TaxTMI 
TaxTMI 
2022 (3) TMI 1330
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.... of the learned CIT(A) is contrary to the law and facts of the case. Ground No.2 : 2.1. The learned CIT(A) erred in holding that the assessee is entitled to exemption of all its income, including rental income out of letting, interest income on investments and miscellaneous income, under Secs.11 & 13 of the I.T. Act, 1961. 2.2. The learned CIT(A) failed to appreciate that letting out of buildings (without any charitable activity carried on, by the assessee) involves activity in the nature of trade, commerce of business, which would cause invocation of first proviso to Sec.2(15) of the I.T. Act, 1961. 2.3. The learned CIT(A) ought to have noted that the Hon'ble ITAT, Bangalore Bench, in the case of Subharam Trust v. OIT (E) (126 ITO 33) has held that in view of the amended definition of 'charitable purpose', the activity of letting out of buildings I halls is in the nature of business. 2.4. The learned CIT(A) failed to note that the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. Halai Nemon Association (243 ITR 439) squarely applies to the facts of the case. 2.5. Having regard to the obser....
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....ence. 5.2. The learned CIT(A) failed to appreciate that the moot question when such research activities will commence in the constructed buildings has not at all been answered. 5.3. The learned CIT(A) ought to have noted that the lease deed executed by the assessee with various commercial establishments in respect of the subject building reveals that the lease has been granted by the assessee for 10 years, commencing from 2010, and therefore, there is no scope for the assessee to utilise the constructed building for research activities within 10 years, i.e., up to 2020. 5.4. The learned CIT(A) failed to observe that it would not serve the purposes of the trust, if no charitable activity is carried on, for ten years and the trust's version that it will utilise the building for research activities in future, i.e., after ten years, is far-fetched. 5.5. The learned CIT(A) ought to have appreciated the decision of the Hon'ble Kerala High Court in the case of ell v. Sree Seetharama Anjaneya Veda Kendra 336 ITR 65, wherein, the Court has propounded the ratio that accumulating income u/s.11 (2), without carrying on any activity towards the object....
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....range for lectures, seminars and all other activities intended to promote research and expertise in the general field of knowledge including the objects mentioned above and allied objects. (h) To give donations and grants and aids to any trust this is established for charitable purposes ensuring for the benefit of the public in the discretion of the trustees. (i) To obtain grants of lands and buildings and other gifts of property movable and immovable and moneys by way of block-grants, recurring grants, maintenance grants and stipendiary grants from any Government or from any quasi-governmental corporations or bodies or from any municipal and local bodies as may be acceptable to the Governing body for carrying out the objects of the trust. (j) To acquire by purchase or lease and to construct immovable property to carry out the objects as above. (k) To obtain by lease of other arrangement possession and use of land and buildings from any person, body or government on such terms as may appear reasonable to the governing body for the purposes of the objects of the trust. (l) To investment surplus moneys belonging to the trust in approved se....
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....ntly made development of multi storied building out of which 2 Floors were allotted to Indian Cultural Research Trust. For this purpose, the Trust advanced sum of Rs. 6,27,55,000/- till 31.03.2010 to Wellington Charitable Trust. The amount is paid for investment in immovable property which is permitted investment by a Trust under the Income-tax Act 1961.The same has been fully completed and rental income has come to the Trust". 3.4 The Assessing officer further noted on perusal of the approved building plan submitted by the assessee that the building was constructed in a land belonging to the assessee, M/s. Willington Charitable Trust and M/s. Tamil Nadu Educational Trust in R.S.No.1629/1, 1629/2 & 1629/7. The assessee has not obtained any approval either from the Director of Income tax (Exemptions), Chennai or from the Court having jurisdiction over the assessee to enter into an agreement to align its land with other trust. The building construction approval was given to M/s. Wellington Charitable Trust by the Chennai Metropolitan Development Authority vide Letter dated 14.12.2009. The Assessing Officer has discussed the facts in paragraphs 15 to 30 elaborately and also noted t....
