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2020 (11) TMI 267
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....ed an application dated 20.07.1973 for registration under Section 12A(a) of the Act before the Commissioner of Income Tax, Central-II, Chennai [CIT(A)]. The assessee Trust was constituted by a Memorandum of Association dated 01.03.1954 and subsequently by Supplementary Deed dated 28.06.1961. The CIT(A) by order dated 30.06.1989, granted registration to the assessee Trust under the said provision. Proceedings were initiated by the Director of Income Tax (Exemptions) ('DIT(E)') under Section 12A(a)(iii) of the Act, after noting that the assessee Trust was granted registration by the CIT(A) under Section 12A(a), by order dated 30.06.1989. The DIT(E) examined the records and noted the objects and activities of the assessee Trust. It was stated in the records that the assessee does not run any school or colleges, though such purposes have been formulated as the main objects of the Trust, the Trust engages itself in the business of publishing the Tamil news business commitments 'Dina Thanthi' and also job works for printing are undertaken as business commitments. The surplus of the income from the business after defraying all the expenses is utilized for donation to anoth....
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....ssee's activity can be said to be educational in nature. The DIT(E), therefore, came to the conclusion that the assessee's activities can only be for advancement of general public utility. Further, the Trust is conducting business of running the newspaper and the turnover exceeds the threshold limit as per second proviso to Section 2 (15) of the Act. It was held that undoubtedly the assessee is conducting business of publication of newspaper and gross receipts running into hundreds of crores of rupees exceeding the threshold limit as provided under second proviso to Section 2(15) of the Act. Therefore, the first proviso to Section 2(15) of the Act is squarely applicable to the assessee's case and therefore the activities, prima facie, shall not be charitable in nature. Further, it was held that this position will not change whether the business is carried independently or given as corpus by the settlor. Thus, the DIT(E) held that it appears that the activity of the assessee is hit by proviso to Section 2(15) of the Act and the prima facie activities of the Trust are no longer charitable in nature. 3.The assessee was called upon to show cause as to why action under....
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....a Trust, but they submitted that the doctrine of promissory estoppel will come to their rescue when there is no change in circumstances not in law or in facts. Noting that in the show cause notice, the DIT(E) has stated that the registration was granted on the basis of the Memorandum of Trust dated 01.03.1954 and by Supplementary Deed dated 28.06.1961, the assessee stated that the Department is well aware that the assessee preferred appeals before the Appellate Assistant Commissioner (AAC) for the assessment year 1962-63 contending that they are entitled to the grant of exemption under Section 11 of the Act. The AAC accepted the plea of the assessee that the decree passed by this Court in C.S.No.90 of 1961 created a legal obligation on the Trustees to utilise the income from the Trust for the object set out in the schedule to the decree. The decree passed by this Court in the said suit was mandatory in nature and that the assessee had credited in the books of accounts 75% of the income in favour of 'Aditanar College'' and therefore, the assessee was entitled to the benefit of the exemption under Section 11 of the Act. It was further stated that aggrieved by the orders o....
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.... made by this Court. The Tribunal decided the case in favour of the assessee holding that by reason of the judgment and decree in C.S.No.90 of 1961, the objects of the Trust are only those set out in the schedule to the said decree and they are charitable objects and that the assessee will be entitled to exemption from tax in respect of such income derived from the business as is shown to have been actually parted by it and actually spent on such charitable objects during the relevant previous years. With this finding, the Tribunal directed that the assessments for the two years in question should be modified. Aggrieved by such decision of the Tribunal, the Revenue as well as the assessee Trust sought for references to this Court and the following questions were referred for the opinion of this Court: (1) Whether on the facts and circumstances of the case, by reason of the judgment and decree of the Madras High Court in C.S.No.90 of 1961, the objects of the trust are only those that are set out in the schedule to the said decree and not those for which the trust was originally founded and that such objects are charitable objects within the meaning of section 2(15) of th....
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....tted or amended and the same situation and circumstances continues, so far as the assessee Trust is concerned. With regard to the applicability of Section 11(4a), the assessee referred to the judgment of the Honble Supreme Court in their case reported in ACIT vs. Thanthi Trust [(2001) 247 ITR 785(SC)]. The assessee referred to the instrument of declaration of Trust dated 01.03.1954 registered as document no.136/1954 on the file of the Sub Registrar, Mylapore and the Supplementary Deed dated 28.06.1961 and submitted that the judgment in C.S.No.90 of 1961 validates the Supplementary Deed and has held that the Trustees are bound to apply the surplus income to the objects mentioned in the Supplementary Deed. Further, it was submitted that the Director/Trustee is the Chairman of the governing body of the College from the very inception, he is managing and running the newspaper as Director, chosen by other trustees and he is also the Chairman of the educational agency which is a Society which runs various Colleges in Thiruchendur and there is no other effective way to carry out the directions, of those contained in the judgment in C.S.NO.90 of 1961 and wishes of the Founder of the Thanth....
