AI Drafter 
TaxTMI 
TaxTMI 
2022 (10) TMI 275
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....ssee has declared Hall Hiring Charges amounting to Rs..11,81,000/- and Royalty amounting to Rs..9,41,000/- under the head 'Any other income'. The assessee was asked to submit the details regarding the above incomes. In response assessee submitted its reply on 18.02.2021 on ITBA Portal as under: - "Details of property for which royalty received: The school has a Hall which is given on hire basis to other parties in idle hours for Prarthana Sabha, Wedding Ceremony, Engagement Ceremony Etc. The royalty charges received are amount received from Caterers & Decorators. Details of Royalty & Hall Charges: This income has been received for an activity which is incidental to attainment of objective of the Trust. The school has a Hall which is used for Prayer meeting. Physical Training, Cultural Programme of School Students etc. The hall is given on hire basis to other parties in Idle Hours for Prarthana Sabha, Wedding Ceremoney, Engagement Ceremoney etc. The royalty charges received are amount given by Caterer & Decorator of the function. The amount received for attainment of Educational Object which is the main objects." 4. After considering the submissions of t....
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.... "1. The learned Commissioner of Income Tax (Appeals) erred in confirming action of the Assessing Officer in treating hall hiring charges of Rs. 11,81,000/- and royalty of Rs. 9,41,000/ as business income and denying exemption u/s 11 in respect of the said income. 2. The learned Commissioner of Income Tax (Appeals) failed to appreciate that hall hiring charges of Rs. 11,81,000/- and royalty of Rs. 9,41,000/- constituted mere 3.7% of total receipts of the assessee educational trust and was incidental to its activities. 3. The learned Commissioner of Income Tax (Appeals) failed to appreciate that the assessing officer had not given a reasonable and sufficient opportunity of being heard to the assessee. 4. Without prejudice to above, the learned Commissioner of Income Tax (Appeals) failed to appreciate that even if hall hiring charges of Rs. 11,81,000/- and royalty of Rs. 9,41,000/ were to be treated as business income, non-maintenance of separate books of accounts as required by section 11(4A) is merely a procedural default and the Assessing Officer ought to have granted opportunity to the assessee trust to make good such default. 5. The as....
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....Officer observed that this additional income earned by the assessee are not incidental to the education activities but it is for the purpose of making profit i.e., business and also according to him assessee has not maintained separate books of accounts for these transactions. For the above reasons Assessing Officer denied the exemption u/s. 11 of the Act. 13. We observe that the Trust is engaged mainly for imparting the education and the assessee has allowed the hall in the school/college to earn the additional income by way of Hall Hiring Charges and royalty from the caterers and ultimately this income was applied for imparting the education. We also observe that in section 11(1)(a) clearly indicates that income derived from property held under Trust for charitable purpose to the extent to which such income is applied to such purposes in India. It clearly indicates that the purpose of the assessee is for imparting education which is covered in the definition of charitable purpose and assessee has derived the income from the property. Therefore, the earning of income from the property on allowing others to use the hall and earn Hall Hiring Charges and other royalty income is no....
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....ion 2(15). It further held that even if all the objects of the assessee were not for the purpose of education, they were clearly ones for general public utility. It further held that the activity of letting out the hall is not for profit, and hence the object of the assessee was only for charitable purposes within the meaning of section 2(15) and, therefore, the rental income from the hall is exempt u/s 11 of the Act, provided the assessee satisfied the other conditions. The Revenue filed an appeal against the above order of the Tribunal before the High Court. It is seen that the following facts are noted by the High Court: "9. The Sabha was established to promote the advancement of music and other fine arts. In pursuance of the above objects, the assessee was holding musical entertainments, dramas, kalakshepams, dance, recitals, bhajans, exhibitions and lectures, etc. The assessee is also making arrangements for the exposition of art by competent artistes and thereby encouraging deserving talented people. One of the objects of the assessee is to conduct a school called "Sri Thyaga Brahma Gana Sabha Music and Dance School" for imparting education in music and danc....
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....rental income derived from letting out the Vani Mahal. In that view of the matter, we answer the questions referred to us in the affirmative and against the Revenue." 7.1 It would be relevant to refer to section 2(15) of the Act which defines "charitable purpose" to include inter alia the following: i. relief of the poor ii. Education iii. medical relief, and iv. the advancement of any other object of general public utility. Circular No. 11 of 2008 dated 19.12.2008 issued by Central Board of Direct Taxes (CBDT) clarifies that the newly inserted proviso section 2(15) will not apply in respect of the first three limbs of section 2(15), i.e. relief of the poor, education or medical relief. Consequently, where the purpose of a trust or institution is relief of the poor, education or medical relief, it will constitute 'charitable purpose' even if it incidentally involves the carrying on of commercial activities. 7.2 In the instant case, as mentioned earlier, the assessee is a charitable trust engaged in imparting education in the field of classical music and light music based on the Gurukul Philosophy, where the student lear....