TaxTMI 
TaxTMI 
2020 (9) TMI 823
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....Assessment Years was selected for scrutiny and notices u/s.143(2) of the Act had been issued to the appellant. In response to the notices, the appellant's authorized representative appeared from time to time and provided the details called for. After scrutinizing the details filed, the assessments were completed u/s.143(3) of the Act on 25.02.2013 and 27.01.2014 for the Assessment Years 2010-11 and 2011-12 respectively. In both orders, the Assessing Officer invoked Sections 2(15) and 13(8) of the Act to make Sections 11 and 12 inapplicable insofar the appellant is concerned and computed the taxable income of the appellant, treating the appellant as an Association of Persons at Rs. 25,42,950/- for A.Y.2010-11 and at Rs. 22,16,619/- for AY 2011-12. 3.1. The appellant society operates a community hall 'Ayodhya Aswamedha Mandapam', a marriage function centre 'Mithalapuri Kalyana Mandapam' and a unit to facilitate performance of customary and traditional rites connected with funeral obsequies named 'Gnanavapi'. The corresponding income received from these properties, is classified as income from House Property. The Assessing Officer pointed out that such c....
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....relief to the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic of historic interest and the advancement of any other object of general public utility. 1st Proviso- Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income such activity. 2nd Proviso - Provided further that the first proviso shall not apply if the aggregate value of the receipts from the activities referred to therein is ten lakhs rupees or less in the previous year." 8. The Assessing Officer, dealt with new proviso in Section 2(15) of the Act, holding that certain types of activities (advancement of objects of general public utility) considered otherwise charitable were taken out of the definition of charitable activity, if t....
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....objects as required u/s.11(4A) of the Act to merit exemption u/s.11 of the Act. 10. The CIT (Appeals) held that the activity of letting out of halls is covered by the residuary limb of definition u/s.2(15) of the Act and hit by proviso to Section 2(15) of the Act and liable to lose exemption u/s.11 and 12 of the Act. Thus, the CIT (Appeals) confirmed the order of the Assessing Officer for the Assessment Years 2010-11 and 2011-12. 11. Aggrieved by the order of the CIT(Appeals), the appellant/assessee filed appeal before the Income Tax Appellate Tribunal. By common order dated 06.04.2016, the ITAT, in paragraph 9, cited the decision of the Supreme Court in the case of Additional CIT Vs. Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1, wherein it is held that under trust for a charitable purpose, the income therefrom would be entitled to the exemption u/s.11(1) of the Act. The ITAT pointed out that the finding of the CIT (A) is that running of community hall Kalyanamandapam and funeral ceremony hall were not held under trust, but it was business commenced/carried on by the Society, subsequent to the formation of the trust; though the business was commenced by the....
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....el relied on Paragraphs 48, 49 and 50 of the said decision, which is as under:- "48. With this in mind, it is to be seen as to what is meant by the expressions "trade", "commerce" or "business". The word "trade" was considered by the Supreme Court in its decision in the case of Khoday Distilleries Ltd and Others v. State of Karnataka and Others: 1995 (1) SCC 574, whereby the Supreme Court held that "the primary meaning of the word 'trade' is the exchange of goods for goods or goods for money". Furthermore, in State of Andhra Pradesh v. H. Abdul Bakhi and Bros: 1964 (5) STC 644 (SC), the Supreme Court held that -the word "business" was of indefinite import and in a taxing statute, it is used in the sense of an occupation, or profession which occupies time, attention or labour of a person, and is clearly associated with the object of making profit". This court, in ICAI (I) (supra) held that, while construing the term "business" as appearing in the proviso to Section 2(15), the object and purpose of the Section has to be kept in mind. It was observed therein that a very broad and extended definition of the term "business" was not intended for the purpose of interpreti....
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.... ICAI fell within the proviso to Section 2(15) as introduced with effect from 01.04.2009, this court, after considering the Supreme Court decision in the case of Commissioner of Sales Tax v. Sai Publication Fund: (2002) 258 ITR 70(SC) held:- "Thus, if the dominant activity of the assessee was not business, then any incidental or ancillary activity would also not fall within the definition of business." 51. This court also observed in ICAI(II) (supra) that:- 51. This court also observed in ICAI(II) (supra) that:- 64. ... It is not necessary that a person should give something for free or at a concessional rate to qualify as being established for a charitable purpose. If the object and purpose of the institution is charitable, the fact that the institution collects certain charges, does not alter the character of the institution. ...This court in ICAI (II) (supra) held:- 67. The expressions -trade?, -commerce? and -business? as occurring in the first proviso to section 2(15) of the Act must be read in the context of the intent and purport of section 2(15) of the Act and cannot be interpreted to mean any activity which is carried on in an o....
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....e entire revenue derived therefrom is used to offset the cost in maintaining schools run by the Trust, thus, towards charitable objects such as Education and Medical relief to the poor. The contention of the assessee before the CIT (Appeals) is that the surplus income from Community Hall, Kalyana Mandapam and Gnanavapi was utilized only to meet the shortfall in the income of the educational institution and that contention was rejected by the CIT (Appeals). 19. On a perusal of the entire records, it is apparent that even though the appellant trust is running Kalyana Mandapam, Gnanavapi and Community Hall, the income derived therefrom cannot be construed as business income as the very object of the Trust is for charitable purpose and it should be incidental for the Trust. 20. The fact remains that there is no records to show that all the income derived from Kalyana Mandapam, Gnanavapi and community hall are not used for the objects of the trust but whereas the fact remains that they spent all the income from the Kalyana Mandapam, Gnanavapi and Community Hall only for the educational purpose and medical relief to the poor, which are the objects of the trust. Under these circumst....
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....ontention of the appellant/assessee is that in view of the above objects of the trust to be fulfilled, which is for a charitable purpose, the income therefrom would be entitled to exemption u/s.11(1) of the Act. 22. Whether the income derived from letting out of Kalyana Mandapam, Community Hall and Gnanavapi owned by the appellant/assessee is the income from the House property or business income and whether the same is liable to be taxed or exempted is the other question. The contention of the assessee is that since utilization of the surplus income from the running of Kalyana Mandapam, Community Hall and Gnanavapi are for the objects of the trust, it is exempted from tax. 23. It is to be noted herein that both the CIT (Appeals) and the ITAT have not discussed about the facts in respect of the surplus income having been utilized for the objects of the trust viz., Running educational institution, providing medical relief to the poor etc., Absolutely there is no discussion of the facts relating to the utilization of earned income from letting out of Kalyana Mandapam and Gnanavapi towards charitable objects such as Education and Medical relief to the poor as given in the objects....