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.... advancement of any other object of general public utility as used in Section 2(15) of the Act and those activities would not fall within the scope of educational activity, as held in Victoria Technical Institute (supra). Reference was made to the decision of the Hon'ble High Court of Gujarat in Sorabji Nusserwanji Paarekh (supra). Relying upon the decision in the case of Loka Shikshana Trust (supra), it was stated that the word 'Education' connotes the process of training and developing the knowledge, mind and character of students by normal schooling. Further, by once again referring to the above stated decision, it was held that it is necessary to run educational institution to qualify under the category 'Education' in Section 2(15) of the Act. It was further stated that the material differences between Section 2(15) and Section 2(22) as far as a education is concerned, is a use of the word 'solely'. Further, the DIT(E) accepted that there is no dispute that the objects of the Trust as per the Supplementary Deed dated 28.06.1961 were ratified by judgment in C.S.No.90 of 1961 and that the Department is accepting the objects as per the Supplementary ....
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....ound to be applied only for chargeable purpose and hence the activities of the Trust are genuine; that the interpretation given to Section 2(15) of the Act is incorrect; DIT(E) failed to appreciate the findings of this Court in the assessee's own case, wherein it was held that the entire property were held under Trust and / or under legal obligation was the business itself and entire income from the business have to be utilised for the various charitable objects set out in the schedule to the decree of this Court and therefore they cannot be denied the benefit of exemption under the Act. The other contents and decisions which were referred by the assessee while submitting their reply dated 30.11.2011 to the show cause dated 25.10.2011, were placed before the Tribunal. The Revenue contended that as per the Trust Deed dated 01.03.1954, the object of the Trust was to establish the newspaper as an organ of educated public opinion for the Tamil reading public and to disseminate news and to ventilate opinion upon all matters of public interest through it. It was further stated that the assessee does not run any school or college, though such purposes have been stipulated as a main ob....
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.... on of charitable activity and donations for charitable purpose and that the assessee Trust having not carried out any charitable activity but only carrying on business activity is not entitled for registration. With these observations and findings, the appeal was dismissed by the Tribunal. 12.Aggrieved by such order, the assessee has preferred this Tax Case Appeal. 13.Mr.V.S.Jayakumar, learned counsel for the appellant with a view to assist this Court to take a decision in the matter and also to assimilate all relevant facts and details regarding the past litigation between the assessee and the Department on the same subject matter, prepared his notes on submissions in the form of Power Point Presentation (PPT). 14.To the best of our knowledge, this is the first time, we have come across arguments advanced by the learned counsel by submitting a PPT before this Court. One school of thought seeks to condemn PPT presentations and have faulted the speakers who had used PPT as being monotonous and boring. The fault does not lie on the PPT but on the presenter, invariably the presenter reads out what is displayed in the presentation, forgetting that the Powerpoint Presentations....
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....A Y 97-98 till 08-09 there were no disputes. *For AY 09-10 to 12-13- Exemption u/s 11 was denied by AO/CIT(A) and appeals before ITAT along with refusal of registration u/ s 12 A A were listed several times. *Only the appeal relating to refusal of registration u/s 12 A r/w 12AA was disposed off which is the impugned order passed by the ITAT in this TC(A) 822 if 2018 *Donations list for various years from inception refer pg 22-23-spiral binding. Aditanar educational trust is the only donee *Charitable activities of the assessee trust was questioned by the tax department from A Y 68-69 and 69-70 for the first time and exemption u/s 11 was denied. Refer 137 ITR 735(Mad)(see below).Other aspects like application of income etc were considered in earlier assessment years appeals. *ITAT and HC upheld that supplementary deed was not valid as the trustees have no power under the deed to change the objects-but because of the Civil Court decree ordering the prayer to carry out six objects mentioned therein, there was a legal obligation on the part of the trustees to carry out the charitable activities which are six in numbers and so the trust is el....
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....dominant object of the trust is the carrying out of the charitable objects referred to its two off the three categories of charitable purpose referred to in S 2(15), the carrying on of the business which is actually the property held under trust or other legal obligation is incidental and the profit resulting therefrom the business can be taken to be a by product. *(ii)Page 65 para 22 end. The principle laid down by the SC(121 ITR1) in the said decision seems to squarely apply to this facts of the case. In this case the property held under trust or under legal obligation is the business itself and the entire income from the business has to be utilised for the various charitable objects set out in the schedule to the decree in CS No.90 of 1061. Thus, the objects will clearly fall under the head ' relief of the poor,education, medical relief etc, and merely because the trust is carrying on the charitable objects referred to in schedule to the decree, it cannot be deprived of S.11. *(iii) Page 65-66 para 25 : As pointed out by the SC , if the contention of the revenue is accepted, no trust can carry on any business even for the fulfillment of the charitable objects, ....
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....ndia Barucha, (2001)247 ITR 785(SC) at para 20- 21 pg 184 of PB- para21 end 11(4A)-"The trust, therefore , is entitled to the benefit of S.11 for the A Y 92-93 and thereafter. It is, therefore, we should add, not in dispute, that the income of its newspaper has been employed to achieve its objectives of education and relief to the poor and that it has maintained separate books of account in respect thereof. *....Pg. 180 of PB - para 6 Court observes... 137 ITR 735 has become final and binding on the revenue, namely, that the primary purpose of the trust was to carry out the charitable objects and that the business carried on only as a means in the course of the actual carrying on the purpose of the trust." *) Hon'ble Justice Jeevan Reddy-(1999) 239 ITR 502(SC) CIT v Thanthi trust- application of income aspect only-para 2-page 208PB- *"2. It appears that the Adityanar College was run, not by the assessee trust, but by another registered charitable society. In the circumstances, the HC was right in the conclusion which it arrived at. *.....It may also be mentioned that it is no part of the revenue's case at any point of time that the credit entries....
