TaxTMI 
TaxTMI 
2018 (3) TMI 1896
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....essee towards various heads i.e. Board of Trustee Account (Rs. 1.04 crores), Medical care account (Rs. 99.19 lakhs) Music-school-account(Rs. 17.69)lakhs and Sabha account (Rs. 78.94 lakhs) and not granting the benefits of provisions of section 11 of the Act. During the assessment proceedings,the AO observed that the objective of the assessee were primarily in the nature of advancement of any other object of general public utility. He issued a notice to the assessee mentioning that majority of the receipts were from renting of auditorium for various programmes,that receipts from auditorium worked out to Rs. 87.90 percent of gross receipts, that the hall maintained by the assessee trust i.e. Shanmukhananda Hall (SH)was primarily used for ticketing shows and was given to various event managers, that it madecommercial exploitation of the hall for 245 days in the year under consideration, that it was collecting entertainment tax and service tax for the events organised in the hall, that the activities carried out by it did not entail any benefit to the general public, that it was earning huge profit which was primarily commercial in nature. Accordingly he directed the assessee to show ....
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.... claiming depreciation. 4.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA)and made elaborate submissions.It also relied upon several case laws. After considering the available material,the FAA held that the assessee had claimed that it was engaged in educational activity for which number of music conferences including International conferences were organised, that during the appellate proceedings no details of conferences/International conferences were filed,that it had claimed that the exposition of fine arts by talented and renowned artists would spread awareness of knowledge and culture among the members of community at large. He referred to the case of Sole Trustees, Loka Shikshana Trust (101ITR234); Bihar Institute of Mining and Mine Surveying (208ITR608); and observed that while deciding the issue application of proviso to section 2(15) had to be considered,that the proviso was brought on statute w.e.f. AY 2009-10,that the 88% receipts of the assessee were from rental income,that the income pattern proved that education was merely a byproduct,that it had earned profit during the year and that rental income was more ....
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....ved from the hall was used for subsidising the medical and education expenses,that the pre-dominant purpose was to provide education and medical help, that the provisio to section 2(15) of the Act was not applicable to such activities,that the assessee was not in commercial activities,that till 12A certificate was in operation the AO was not entitled to declare the object of the trust as non charitable.He referred to the order of the Hon'ble Bombay High Court in its own case of IA No. 214 of 2012 and the order of the Tribunal dtd.09.09.2011(ITA/1849/2011).For the rental receipt he relied upon case of Madras Stock Exchange Ltd.(105 ITR 546) and Woman's India Trust(379 ITR 506).For Rule of consistency,he referred to the case of Shree Ram Memorial Foundation (158 ITR 3) and Excel Industries Ltd.(358 ITR 295).Cases of Thyaga Brahma Gana Sabha (188 ITR 160),Delhi Music Society(357 ITR 265) Jeevan Vidya Mission (ITA/770/ Mum/ 2014,dtd.30.09.2014)were relied upon to argue that music was part of educational activity. The cases of Lala Lajpatrai Memorial Trust(IT Appeal No.2307 of 2013 dtd.13.04.2016), India Trade Promotion Organisation(371 ITR 333) and Army Welfare Placement Organisa ....
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...." We find that the main objection of the departmental authorities was that the SH was rented out most of the time and that it was a commercial activity.In our opinion, act of letting out of hall cannot be and should not be considered in isolation.Eligibility or otherwise of benefit u/s. 11 of the Act cannot depend solely on one factor.What has to be seen is as to whether the trust is incurring the expenditure for the objects and purposes for which it was established. We find that the issue of letting out of a hall by a charitable institute was deliberated upon by the Hon'ble Madras High Court in the case of Madras Stock Exchange Ltd(supra) and Women's India Trust (supra).We would like to reproduce the relevant portion of the judg ment of the Hon'ble Bombay High Court in the case of Women's India Trust and it reads as under: "The assessee-trust formed to carry out the object of education and development of natural talents of people having special skills, more particularly women. It trained them to earn while learning. It educated them in the field of catering, stitching, toy making, etc. While giving them training, it used material bought from the open market. This was essential ....
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....n fund generation were for furthering the objects but not indicative of trade, commerce or business. The proviso did not apply. ...... considering the fact that the trust had been set up and was functional for the past several decades and it had not deviated or departed from any of its stated objects and purpose, utilisation of the income, if at all generated, did not indicate the carrying on of any trade, commerce or business. The Tribunal's view was to be upheld. It was a possible view and could not be termed perverse. The view was taken on an overall consideration and bearing in mind the functions and activities of the trust. In such circumstances, it was not vitiated by any error of law apparent on the face of the record." 6.1.We also find that the assessee had suffered loss in the various activities,carried out by it, to the tune of Rs. 32 lakhs(app.)except for eye care department and interest on investment (Pg.50,52, 56-57 of the PB).A perusal of Pg.s 82-84 reveal that expenditure incurred by it during the year under appeal pertained to overall administration and activities. In other words the said expenditure would have to be incurred even if the SH was not let out.SH was r....
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....ction 2(15)the assessee was not entitled to claim the benefit of section 11 of the Act.We would like to reproduce the proviso and it reads as under: (15) "charitable purpose" includes relief of the poor, education, medical relief, preservation of environment (including watersheds, forests and wildlife) and preservation of monuments or places or objects of artistic or historic interest, and the advancement of any other object of general public utility : 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 from such activity." If we consider the various activities carried out by the assessee,as evident from the various pages of the PB,it is clear that it was incurring expenditure in the fields of education and medical relief.Therefore,in our opinion,the assessee cannot be denied the benefit of section 11.Here, we would li....
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....urpose" has been divided into six categories, namely, (i) relief to poor, (ii) education, (iii) medical relief, (iv) preservation of environment including watersheds (forest and wildlife), (v) preservation of monuments and places or objects of artistic or historical importance, and (vi)  advancement of any other object of general public utility. The first proviso to section 2(15) of the Act carves out an exception which excludes advancement of any other object of general public utility from the scope of charitable purpose to the extent that it involves carrying on any activity in the nature of trade, commerce, or business or any activity of rendering certain services in relation to any trade, commerce, or business, for a cess or fee or any other consideration is irrespective of the nature of the use or obligation, or retention of the income from such activity.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 organised manner. The purpose and the domina....