ITO, Tuticorin V. M/s. Suganthi Devadason Trust, Tuticorin

ITA 1238/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4901 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 02-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 02-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN
• Assessee Lawyers: T BANUSEKAR
• Keywords: Charitable institution
• Section: 12A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D CHENNAI BEFORE SHRI HARI OM MARATHA, J.M. AND SHRI N.S. SAINI, AM .. I.T.A. NO. 1238/MDS/2010 ASSESSMENT YEARS 2005-06 THE INCOME-TAX OFFICER WARD 1(1) TUTICORN VS. M/S SUGANTHI DEVADASON TRUST 18, MANAIKAVALAN STREET TUTICORN (PAN NO. AACTS 3887 K) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI T. BANUSEKAR DEPARTMENT BY : SHRI K.E.B. RENGARAJAN O R D E R PER N.S. SAINI, A.M :- THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER PASSED BY THE LD. CIT(A)-I, MADURAI DATED 04.05.201 0 FOR ASSESSMENT YEAR 2005-06. PAGE 2 OF 7 I.T.A. NO. 1238/MDS/2011 2. THE SOLE ISSUE ARISING OUT OF THE FIVE GROUNDS O F APPEAL TAKEN BY THE REVENUE IN THIS APPEAL IS THAT THE COMMISSIO NER OF INCOME- TAX [APPEALS] ERRED IN DELETING THE ADDITION MADE B Y HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR EXEMPTION U/S 11(1)(A) OF THE INCOME-TAX ACT, 1961 [IN SHORT, THE ACT] AS THE ACTIVITIES OF FUMIGATION OF CONTAINERS IN SHIPPING COMPANIES AND OTHER FIELD OF ENGINEERING CONSTRUCTION ARE INCIDENTAL TO THE ATTAINMENT OF OB JECT OF THE TRUSTS 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE INSTANT CASE, THE ASSESSEE TRUS T IS A TRUST REGISTERED U/S 12A OF THE ACT. THE ASSESSEE TRUST IS RUNNING A SUGANTHI DEVADASON MARINE RESEARCH INSTITUTE WHICH IS A MARINE RESEARCH AND HIGHER EDUCATION ORGANIZATION ESTABLIS HED IN 1998 AT TUTICORN. THE ASSESSEE TRUST CLAIMED ITS ENTIRE IN COME AS EXEMPT U/S 11 OF THE ACT. THE ASSESSING OFFICER HELD THAT FUMIGATION OF CONTAINERS IN SHIPPING COMPANY AN ALSO OTHER FIELDS OF ENGINEERING UNDERTAKEN BY ASSESSEE BY CHARGING FEE THERE AGAINS T WAS A BUSINESS ACTIVITY OF THE ASSESSEE FOR THE PURPOSES OF PROFIT AND THE SAME WAS NOT INCIDENTAL TO THE OBJECT OF THE ASSESSEE TRUST AND ACCORDING TO THE ASSESSING OFFICER, THE OBJECT CLAUSE OF THE ASS ESSEE INSTITUTION PAGE 3 OF 7 I.T.A. NO. 1238/MDS/2011 DOES NOT SPECIFICALLY PERMIT THE TRUST TO UNDERTAKE SUCH ACTIVITY AND THEREFORE, THE ASSESSING OFFICER DISALLOWED RS. 22, 17,014/- OUT OF TOTAL APPLICATION OF FUND AND THEREBY DETERMINED TO TAL INCOME OF THE ASSESSEE AT RS. 14,75,700/-. 4. ON APPEAL, THE LD. CIT(A) ALLOWED EXEMPTION ON T HE ENTIRE INCOME U/S 11 OF THE ACT BY OBSERVING AS UNDER: 11. I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION S OF THE APPELLANT AS WELL AS ASSESSING OFFICER. IT IS A FA CT THAT THE APPELLANT WAS REGISTERED U/S. 12A OF THE I.T. ACT FR OM THE A.Y. 1998-99 ONWARDS. THE REGISTRATION GRANTED WAS NOT CANCELLED AND THE TRUST CONTINUES TO ENJOY EXEMPTION U/S.11 OF THE ACT. SEC. 2(15) DEFINES CHARITABLE PURPOSE A S UNDER:- CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, EDUC ATION, MEDICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OBJ ECT OF GENERAL PUBLIC UTILITY. AS PER THE DEFINITION, THE APPELLANT IS A CHARITABL E TRUST DULY REGISTERED WITH THE COMMISSIONER OF INCOME TAX, MAD URAI, ACCORDING TO THE AUTHORIZED REPRESENTATIVE. THE MAI N ACTIVITY OF THE TRUST IS RUNNING A MARINE RESEARCH IN STITUTE PAGE 4 OF 7 I.T.A. NO. 1238/MDS/2011 AND THIS ACTIVITY IS COVERED BY THE OBJECTS IN THE OBJECT CLAUSE OF THE TRUST DEED, CONTENDED THE AUTHORIZED REPRESENT ATIVE. ACCORDING TO HIM, THE FUMIGATION AND PEST CONTROL AC TIVITIES OF THE TRUST ARE INCIDENTAL TO THE OBJECT OF