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....ying on of any activity for profit. In the same para: *It is now well settled as a result of the decision of this court in Dharmadeepti v CIT 114 ITR 454(SC) that the words "not involving the carrying on of any for profit qualify or govern only the last head of charitable purpose and not the earlier three heads. *Where, therefore, the purpose of a trust or institution is relief of the poor, education or medical relief, the requirement of the definition of charitable purpose would be satisfied , even if an activity for profit is carried on in the course of the actual carrying out the primary purpose of the trust or institution . *Sree Anjaneya Medical trust v CIT 382 ITR 399(Ker) 12 A and 12AA deal with the registration only. *Tamil nadu Kalvi Arakkatalai v CCIt (2014) 90 CCH 184(Mad) -Income received by person on behalf of educational instn exemption allowed. *Summing up of arguments up to this stage 1)In the impugned ITAT order and DIT( E ) 's order they are reviewing the very same Issue once again ignoring the case laws cited before them by the assessee trust. Thanthi trust case in 137 ITR 735(Mad) has become final as observed in by th....
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....ice Beg. *Refer pg 97-11(4)- Exemption u/s.11 read with Sec 2(15). *"Education" is not the core issue in this case. The discussion on education is obiter...only. Hon' ble Justice Beg says education is wider in Sec 2(15); Hon' ble Justice H.R. Khanna says narrower . Hon' ble Justice Beg compares it with Sec 10(22). -Refer Karnataka Ecumenical -139 ITR 226(Kar)at page 251 of typed set. Business held under trust in Thanthi's case *Hon' ble Chief Justice Baruch's judgment-247 ITR 785(SC) for AY 79-80, 80-81,81-82,82-83, 83-84, 84-85, 85-86, 86-87, 87-88, 88-89, 89-90, 90-91 and 91-92. *79-80 to 83-84 trust not entitled to exemption vide Sec 13(1)(bb). * 84-85 to 91-92 not entitled to exemption as per Sec 11(4)/4A *New 11(4A) from 01.04.1992 viz A.Y. 92-93 and thereafter the trust is eligible for exemption. *Also education aspect is dealt with in this judgement. *Sec 12AA(3) case law- 8)12AA(3) is not automatically to be invoked. *CIT v Mumbai Metropolitan Region Development Authority (2020) 270 Taxmann 21(Mum) *Goa Industrial Development Corporation v CIT (2020) 421 ITR 676....
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....IT 379 ITR 393(Del). *Standing counsel's arguments *(i)Written submissions of the Respondent does not anywhere mention as to how the activities of the appellant trust are non genuine or that the activities are carried out other than those covered by the trust deed or C S No.90 of 1961 being the Court decree of this Hon'ble Court. *(ii)Case law cited by the Respondent : Some of the case laws contain observations which are helpful to the stand taken by the assessee trust. *(iii)Other case laws are distinguishable on facts. *(iv)Each judgment relying on Lok shikshana trust 101 ITR 234 is distinguishable. *(v)Judgments in the context of Sec 10(22) are not relevant. *(vi)Scope of restricted meaning of word "education" is misplaced. Sec 2(15) is an inclusive definition and not exhaustive. *(vii)Rule of consistency and judicial discipline ignored. The impugned Tribunal order is perverse as the lower authorities have mixed up registration of a trust u/s 12 A with exemption under Sec 11 and judicial discipline is not adhered to by not following jurisdictional High Court decisions in rendered in Assessee's own case. ....
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....e assessee is in order and the written submissions given by the respondent is distinguishable on law and facts." 15.It is submitted that in the light of the decision in the assessee's own case pertaining to the very same issue, the respondent Department is estopped from cancelling the registration. The Hon'ble Supreme Court in the assessee's own case in (1999) 239 ITR 502 (SC) has specifically noticed that the educational activity has been carried on by the appellant trust through another entity and the Court has confirmed the decision of the Division Bench of this Court in CIT vs. Thanthi Trust [(1982) 137 ITR 735 (Mad)]. Hence, the objection raised by the respondent no longer survives in the eye of law. 16.It is submitted that in the decision of the Honble Supreme Court in Industrial Infrastructure Development Corporation (Gwalior) M.P Ltd. vs. CIT [(2018) 403 ITR 0001 (SC)] that the DIT(E) has held that the Commissioner had no power till 01.10.2004 to cancel registration under the Income Tax Act 1961 as per the relevant provisions that stood at that point of time to cancel the registration originally granted in terms of Section 12A. In the case before the Hon&#....
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.... Section 143(3) for each assessment year and it is not a condition precedent for grant of registration and his interpretation of Section 2(15) is incorrect. Several decisions of different High Court as well as this Court has held so. Reliance is placed on Tamil Nadu Cricket Association vs. DIT(E) (2014) 265 CTR 277 (Mad), where this Court has held at para 45 ''We do not accept the submission of the learned Standing counsel appearing for the revenue. As rightly observed by learned Senior Counsel for the assessee, the revenue granted registration under Section 12AA of the Act satisfying itself as to the objects of the association befitting the status as charitable purpose as defined in Section 29(15), as it stood in 2003 and after granting the registration, if the registration is to be cancelled, it must be only on the grounds stated under Section 12AA(3) of the Act with reference to the objects accepted and registered under Section 12AA, as per the law then stood under the definition of Section 2(15) of the Income Tax Act. Thus if a particular activity of the institution appears to be commercial in character, and it is dominant, then it is for the assessing officer to consid....
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....last limb of Section 2(15) of the Act is inapplicable and in the absence of any amendment in Section 11(A) the carrying on commercial activity to feed the educational activity is not hit by the amended Section 2(15) of the Act. 23.It is submitted that the Tribunal should have considered the principle relating to the powers of the DIT(E) under Section12AA(3) while denying / cancelling the registration already granted under Section 12A and applied the judgment of the Hon'ble Supreme Court in Industrial Infrastructure Development Corporation (Gwalior) M.P.Ltd. (supra). 24.Mr.J.Narayanasamy, learned Senior Standing Counsel for the Revenue took us through the order passed by the DIT(E) as well as the Tribunal and sought to impress upon us that the decision of the Tribunal is based on the findings of fact and this Court would not interfere with such findings in an appeal under Section 260A of the Act. Further it is submitted that the amendment to Section 2(15) of the Act with effect from 01.04.2009 gives importance to the attributes of the Trust. Therefore, the reasons assigned by the Tribunal is proper. 25.It is submitted that the assessee was originally granted registratio....
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....al Trust is still in vogue. 28.The decisions rendered by the Hon'ble Supreme Court in the assessee's own case are distinguishable, because these decisions were rendered before the introduction of proviso to Section 2(15) of the Act. It is further submitted that the Tribunal, which is the fact finding authority, has concluded that the activity of the assessee is in the nature of services in relation to trade and, not education. Further, the objects of the assessee Trust, which have been noted by the authorities, clearly show that it does not fall under any of the main limbs including education, it does not involve any activities of formal education or running of any educational institutions approved by the Authorities for School or College Education. The assessee Trust did not run any formal school or college imparting formal education to be in the field of education for the purpose of Section 2(15) of the Act. 29.Further, it is submitted that the decisions in Loka Shikshana Trust (supra), Oxford University Press (supra), Sorabji Nusserwanji Parekh (supra) and Victoria Technical Institute (supra) have held that the activities of general trading like that of newspaper o....
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....e binding nature of the earlier decisions of this Court and the Hon'ble Supreme Court in the assessee's own case and regard to the plea of promissory estoppel raised by the assessee, the DIT(E) seeks to get over the same by stating that those decisions were rendered prior to the insertion of the proviso to Section 2(15) of the Act. Apart from that, the DIT(E) was guided by the amount of revenue earned by the assessee in their newspaper business. Thus, they brought the activity of the assessee under the head 'objects of general public utility' and not 'education' and conducting business of newspaper having turnover running to crores much more than the threshold limit prescribed under the said proviso to Section 2(15) of the Act. 33.At the very outset, it needs to be pointed out that the DIT(E) failed to take note of the legal principle of estoppel presumably, not fully aware about the effect of such principle with particular reference to the facts of the case, though not as a general proposition in tax law. Admittedly, the decisions rendered by this Court and the Hon'ble Supreme Court pertain to the very same subject matter and the parties to the litigatio....
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.... on the file of the High Court, Madras, and not merely in respect of the income from the said business ? (4) Whether, on the facts and circumstances of the case, the mere crediting of 75% of the assessee's income to the accounts of Adityanar College of Arts and Science in the assessee's books will amount to application within the meaning of section 11 of the Income-tax Act, 1961 ? (5) Whether, on the facts and circumstances of the case, such application of income should take place during the relevant accounting years for claiming exemption under section 11 of the Act ? (6) Whether, on the facts and circumstances of the case, the assessee is entitled to exemption in respect of Rs. 3,04,035 only for the assessment year 1968-69 ?" 34.The following was the finding rendered by the Hon'ble Division Bench:- "18. .......... The supplementary deed as well as the decree in C.S. No. 90 of 1961 proceed on the basis that as the original objects had since been achieved, new objects had been substituted for them. The new objects are purely charitable. If the new objects have been substituted for the original objects set out in the original trust ....
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....ords "not involving the carrying on of any activity for profit" qualify or govern only the last head of charitable purpose of a trust or institution is relief of the poor, education or medical relief, the requirement of the definition of "charitable purpose" would be fully satisfied, even if an activity for profit is carried on in the course of the actual carrying out of the primary purpose of the trust or institution. The principle laid down by the Supreme Court in the said decision seems to squarely apply to the facts of this case. In this case the property held under trust or under legal obligation is the business itself and the entire income from the business has to be utilised for the various charitable objects set out in the schedule to the decree in C.S. No. 90 of 1961. Thus, the objects will clearly fall under the head "relief of the poor, education, medical relief, etc.", and merely because the trust is carrying on an activity for profit for the purpose of carrying on the charitable objects referred to in the schedule to the decree, it cannot be deprived of the benefit of section 11." 36.With regard to the property held under the Trust, the business activities and the e....