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....credited or paid to any trust or institution registered under section 12AA or to any fund or institution or trust or any university or other educational institution or any hospital or other medical institution referred to in sub-clause (iv) or subclause (v) or sub-clause (VI) or sub-clause (via) of clause (23C) of section 10,] shall be deemed to be the income of such person of the previous year in which it is so applied or ceases to be so accumulated or set apart or ceases to remain so invested or deposited or credited or paid or], as the case may be, of the previous year immediately following the expiry of the period aforesaid.] 3.8 The Assessing Officer further noted that for the assessment year under consideration, the assessee has spent Rs..15,72,61,182/- within 6 months as additions to building and Rs..2,42,69,477/- in the second half of the year summing up to Rs..18,15,30,659/- which was not spent for the purpose of charity and the same is not an application. However, the assessee trust has paid only Rs..14,02,12,514/- for the financial year 2010- 11 to Willington charitable Trust and ultimately to M/s. Chettinad Builders Pvt. Ltd. The exemption under section 11 of the ....
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....ilding (Annexure) - 2nd and 3rd floor belongs to the assessee. Other floors belong to whom/ f. Raja Muthiah Centre - 4th floor belongs to the assessee. Other floors belong to whom/ g. Willingdon Estate Building (3rd floor) belongs to assessee. Other floors belong to whom? h. Details of rates and taxes of Rs..31,87,720/- paid to whom and to which property. 4.2 The assessee has given reply vide letter dated 04.12.2014 as under: "a) The purpose of construction of Sigapi Achi Building, to earning of rental income and use the income for objects of the Trust. An activity for generating income for pursuing the approved object and there should not be any attempt in approving such activities as commercial in as much as the finding on the commerciality of such activities is not at all relevant to the factual matrix of the Assessees. The Sigapi Achi building which is let out and the income where from was used for the objects was held as application of income by the Trust in CIT Vs. Saint George Forana Church 170 ITR 62. We have applied the rental income of the Sigapi Achi Building and other receipts for Charitable objects for the Financial years 11-12, 1....
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....view of the non-applicability of the said proviso to the factual matrix of the case, due to the fact that running of the kalyana mandapams was not the objects mentioned in the Memorandum of Association of the Appellant and the surplus generated from the kalyana mandapams was admittedly ploughed back for pursuing the objects of the trust and relief was granted. This has not been reversed so far. The AO's contention that the Appellant's objectives are only towards advancement of the object of general utility is not totally correct. 5.3 Moreover, in the case of Willingdon Charitable Trust case, the Jurisdictional High Court held that when a business income was used towards the achievement of the object of the trust it would be incidental to the .achievement of the object of the trust notwithstanding the profit and gain involved therein. That section 11(4A) of the Act did not exclude section 11(1)(a). The exemption under section 11(4A) would be available only when the business was incidental to the attainment of the object of the trust. In the absence of any specific bar under section 11(4A) of the Act prohibiting the application of section 11(4A) it could not be const....
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....n exhibiting the revenue of the Appellant Trust as Income from House Property is not correct, since the main objects of the trust remain intact. Also, the Income accumulated and applied for the construction of the building amounting to Rs. 14,02,12,514/- had been disallowed by the A.O is also not correct, in view of the Hon'ble High Court decision in the case of CIT Vs. St. George Forana Church in 170 ITR 62 Ker which lends support to the Appellant wherein, it was decided that the word "applied" is of wider import than the word "expenditure" . The sum spent on the construction of additions to the buildings owned by a religious institution, which were let out, and the income where from was used for religious purposes, can be said to be an application of income for religious or charitable purpose. Even, repayment of loan for construction of building is treated as application as per the decision of the Jurisdictional High Court in case of CIT Vs. Kannikaparameswari Devasthanam Charities 133 ITR 779 Mad. That being the case, the expenditure on construction of buildings and income wherefrom is used for charitable purposes is definitely a clear case of "Application of income". F....
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....her trust is also application of income. 5.8 The A.O had brought out the case of Info Parks Vs. DCIT reported in 329 IIR 104 Ker, wherein it was held that letting on rent commercial building to software companies was an activity of commercial in nature and cannot be treated as income from properties and in the case of the Appellant multistoried commercial complex constructed and let out to various corporate houses. The Appellant has countered it saying that it is a charitable trust and it is permitted to put up buildings and let it out and use proceeds for charitable purposes. Hence, the case of Info Parks is not applicable since Info Parks is not a charitable trust and its objectives are totally different from that of the Appellant trust. 5.9 The A.O had again stated that the accumulations had been aimed to construct buildings and not to do charity. Also it had not complied with the purpose for which the accumulations have been meant as mentioned in Form no.10.He has also referred to the provisions of sec 11(3) of the Income Tax Act. He has again added that the Appellant had spent Rs. 15.72 Crores in six months and Rs. 2.43 Crores in second half of the year total....
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....er in appeal before the Tribunal. 5.1 The ld. DR has submitted that the initial object of the assessee trust was to establish Research Institute for learning and research and study in depth of all Vedas and effect of Vedic chants on human life, nature and universe and since they are not successful in conducting the research all the buildings were given on rental for a period of 99 years. Therefore, the intention of the assessee is only running a commercial institution and no charitable activity was carried out by the assessee. Only a small amount was given to another charitable society and claim exemption under section 11 of the Act. 5.2 The ld. DR further submitted that the original object of the assessee trust to carry on research on Vedas are no more carried by the assessee and the assessee only constructed commercial building and leasing out to corporate houses. Therefore, the income earned by the assessee cannot be exempted under section 11 of the Act. 5.3 the ld. DR further submitted that the Assessing Officer has proved beyond doubt that the assessee has not carried many of the objects and carried only ancillary object and thus, exemption under section 11 of the Act....
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....ncial Education Academy v. ITO (E) in I.T.A. No. 2565/Chny/2017 dated 11.06.2018 and pleaded that the same may be followed. 8. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below including paper book. The assessee trust has been created mainly for the purpose of research and study in depth of all Vedas and effect of Vedic chants on human life, nature and universe. Since the assessee was not able to carry out the activities for which it has obtained 12A registration, started construction activities and letting out to corporate houses and getting rental income out of which some portion of amount was donated to educational institution. The assessee has not carried out any activity relating to medical and education or any medical relief. Therefore, the activities carried out by the assessee cannot be said as charitable activity. The assessee was only constructing commercial complex and the same was given to long lease for 99 years. Therefore, there is no possibility that the assessee can again revive its main object of carrying out research on Vedas. We find that in the assessment years under consideration, the ass....
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....f general public utility and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities of that previous year]] From the above, it is clear that if the assessee has to claim relief under charity, it has to carry out charitable activities of relief to poor or education or medical relief. In the case in hand, the assessee neither carried out any activity relating to relief to poor nor education or medical relief. Therefore, the provisions of section 2(15) of the Act clearly attracts in the case of the assessee, i.e., other object of general public utility. Therefore, the Assessing Officer has rightly decided that the assessee has not carried out any charitable activity and not entitled for claiming deduction under section 11 to 13 of the Act. The ld. CIT(A), without examining any material documents and provisions of section 2(15) of the Act, simply reversed the order passed by the Assessing Officer. We find that the order passed by the ld. CIT(A) is without any material and any basis. Therefore, the order passed by the ld. CI....
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....se the assessee is having 12A registration and carrying out only construction of multi-storied buildings the rental income earned by letting it out to corporate business houses without carrying out any charitable activity such as relief to poor or education or medical relief. Thus, the case law relied on by the assessee are rejected. 8.7 Further, as relied on in the CIT(A)'s order in the case of Willington Charitable Trust 330 ITR 24, the Jurisdictional High Court held that when a business income was used towards the achievement of the object of the trust it would be incidental to the achievement of the object of the trust notwithstanding the profit and gain involved therein. That section 11(4A) of the Act did not exclude section 11(1)(a). The exemption under section 11(4A) would be available only when the business was incidental to the attainment of the object of the trust. The above case law has no application to the facts of the present case for the reason that the assessee trust was created and granted 12A registration for carrying out its objects. The assessee's objects are reproduced at para 3 page 5 & 6 hereinabove. The Income and Expenditure Account shows that the assess....