THE TRUS T AND COVERED BY CLAUSE(XX) OF THE OBJECTS IN THE TRUST DEE D. THE ASSESSING OFFICERS ONLY OBJECTION WAS THAT THE APP ELLANT DID NOT ENUMERATE A SPECIFIC CLAUSE FOR BUSINESS ACTIVITIE S AND HENCE EXEMPTION IS NOT AVAILABLE U/S. 11(1)(A) OF TH E ACT. IT IS PERTINENT TO NOTE THAT THE ASSESSING OFFICER ALL OWED EXEMPTION TO M/S V.O. CHIDAMBARAM, EDUCATIONAL SOCIE TY, TUTICORIN FOR A.Y 2007-08 UNDER SIMILAR CIRCUMSTANCES WHERE THE SOCIETY WAS RUNNING A PETROL BUNK. THE ASSESSIN G OFFICER HELD THAT THE INCOME EARNED FROM PETROL BUNK WAS USED FOR THE DEVELOPMENT AND IMPROVEMENT OF EDUCATIONAL INSTI TUTION. IN THE PRESENT CASE THE PEST CONTROL AND FUMIGATION WORK UNDERTAKEN BY THE APPELLANT IN SHIPS ARE MORE RELATE D AND RELEVANT TO THE MAIN ACTIVITY OF THE TRUST I.E. RUNN ING OF MARINE RESEARCH INSTITUTE. THE FUMIGATION AND PEST C ONTROL OF CONTAINERS OF SHIPPING COMPANIES ARE MORE HELPFUL TO THE STUDENTS TRAINED BY THE INSTITUTE RUN BY THE APPELLANT . THEREFORE, I AM OF THE CONSIDERED OPINION THE ACTIV ITY OF FUMIGATION OF CONTAINERS IN SHIPPING COMPANIES AND O THER FIELDS OF ENGINEERING CONSTRUCTION IS INCIDENTAL TO THE ATTAINMENT OF OBJECTS OF THE TRUST AND THE APPELLANT IS ELIGIBLE FOR EXEMPTION U/S. 11(1)(A) OF THE ACT. PAGE 5 OF 7 I.T.A. NO. 1238/MDS/2011 IN THE CASE OF SURAT SILK CLOTH MANUFACTURING ASSOCIA TIONS CASE 121 ITR 1 (SC), IT WAS HELD IF THE PREDOMINANT OBJECT IS CHARITY, AN ACTIVITY FOR PROFIT IN PURSUING THAT OBJECT WILL NOT UNDERMINE THE PRIVILEGED POSITION OF THE TRUST. IF THE PROFIT PURS UING THE OBJECT WILL NOT UNDERMINE THE PRIVILEGED POSITIO N OF THE TRUST, THE MERE FACT THAT THE ACTIVITIES OF THE TRUST YIELD PROFIT WILL NOT ALTER THE CHARITABLE CHARACTE R OF THE TRUST. IN THE CASE OF LOKASHIKSHANA TRUSTS CASE 101 ITR 2 34(SC), IT WAS HELD IF THE PROFIT MUST NECESSARILY FEED A CHARITABLE PURPOSE, UNDER THE TERMS OF THE TRUST, THE MERE FACT THAT THE ACTIVITIES OF THE TRUST YIELD PROFIT WILL N OT ALTER THE CHARITABLE CHARACTER OF THE TRUST. FURTHER, SEC. 2(15) SHOULD READ WITH THE PROVISIONS O F SEC. 11(4A0 TO HAVE A PROPER VIEW OF THE LIMITATION IMPO SED ON PURSUING PROFIT-ORIENTED ACTIVITY IN SUB SERVING THE O BJECTS OF THE TRUST. SEC. 11(4A0 ALLOWS INCIDENTAL BUSINESS AC TIVITY TO ATTAIN THE OBJECTS OF THE TRUST. PAGE 6 OF 7 I.T.A. NO. 1238/MDS/2011 12. IN VIEW OF THE FOREGOING DISCUSSION, I AM OF THE CONSIDERED VIEW THAT THE APPELLANT TRUST IS ELIGIBLE FOR EXEMPTION U/S. 11(1)(A) OF THE ACT. I THEREFORE, DE LETE THE ADDITION OF RS. 14,75,700/- MADE AND THE APPELLANT IS ENTITLED FOR THE EXEMPTION OF RS. 59,23,537/- CLAIM ED U/S. 11 OF THE ACT. 5. BEFORE US, THE LD. D.R. RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND THE LD. A.R. RELIED UPON THE ORDER OF T HE LD. CIT(A). 6. WE FIND THAT THE REVENUE COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ORDER OF THE LD. CIT(A). IN OUR CONSI DERED OPINION, THERE IS A DISTINCTION BETWEEN THE OBJECT AND POWER OF AN INSTITUTION. THE POWER TO CHARGE FEE DOES NOT MEAN THE OBJECT OF THE INSTITUTION IS TO EARN PROFIT. NO MATERIAL HAS BEEN BROUGHT ON RECOR D TO SHOW THAT ANY PART OF THE INCOME OF THE ASSESSEE INSTITUTION WAS UTILIZED FOR ANY NON CHARITABLE ACTIVITY OR FOR PERSONAL USE OF INTERESTED PERSON. IN THE ABOVE CIRCUMSTANCES, WE DO NOT FIND ANY ERRO R IN THE ORDER OF THE LD. CIT(A) AND THEREFORE, CONFIRM THE SAME. PAGE 7 OF 7 I.T.A. NO. 1238/MDS/2011 7. IN THE RESULT, APPEAL FILED BY THE REVENUE STAND S DISMISSED. ORDER PRONOUNCED IN THE COURT ON 13 TH JUNE, 2011. SD/- SD/- ((HARI OM MARATHA ) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 13 TH JUNE, 2011. VL COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE