TaxTMI 
TaxTMI 
2018 (11) TMI 117
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....activities of the assessees did not fall under under any of the objectives such as relief for the poor, education, medical relief, the preservation of environment (including water sheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest but comes under the objectives of advancement of any other object of general public utility. The Assessing Officer held that the assessee's objective comes under the first proviso to section 2(15) of the Act and as the turnover of the assessees is much more than the receipts prescribed under the second proviso to sub section 2(15), the object of the assessees cannot be considered as a charitable purpose. Therefore, the Assessing Officer treated the income of the assessees as not eligible for exemption u/s. 11 of the Act though the assessese were issued a certificate u/s. 12A of the Act by the CIT. 4. On appeal, the CIT(A) confirmed the findings of the Assessing Officer . 5. Against this, the assessee is in appeal before us. The Ld. AR submitted that the assessee is a charitable society promoted by the Government of Kerala and not carrying out any activity in the nature of trade, commerce or b....
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....Krishibhavan office, Vayanasala Office etc by using MPs, MLAs and local authority funds and there is no profit element in these works. It was submitted that the assessee was only receiving consultancy charges (upto a maximum of 8% of the estimate cost) for these works. It was submitted that the assessee was incurring various administrative expenses such as employee benefit expenses, electricity charges, travelling expenses etc. in connection with the day to day running of the organization. Therefore, it was submitted that the consultancy charges received is the only amount which can be used for meeting the administrative expenses of the assessee. From the above it is clear that the assessee was engaged only in public works and there is no profit motive in undertaking these works and thhese works are in connection with the funds received from various MPs, MLAs and local bodies. According to the Ld. AR, the test which has to be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to sub-serve the charitable purpose or to earn profit. For this purpose, the Ld. AR relied on the decision of the Special Bench of the Tr....
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....aterials to the public. In the account statements submitted by the assessee, it was found that the assessee is engaged in executing various construction projects which include: 1. General projects 2. MPLADS projects and 3. ML A projects. 1. Under the General projects, the assessee is engaged in construction of Community hall, Kudumbasree Working Womens Hostel, toilet blocks, etc. 2. Under the MPLADS projects, the assessee is engaged in construction of Anganwadis, kitchen & dining hall, smart classrooms, school building, etc. 3. Under the MLA projects, the assessee is engaged in Anganwadis, Dispensaries, Library buildings, class rooms, etc. The assessee received funds for undertaking these projects and these projects were undertaken by the assessee in a very systematic and organized manner. 7.2 The Ld. AR submitted that the Assessing Officer treated the income from activities undertaken by the assessee as taxable income by invoking the provisions of section 2(15) of the I.T. Act. According to the Ld. AR, none of the objectives of the assessee were carried on with any profit motive or involved in activities in the nature of trade, commerce or business. According to the....
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....is not entitled for the benefit of section 11 of the Act on the income generated from such activities. 7.5 Alternatively, we have to look into section 11(4A) of the Act. Sub-section (4A) provides that exemption shall not be applied in relation to any income of any Trust or institution, being profits and gains of business, unless the business is incidental to attaining of the objectives of the assessee or as the case may be, institution, and books of account are maintained by such Trust or institution in respect of such business. During the assessment year under consideration, the assessee had undertaken construction activities as well as sale of material to the public out of the funds provided by MPs, MLAs and local bodies and maintained separate accounts for the above business activities. Now the question is whether carrying on of such activities is a business incidental to the advancement of any of the objects of the assessee or not. By any stretch of imagination, it is not possible to hold that the business carried on by the assessee is incidental to the objects mentioned in the Memorandum of Association. On the other hand, it is a pre-dominant activity carried on by the assess....
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....or the business income of a trust or institution to be exempt is that the business should be incidental to the attainment of 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 ...........In any event, if there be any ambiguity in the language employed, the provision must be construed in a manner that benefits the assessee". 11. Prima facie the above observation would appear to support the assessee's case in the sense that even if is held not to constitute a business held under trust, but only as a business carried on by or on behalf of the trust, so long as the profits generated by it are applied for the charitable objects of the trust, the condition imposed u/s. 11(4A) of the Act should be held to be satisfied, entitling the trust to the tax exemption. 12. 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 educatio....