TaxTMI 
TaxTMI 
2026 (6) TMI 87
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....s and earning substantial receipts therefrom, which according to the Assessing Officer constituted more than 65% of the total receipts of the trust. According to the Assessing Officer, the activity was organized in nature, various facilities and services were provided, the activity had effectively been outsourced, and separate books of account allegedly were not maintained and therefore the provisions of section 11(4A) stood attracted. The Revenue has further alleged that the assessee falls within the ambit of "advancement of any other object of general public utility" and since the receipts from hall letting were in the nature of trade, commerce or business, exemption under section 11 was not allowable. 3. Brief facts borne out from the assessment records are that the assessee is a long-standing charitable trust duly registered under section 12A and also enjoying approval under section 80G of the Act. The assessee owns and administers "Yashwantrao Chavan Pratishthan", comprising a building and auditorium popularly known as "Chavan Centre". During the year under consideration, the assessee had disclosed receipts from hall rent, auditorium receipts and allied receipts. The Assess....
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.... the predominant objects of the trust squarely fall within "education" and "relief to the poor". The assessee demonstrated before the learned CIT(A) that the trust is actively engaged in formal computer education through C-DAC authorized courses, scholarships to needy students, operation of a national library and research activities, promotion of educational, social, cultural and literary reforms, medical relief and welfare activities for weaker sections of society, especially rural masses, women empowerment programmes, youth training and leadership initiatives, road safety education campaigns, environmental workshops and disability welfare activities involving assistance to physically disabled persons through distribution of hearing aids, wheelchairs and artificial limbs. 7. The assessee also elaborately brought on record the actual educational and welfare activities undertaken by the trust. It was explained that the trust operates an Authorized Training Centre of C-DAC (Centre for Development of Advanced Computing), a premier Government of India organization, conducting recognized post graduate and diploma programmes such as PG-DAC, DACA and MSCIT in advanced information techn....
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....own charitable activities and the receipts generated therefrom were fully utilized for carrying out educational and welfare activities of the trust. It was specifically pointed out that the proportion of hall receipts could not be the determinative factor for denying exemption under section 11(4A), particularly when the educational activities themselves were conducted at highly subsidized or nominal fees and several welfare activities were undertaken completely free of charge. It was submitted that comparing subsidized educational receipts with commercial hall rent receipts to infer predominant business activity was wholly misleading. 11. The assessee also furnished details of substantial expenditure incurred during the year towards charitable objects. It was demonstrated that during the relevant financial year the trust had incurred Rs. 1,67,96,392/- towards maintenance and establishment expenses Rs. 65,32,603/- towards auditorium expenses Rs. 18,02,190/- towards capital expenditure and Rs. 2,92,82,584/- towards education and relief to the poor. It was further submitted that the educational activities themselves operated at deficit and were financed through interest income and ....
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....welfare and relief-oriented programmes. The learned CIT(A) noted that the dominant object of the trust is imparting education and carrying out charitable activities and the letting out of the hall was not the dominant activity but only incidental to achieving the main charitable objects. The learned CIT(A) further recorded that the income generated from hall rent was utilized for carrying out charitable activities including educational programmes, awards, seminars, social awareness campaigns and public welfare initiatives and that the trust had incurred substantial expenditure and even suffered deficits in certain years. 15. The learned CIT(A) further observed that the hall was let out only when not required for trust activities and the income so generated helped sustain and fund the charitable operations of the trust. It was also observed that the ratio of rental income to total receipts cannot by itself become the sole determining factor and that the Assessing Officer had failed to examine the issue from the perspective of application of income. The learned CIT(A), relying upon various judicial precedents including Bombay High Court decisions in Fellowship of Physically Handic....
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....ity could not be treated as merely incidental. It was further submitted that the assessee effectively falls within "advancement of any other object of general public utility" and therefore proviso to section 2(15) squarely applied. 19. Per contra, the learned counsel for the assessee reiterated the submissions advanced before the authorities below and strongly relied upon the findings of the learned CIT(A). It was submitted that the Assessing Officer has nowhere disputed the actual educational and welfare activities carried on by the trust and has merely proceeded on the basis of proportion of receipts from one source. It was emphasized that the hall itself constitutes property held under trust and income generated from such property has admittedly been applied for charitable purposes. It was further submitted that the assessee's activities squarely fall within "education" and "relief to the poor" and therefore the proviso to section 2(15) has no applicability. 20. We have carefully considered the rival submissions, perused the findings recorded by the Assessing Officer and the learned CIT(A) and also examined the material placed before us. In our considered opinion, the enti....
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....ears fundamentally misconceived. 23. At this stage, one must also bear in mind the very foundational principle underlying section 11 of the Act. The scheme of section 11 fundamentally proceeds on the premise that where there exists a property held under trust wholly for charitable purposes and income is derived from such property, then such income, to the extent applied for charitable purposes, is entitled to exemption. Thus, the three essential ingredients embedded in section 11 are: firstly, existence of a property; secondly, such property being held under trust; and thirdly, income derived from such property being applied towards charitable purposes. In the present case, "Chavan Centre", including the auditorium and allied infrastructure, admittedly constitutes property held under trust by the assessee. The assessee continues to hold valid registration under section 12A and there is absolutely no allegation that the trust has deviated from its charitable objects. Most importantly, there is no allegation whatsoever that the receipts generated from the auditorium or hall have been diverted for private benefit or non-charitable purposes. On the contrary, the entire material on r....
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....e Hon'ble Delhi High Court in Hamdard Laboratories India vs. DGIT(E) explained the dominant purpose doctrine and held that where the primary object remains charitable, incidental receipts from ancillary activities would not convert the institution into a commercial enterprise. 27. The Hon'ble Bombay High Court in CIT vs. Shri Vile Parle Kelavani Mandal reported in 378 ITR 593 (Bom) reiterated that educational institutions carrying on incidental activities do not lose their charitable character merely because certain receipts arise therefrom. Likewise, in CIT vs. Lajpatrai Memorial Trust reported in 383 ITR 45 (Bom), the Hon'ble Jurisdictional High Court held that income from letting out halls by charitable institutions, when utilized towards charitable objects and devoid of independent business motive, would not disentitle the institution from exemption under section 11. Similar principles were reiterated in Director of Income-tax (Exemption) vs. Fellowship of the Physically Handicapped and in the decision of Mumbai Tribunal in Shanmukhananda Fine Arts & Sangeetha Sabha rendered on almost similar facts. 28. Even otherwise, the very invocation of proviso to section 2(15) by th....