settled upon trust. T....
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....or some part of the income from running of "Community Hall" is used for charitable purposes would not render the business itself being considered as incidental to the attainment of the objects. We are in agreement with the Department that the application of income generated by the business is not relevant consideration and what is relevant is whether the activity is so inextricably connected or linked with the objects of the trust that it could be considered as incidental to those objectives. 11. It was contended by the Ld. AR that the surplus funds generated from the running of "Community Hall" was spent towards charitable activities and therefore, the assessee is entitled for exemption u/s. 11(4) of the I.T. Act. We are unable to accep....
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.... be satisfied, entitling the trust to the tax exemption. 14. In our opinion, these observations have to be understood in the light of the facts before the Supreme Court in the case of Thanthi Trust (supra), wherein the trust carried on the business of a newspaper and that business itself was held under trust. The charitable object of the trust was the imparting of education which falls u/s. 2(15) of the Act. The newspaper business was incidental to the attainment of the object of the trust, namely that of imparting education and the profits of the newspaper business are utilized by the trust for achieving the object of imparting education. In this case, there is no such nexus between the activities carried on and the objects of the asses....