TaxTMI 
TaxTMI 
2023 (1) TMI 611
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....eneral Public Utility in regards to letting out of auditorium was a commercial activity contradicting proviso to section 2(15) of the Act as against the assessee trust being falling in the category of Education u/s 2(15) of the Act. For this, assessee has raised common and identical grounds in all these four years and facts are also identical, as admitted by ld.AR for the assessee. Hence, we will take the facts from assessment year 2010-11 in ITA No.976/Chny/2019 and will decide the issue. For this, assessee has raised the following four grounds:- "1. CIT(A) erred both in law and on the facts of case in holding that letting-out auditorium was a commercial activity, attracting proviso to Sec.2(15) of the Income-tax Act. 2. He failed to appreciate that the auditorium is used only for educational purposes for the students during school houses and it was let-out, beyond school hours for educational purposes and promotion of fine-arts, etc., in order to augment the income to be used for educational purposes. 3. He erred in holding that letting-out of auditorium is service in the nature of trade, commerce or business. 4.The decisions relied upon the CI....
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....ess or commerce as evidenced from the above receipts. The assessee filed written submissions dated 25.03.2013 stating that the auditorium is located inside the premises of school and predominantly utilized by school for promotion of cultural and extracurricular activities. The assessee contended that the main purpose of auditorium is to provide facilities for the school in exhibiting the student's artistic talents. The auditorium was let out to outside parties only when the same was not needed by school and the proceeds received from letting out of auditorium hall was utilized in promotion of education and hence, it would not lose character of charitable purpose merely because some profit arises from the activity. The assessee objected to the proposal of AO and argued that the trust has not carried out any business / trade / commerce as provided in the proviso to section 2(15) of the Act. It was claimed that the income from this activity is only incidental and not business in nature and thus, letting out of auditorium hall for rent is not carrying on business and the income of the trust so received by way of rent would continue to enjoy exemption u/s.11 of the Act. The AO examined ....
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....ts on various topics in connection with the curriculum. These lecture meetings might be over by 5.p.m. To increase the revenue and to reduce overheads, the assessee had let out the auditorium for educational purposes for conducting lecture meetings, conferences and to promote find-arts such as music, dance, etc. This is also part of the education and not connected with any trade or commerce or business activity. The assessee does not carry any activity related to trade, commerce or business. It was further argued that the assessee's activities are covered by CBDT circular No.11/2008 dated 19.12.2008, wherein it is specifically mentioned as under:- "The newly inserted proviso to section 2(15) will not apply in respect of the first three limbs of Section 2(15) ie, 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." The CIT(A) noted that in the present case, assessee let out auditorium for 227 days during the financial year 2009-10 and earned substantial....
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....iven by AO and CIT(A) as under:- Reasons Appellant Submission (a) It is let-out for 227 days (Page 8 of Assessment Order for asst.year 2010-11) The list of days used by outsiders are : Asst. Year No. of days 2010-11 134 2011-12 144 2012-13 140 2013-14 141 It was occupied only on holidays and non-school working hours and that only for few hours. (b) There is a separate gate and exclusive car parking for private access to outsiders and general public This is factually incorrect. It is having only one gate for "in" and one gate for "out". It does not have a separate gate for Auditorium. The Auditorium is between two divisions of the school. The parking area is used by the school students during working hours and by outsiders during non-working hours (Copy of site plan is enclosed separately) (c) The Auditorium is let-out for dance programmes, music programmes, corporate meetings, corporate conferences, get-together and family functions. It is let-out mostly for music, dance, etc. The break-up is as under: 2010-11 2011-12 2012-13 2013-14 Music, Dance, etc. 83 95 112 106 M....
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....eason that the legislature has given the conscious use of 'or' connecting the two. He argued that the meaning of the proviso is that if charitable trust carries on any activity in the nature of any business, trade or commerce, in the actual cause of fulfilling its object, the income from such business should not exceed the limit defined in sub-clause (ii) to the proviso. He argued that in the present case, there is a clear finding given by the AO and the CIT(A) and from the details filed by assessee before Tribunal even in its paper-book, it clearly reveals that the auditorium is let out to like example, on 20.05.2009 Bharathi Airtel Ltd., on 01.06.2009 Metropolis Entertainment and on 02.07.2000 Chemplast Sanmar Ltd., etc. It means that the assessee is letting out auditorium to general public and therefore it is clearly hit by proviso to section 2(15) of the Act and the issue is squarely covered in favour of Revenue by the decision of Hon'ble Supreme Court in the case of Ahmedabad Urban Development Authority, supra. 6. We have heard rival contentions and gone through facts and circumstances of the case. We have gone through the indenture created this trust vide dated 28.12.1971 ....
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....y and incidental for carrying out the aforesaid purposes and for management of the Trust hereby constituted: (d) subject to availability oGBP funds after providing GBPor the aforesaid objects, to construct a school for education in "Rama Vilas " property and maintain and manage the school; 4) The Rama Vilas property will continue to be the property of the Thirupani Trust. The Board of Trustees are, however authorised to enter the premises, construct the hospital and school as aforesaid and manage the hospital and the school. The property tax and other outgoings in respect of the Rama vilas property shall be paid by the Board of Trustees out of the funds available with them. 7. Admittedly, the assessee is running a Matriculation School and it is also having an auditorium in its campus which is let out to various people for conducting meetings for school purpose or dance competition, music programme, etc., as contended by ld.AR for the assessee. From the records produced before us by the assessee in its paper-book and the details noted by the AO of list of parties from whom the assessee has received rent clearly reveals that the auditorium has been let out to gen....
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....eferred to therein is [ten lakh rupees] or less in the previous year; In the second proviso, the reference to ten lakhs was substituted, and the figure of rupees twenty-five lakhs, was inserted, by the Finance Act, 2011 (w.e.f. 01.04.2012). By Finance Act, 2015 (w.e.f. 01.04.2016), the first two provisos to Section 2(15) were deleted, and instead, the following proviso was inserted: "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, unless- (i) such activity is undertaken in the course of actual carrying out of such advancement of any other object of 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 a....
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....t apply to the first six categories. Although the occasion did not so arise in Surat Art Silk (supra) (since this Court was dealing with AYs prior to 1975), the provision in Section 13(1)(bb) which prevailed then with effect from 01.04.1977 made the position clearer in that it permitted these per se category charities, in the course of their actual carrying on of their activities, to earn profits. Of course, this provision was deleted from 01.04.1984. Alongside, the restriction imposed on GPUs from engaging in activities for profit, was also deleted. We have noted from the above para, that if the assessee's activity or category for charity is education, the restriction imposed by parliament against charities as prescribed under the proviso to section 2(15) of the Act prohibiting them from carrying on activities of profit do not apply to the first six categories including education. 7.2 In view of the above fact situation that the assessee trust exist for the purpose of education and the auditorium which is within the school complex for the purpose of conducting guest lectures or topics to address the students in connection with the curriculum and this is incidental and to ear....