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....le purposes referred to in s. 2(15), the carrying on of the business which is actually the property held under trust or other legal obligation is incidental, and the profit resulting from the business can be taken to be a by-product. In view of the said decision of the Supreme Court in Addl. CIT v. Surat Art Silk Cloth Mfs. Assn. , it is not possible to accept the case of the Revenue that the trust in this case cannot claim the benefit of exemption under s. 11 merely because it carries on a commercial activity for profit. We have to, therefore, agree with the conclusion of the Tribunal that the trust in this case can claim the benefit of s. 11, if 75% of its income has been applied for charitable purposes and answer questions Nos. 1 to 3 in the affirmative and against the Revenue." 38.Next, the Court proceeded to consider as to whether there has been an application of income of the Trust for charitable purposes and after referring to earlier decisions, it was held as follows:- "34. .............. The conduct of the educational institution in drawing from the assessee trust larger sums that what was been credited by the trust in its favour in 1969-70 shows that it was fu....
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....or charitable purposes as contemplated by s. 11. ............." 39.The above findings are binding on the Department and the argument that on the ground of insertion of a proviso to the definition of 'charitable purpose' as defined under Section 2(15), would nullify the effect of the judmgment, which considered the conditions in the Deed of Trust, Supplementary Deed, which was affirmed by the judgment and decree of this Court in C.S.No.90 of 1961, cannot be taken away or diluted. In fact, the DIT(E) candidly admits that the judgment and decree in C.S.No.90 of 1961 has given a stamp of approval to the Deed of Trust and Supplementary Deed. Having accepted so, the observations made by the DIT(E) to get over the decisions in the assessee's own case are utterly perverse. 40.In (2009) 239 ITR 0502, the view taken by this Court was affirmed in the assessee's own case by the Hon'ble Supreme Court by holding as hereunder:- "2.It appears that the Adityanar College was run, not by the assessee-trust, but by another registered charitable society. In the circumstances, the High Court was right in the conclusion which it arrived at. It may also be mentioned that....
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....ting or appraising the above, one should also bear in mind the distinction/difference between the corpus, the objects and the powers of the concerned entity. ........." 42.In the assessee's own case in [(2001) 247 ITR 0785 (SC)], the Hon'ble Supreme Court examined the claim of the assessee Trust for exemption for the assessment years 1979-80 to 1983-84, which was rejected having regard to the provisions of Section 13(1)(bb) of the Act. The rejection was challenged by the assessee by filing a writ petition before this Court, which was allowed vide decision reported in (1995) 213 ITR 626 (Madras). The Court while allowing the writ petition, took note of the decision in the assessee's case in (1981) 23 CTR 153 (Madras) = (1982) 137 ITR 735, which had become final and binding on the Revenue that the primary purpose of the Trust was to carry out its charitable objects and that the business is carried on only as means in the course of the actual carrying on the purpose of the Trust. The Revenue challenged the said order before the Hon'ble Supreme Court and it was held that the assessee Trust is entitled to the benefit of Section 11 for the assessment year 1992-93 and t....
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....e credit entries made in the assessee's books of account were not genuine or true or that they were mere make-believe or bogus. Further, it was observed that it was also not brought to the notice of the Hon'ble Supreme Court that the ITO doubted the said entries and called upon the assessee to produce the accounts of the College and that the assessee failed to produce the same. With these observations, the appeal filed by the Revenue was dismissed. Thus, in the light of the above decisions in the assessee's own case, it will be too late in the day for the Revenue to now contend that the activities of the assessee are not charitable purposes. The attempt of the Revenue is to rake up a settled issue with an attempt to reopen the entire matter under the guise of introduction of the provision of Section 2(15), which defines 'charitable purpose'. Such attempt is wholly unsustainable and impermissible under law. The Revenue is estopped both on law as well as on facts from raising any contention as mentioned by the DIT(E) in its order dated 08.12.2011. The said order is an outcome of wrong understanding of the legal provisions, the effect of the judgment in C.S.No.90 o....
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....Therefore, it is submitted that one of the Hon'ble Judges of the Three Judge Bench has given a wider meaning to the word 'education' occurring in clause (15) of Section 2 whereas, the other Hon'ble Judge has given a narrower meaning to the word 'education' to mean normal schooling. 47.In Surat Art Silk Cloth Manufacturers' Association (supra), the Hon'ble Supreme Court considered the decision in Loka Shikshana Trust (supra) and observed that while they agree with the decision that the activity involved in carrying out the charitable purpose must not be motivated by a profit objective, but it must be undertaken for the purpose of advancement or carrying out of the charitable purpose, observed that it will be difficult to accept the views in Loka Shikshana Trust (supra) that whenever an activity is carried on which yields profit, inference must necessarily be drawn in the absence of some indication to the contrary that the activity is for profit and the charitable purpose involves carrying on an activity for profit. It was further pointed out that the Court would not be justified in drawing any such inference merely because, the activity results in ....
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....me reason, I a.m compelled, with respect, to hold that the observations of Krishna Iyer, J. speaking for the Court in Indian Chamber of Commerce v. Commissioner of Income-tax, West Bengal-ll(1) do not accord with what I believe to be a true construction of s. 2(15). If that decision can be justified, it can be only on the basis that in the opinion of the court the true purpose of the trust or institution was not essentially charitable. I am unable to accept the proposition that if the purpose is truly charitable,, the attainment of the purpose must rigorously exclude any activity for profit. I am also unable to endorse the position that by permitting, the trust or institution to carry on an activity which brings in profit, although that activity is carried on in the course of the working out of the purpose of the trust or institution, "business men have a high road to tax avoidance". It was apparently not brought to the notice of the learned judges that a carefully enacted scheme has been incorporated in the Act which closely controls the utilisation of the trust income, and that the tax exemption is conditional on the observance of the statutory conditions stipulated in that sched....
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....s, in para 17 of its judgment, that the word "education" is limited to schools, colleges and similar institutions and does not extend to any other media for such acquisition of knowledge. The observations of the Supreme Court do not confine the word "education" only to scholastic instructions but other forms of education also are included in the word "education". As noticed above, the word "schooling" also means instructing or educating. It, therefore, cannot be said that the word "education" has been given an unduly restricted meaning by the Supreme Court in the said decision. Though, in the context of the provisions of section 10(22), the concept of education need not be given any wide or extended meaning, it surely would encompass systematic dissemination of knowledge and training in specialised subjects as is done by the assessee. The changing times and the ever widening horizons of knowledge may bring in changes in the methodology of teaching a shift for the better in the institution set up. Advancement of knowledge brings within its fold suitable methods of its dissemination and though the primary methods of sitting in classroom may remain ideal for most of the initial educat....
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....lled the Chartered Accountants Study Circle, after analysing the objective, it was held that the activities of the assesseetrust cannot be construed to be one of trade or commerce or business and it would only be charitable in nature and merely because they were selling books and books of professional interest and other reference materials to the general public, it would not term their activity as "commercial". 15.In Gujarat State Co-operative Union vs. CIT [(1992) 195 ITR 279], the Court considered as to whether the co-operative union was entitled for exemption under Section 10(22) of the Act and one such activity being publication of journal on the subject of 'co-operative movement' and held in favour of the assessee." 52.While on this issue, it is beneficial to refer to the decision in the case of Ecumenical Christian Centre vs. CIT [(1983) 139 ITR 0226]. The Court while considering a writ petition, filed challenging an order refusing recognition and issuance of certificate under Section 80G of the Act, took note of the decision in Loka Shikshana Trust (supra) and held as follows:- "9. .......... The Commissioner observed that it was not necessary....
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....mdard Dawakhana (Wakf) [(1986) 157 ITR 637 (Delhi)] where the unamended definition of charitable purposes contained in Section 2(15) was considered, it was held that dedication is of a business because, the dedicated property is neither any building nor a trade mark, but a business of the Hamdard Dawakhana. It was urged that it is not a charitable purpose at all and hence, no exemption can be granted. In the said case, out of the business of the Trust, the income is being earned by the Mutawalli, if this is so, there is no scope for showing that it is a charitable purpose. This argument by the Revenue was held to be incorrect and not proper construction of the Act and that is not the meaning to be given to the definition. It was held that in order to have a charity, you must have a source of income, the income may come from gifts, or it may come from running a business. In the said case, the Trust is of a portion of the income of the Hamdard Dawakhana. Although the source of the income is a business, the object of the Trust is not to run the business, but to utilise the income of that business for a charitable purpose. Further, the Court taking note of the decision in the case o....
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....realistic to ignore the rapid advances in research in antibiotic medical microbiology and to attribute a decree of endurability and permanence to the technical know-how at any particular stage in the fast-changing area of medical science. It was further observed that rapid strides in science and technology in the field should make the Court little slow and circumspect in too readily pigeon-holing outlay such as the said case as capital. Thus, in the above decision, the modern development was judicially noticed and the case on hand itself is an example of the rapid strides in science and technology, as the entire hearing of this appeal was virtual. 55.The assessee in their arguments before the Tribunal raised a ground contending that the DIT(E) failed to appreciate that the principle of overriding title will apply to the resultant income of the newspaper activity and as per that principle, such amounts are bound to be applied only for charitable purposes and hence, the activities of the Trust are genuine. 56.We find that though such ground was specifically raised by the assessee, the Tribunal did not consider the same. In the earlier paragraphs, following the decision in the a....
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....ther appeal to the Tribunal, it held that the surcharge levied on admission tickets for the purpose of charity and the receipts in respect of surcharge were not income of the assessee at the point of time when they reached its hands and being earmarked for charity, they never belong to the assessee and were not includible in the taxable income of the assessee. The Revenue moved the Tribunal for referring the question formulated to the High Court for being answered. The High Court agreed with the view taken by the Tribunal, since surcharge on admission tickets was charged for a specific purpose of being applied to local charities and stood diverted to the local charities before they reach the assessee. 57.The correctness of the said decision was challenged before the Hon'ble Supreme Court, which dismissed the appeal filed by the Revenue. The Court applied the test laid down by the Hon'ble Supreme Court in CIT vs. Sitaldas Tirathdas [(1961) 41 ITR 367 (SC)] and held that the surcharge, being impressed with an obligation in the nature of trust for being applied to local charities, was by this obligation diverted before it reaches the hands of the assessee and, at no stag....
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....e DIT(E) accepts this position with regard to the finality of the judgment and decree in C.S.No.90 of 1961. In paragraph 7(b) of its order dated 08.12.2011, the DIT(E) accepts the objects as per the Supplementary Deed as ratified in C.S.No.90 of 1961. If such be the admitted factual position, then the Revenue cannot dispute the fact that the amounts, which were earned by the assessee Trust, have to be necessarily spent for a charitable purpose as per the mandate under the Supplementary Deed as confirmed in C.S.No.90 of 1961 and therefore, it is a case of diversion of income by overriding title. Therefore, it goes without saying that the Department should be consistent in their approach and change of officers cannot change the legal position which stood concluded in the assessee's case. The argument that the Revenue can take a re-look because of the amendment to Section 2(15) by amended proviso is an argument which has to be outrightly rejected especially, when the Department has accepted the finality of the judgment in C.S.No.90 of 1961. (To be noted, the Department has no other option, or else they may be liable for contempt of Court.) 59.The Hon'ble Supreme Court in Radha....
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....r stage and this would apply to quasi-judicial matters as well income tax assessment being quasi-judicial, the theory of finality is equally applicable. To say the least, the assessee cannot be harassed. This principle has to be necessarily transposed to the facts of the instant case on account of the various decisions of the Hon'ble Supreme Court in the assessee's own case, viz., 137 ITR 735, 239 ITR 503 and others wherein, the Hon'ble Supreme Court and this Court had considered the objects as spelt out in the Deed of Trust, as spelt out in the Supplementary Deed, the judgment and decree in C.S.No.90 of 1961, the finding rendered by the Division Bench in 137 ITR 735, which was affirmed and all other subsequent decisions have clearly and consistently held that the activity done by the assessee Trust is charitable activity and they are entitled for registration/exemption. This issue cannot be reopened by the Revenue, that too, by a perverse interpretation of the amendment to the proviso to Section 2(15) of the Act. 62.Moving a step further, we hasten to add that even such an argument is remotely possible, is not available to the Revenue on account of the earlier decis....
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....cation under Section 12AA of the Act is not expected to examine the modus of application of the funds of the Trust or the ethical background of the settlers and the stage for examining such issues will arise only at the time of assessment when the assessee claims benefits under Sections 11 and 12 of the Act. Thus, in the instant case, the DIT(E) while passing the impugned order dated 08.12.2011 cancelling the assessee's registration, applied a wrong test and examined with regard to the application of the funds, which the authority is not expected to do while considering an application for registration. Therefore, the very issuance of the show cause notice dated 25.10.2011, proposing to cancel the registration on examination of the modus of application of funds of the Trust is without jurisdiction. 65.In Tamil Nadu Kalvi Kapu Arakkattalai vs. CIT [(2014) 90 CCH 0184 ChenHC], it was held that while considering the claim for exemption, the substance of the claim would be more relevant than the form. In other words, the authority should not be solely guided by the objects set out in various clauses in the Instrument of Trust, rather should be guided by the activities of the Trus....
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....he Act satisfying itself as to the objects of the association befitting the status as charitable purpose as defined under Section 2(15), as it stood in 2003 and after granting the registration, if the registration is to be cancelled, it must be only on the grounds stated under Section 12AA(3) of the Act with reference to the objects accepted and registered under Section 12AA, as per the law then stood under the definition of Section 2(15) of the Income Tax Act. Even therein, Courts have defined as to when an institution could be held as one for advancement of any other object of general public utility. Thus, if a particular activity of the institution appeared to be commercial in character, and it is not dominant, then it is for the Assessing Officer to consider the effect of Section 11 of the Act in the matter of granting exemption on particular head of receipt. The mere fact that the said income does not fit in with Section 11 of the Act would not, by itself, herein lead to the conclusion that the registration granted under Section 12AAis bad and hence, to be cancelled. 46. It may be of relevance to note the language used in the definition "charitable purpose" in Section....
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....at the Revenue did not challenge this case and it attained finality." 68.The Revenue filed appeal to the Hon'ble Supreme Court against the above decision and leave has been granted - [2015] 57 taxmann.com 136 (SC). 69.The above decision was followed in Director of Income Tax (E) vs. Gujarat Cricket Association [(2019) 419 ITR 561 (Guj.)]. 70.The last aspect to be considered is under what circumstances, the power under Section 12AA(3) can be invoked. The said provision states that where a trust or an institution has been granted registration under clause (b) of sub-Section (1) or has obtained registration at any time under Section 12A and subsequently, the Commissioner is satisfied that the activities of such trust or institution are not genuine or are not being carried out in accordance with the objects of the trust or institution, as the case may be, he shall pass an order in writing cancelling the registration of such trust or registration. In terms of the proviso, no order under sub-Section (3) shall be passed, unless such trust or institution has been given a reasonable opportunity of being heard. Thus, the power under sub-Section (3) of Section 12AA would be invok....
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....t lead to automatic cancellation of registration, as that is not a ground provided under Section 12AA(3) for cancellation of registration. In the said case, the DIT(E) took a view that the assessee was hit by the proviso to Section 2(15) and therefore, it was deemed that the Trust had become non-genuine. Such view was held to be wholly untenable, being contrary to the mandate of Section 12AA(3) and liable to be set aside. 74.On the same point, is the decision in the case of Goa Industrial Development Corporation vs. CIT ([2020] 116 taxmann.com 42 (Bombay)), wherein, it was held that Section 2(15) that by itself would not render activities of the assessee as non-genuine activities so as to enttile the Commissioner to exercise powers under Section 12AA(3) to cancel registration. In the said case, similar question arose where also, the registration was cancelled, as the assessee was hit by the proviso to Section 2(15). The Court referred to Circular No.21/2016 dated 27.05.2016, issued by the CBDT, which states that cancellation of registration has to be initiated strictly in accordance with the provisions under Section 12AA(3) and after carefully examining the application of the sa....
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....application under Section 12AA, it was yet to commence its operation. But nevertheless the genuineness of the objects of the trust were not questioned by the Commissioner. Considering the fact that the continuance of registration is further a subject matter of scrutiny by the Commissioner as contemplated under Section 12AA(3) of the Income Tax Act, we do not think that the Revenue would be justified in refusing the registration at the threshold. The Tribunal had followed the decision of the Gujarat High Court in the case of CIT V. Kutchi Dasa Oswal Moto Pariwar Ambama Trust reported in 29 Taxman 228. We respectfully agree with the decision of the Gujarat High Court." 77.In a recent decision of the Hon'ble Supreme Court in Ananda Social & Educational Trust vs. CIT ([2020] 114 taxmann.com 693 (SC)), the Hon'ble Supreme Court explained as to the duties cast upon the Commissioner under Section 12AA while considering the application for registration in the following lines:- "9.Section 12AA undoubtedly requires the Commissioner to satisfy himself about the objects of the trust or institution and genuineness of its activities and grant a registration only if he is so s....
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....ntribution to another charitable trust is an application for charitable purposes, in other words, such contribution to another charitable Trust by the assessee Trust cannot be treated as income of the assessee Trust in the year of contribution. To the same effect is the decision in the case of CIT vs. Sarladevi Sarabhai Trust [(1988) 172 ITR 0698 (Guj.)] and also the judgment in the case of CIT vs. Trustees of the Jadi Trust [(1982) 133 ITR 0494 (Bom.)] and the decision in CIT vs. Shri Ram Memorial Foundation [(2004) 269 ITR 0035 (Delhi)]. 80.In CIT vs. Kutchi Dasa Oswal Moto Pariwar Ambama Trust [(2014) 362 ITR 0192 (Guj.)], the Revenue's appeal was dismissed holding that the CIT(A) was not justified in rejecting the registration to Trust under Section 12A merely on the ground that the activities of the Trust had not commenced. The CIT had also made a comment upon the activities of the assessee by stating that they are contributing only to one Trust and not to other Trust with similar objects. The question is whether this can be a reason for cancellation of the registration. The answer to the same should be in the negative because, this aspect was dealt with in the earlier ....
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....nder the Act to do so. In this case there was no such express power. 22. Indeed, the functions exercisable by the CIT under Section 12A are neither legislative and nor executive but as mentioned above they are essentially quasi judicial in nature. 23. ............. 24. ............. 25. ............. 26. ............. 27. It is not in dispute that an express power was conferred on the CIT to cancel the registration for the first time by enacting sub-Section (3) in Section 12AA only with effect from 01.10.2004 by the Finance (No.2) Act 2004 (23 of 2004) and hence such power could be exercised by the CIT only on and after 01.10.2004, i.e., (assessment year 2004-2005) because the amendment in question was not retrospective but was prospective in nature. 28. The issue involved in this appeal had also come up for consideration before three High Courts, namely, Delhi High Court in the case of Director of Income Tax (Exemptions) vs. Mool Chand Kairati Ram Trust, (2011) 243 CTR(Del) 245, Uttaranchal High Court in the case of Welham Boys' School Society vs. CBDT, (2006) 285 ITR 74(Uttaranchal) and Allahabad High Court in the cas....
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....ome-tax Act, 1961, merely because the donee trust did not spend the donation during the year of receipt itself. The above position may kindly be brought to the notice of all officers working your charge." 88.Circular No.1 of 2011 dated 06.04.2011 issued by the CBDT deals with various aspects and clause 7 of the circular deals with 'cancellation of registration obtained under Section 12A of the Act', which reads as follows:- "7.Cancellation of registration obtained under Section 12A 7.1. Section 12AA provides the procedure relating to registration of a trust or institution engaged in charitable activities. Section 12AA(3) previously provided that if the activities of the trust or institution are found to be non-genuine or its activities are not in accordance with the objects for which such trust or institution was established, the registration granted under Section 12AA can be cancelled by the Commissioner after providing the trust or institution an opportunity of being heard. 7.2. The power of cancellation of registration is inherent and flows from the authority of granting registration. However, judicial rulings in some cases have held that th....