Asha Nivas Social Welfare Society, CHENNAI V. DDIT, CHENNAI

ITA 1374/CHNY/2013

• Counselvise Citation: 137421714 RSA 2013
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 14-05-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 21-06-2013
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: MANUEL THOMAS
• Keywords: Depreciation; Charitable institution; Revised return
• Section: 11; 15

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , ! ' , # $% BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ ITA NOS. 1373 & 1374/MDS/2013 / ASSESSMENT YEARS : 2006-07 & 2009-10 M/S. ASHA NIVAS SOCIAL WELFARE SOCIETY, NO.9, RUTLAND GATE, V STREET, CHENNAI 600 006. PAN AAAAA0865A APPELLANT) V. THE DEPUTY DIRECTOR OF INCOME-TAX,(EXEMPTIONS-1), CHENNAI. RESPONDENT) / APPELLANT BY : SHRI MANUEL THOMAS, CA / RESPONDENT BY : SHRI P. RADHAKRISHNAN, JCIT ! / DATE OF HEARING : 14.05.2015 '# ! / DATE OF PRONOUNCEMENT : 17.07.2015 & / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINS T DIFFERENT ORDERS OF THE COMMISSIONER OF INCOME-TAX( APPEALS) ITA 1373 & 1374/13 2 DATED 28.3.2014 AND 21.3.2013 FOR THE ASSESSMENT YE ARS 2006-07 AND 2009-10, RESPECTIVELY. 2. FIRST, WE TAKE UP THE APPEAL IN ITA NO.1374/MDS/2013: THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS: 1.THE O RDE R OF THE L EAR N ED CIT APP E AL S F O R TH E AS S ES SMEN T YEAR 2 0 0 9- 10 IS ERRON E O U S AN D O PPO SE D TO LAW A N D T H E F A C T S A ND T H E CIRC U MS T A N CES OF T H E CASE. 2. THE LEA R N ED CIT A PP EALS ERRED I N NO T APPREC I ATING T H E P U RPO R T OF TH E B OARD ' S C I R CULAR N O . 1 1/ 2008 D A TED 1 9 . 1 2. 2 0 08 W HER EI N I T H AS BEEN C L A R IFI E D T H A T THE A MENDMENT WOULD A PPL Y O NL Y IN R ESPECT O F TH E PURPO S E O F A D V ANCEMENT O F AN Y OT H E R OB J ECTS OF GENERAL PUBLIC UTILITY AND THE E NTITIES PUR S UING THE SAID OBJECTS WILL NOT B E ELIGIBLE FOR EXEMPTION IN RESPECT OF AN Y A CTIVITY IN THE NATURE OF TRADE , COMMERC E O F BUSINES S . 3. T H E L E A RN E D CIT APPEAL S FA ILED T O A PPR E C IA T E TH AT , F IR ST O F ALL , TH E AP P E LL A N T TRUST ' S A CTIVITI E S WOULD FALL STRICTL Y ONL Y UNDER TH E F I R ST T H R EE LIMB S O F SECTION 2( 15 ) , VIZ. , R E LIEF OF THE POOR , E DUCATION AND MEDICAL RELIE F A ND WILL NOT COME UNDER THE LIMB , A D V ANC E M E NT OF ANY OTHER O BJ E CT O F GE N E R A L PUBLIC UTIL I TY ' . SECONDL Y, TH E A PPELL A NT TRUST I S NOT CARR Y ING ON AN Y TR A D E, COMM E RC E OR BU S INE S S . THE RUNNING OF WOMEN ' S HOST E LS AND CANTE E N ETC. , WERE ONL Y FOR THE BENEFIT OF THE BENEFICIARIES AND NOT MEANT FOR TH E U SE OF THE GENERAL PUBLIC AND WAS INCID E NT A L TO THE OBJECT S UNDER THE FIRST TH REE LIMB S OF SEC TION 2(15) . 4. T H E LEA RN E D C IT APPEALS E RRED IN H O LD I N G THAT TH E A CTI V ITIE S OF TH E APPELL A NT TRUST ARE OUT S ID E THE PUR V IEW OF THE MEANING OF ' RELIE F OF THE POOR ' USED IN SECTION ITA 1373 & 1374/13 3 2(15) OF TH E ACT ON THE GROUND THAT THE MAIN ACTIVIT Y OF THE TRUST WAS RUNNIN G OF WORKING WOM E N HOST E L AND WORKING WOMEN C ENTRE . 5.TH E LE ARN E D CIT APPEA L S ERRED IN NOT A PPR E CIATING THAT THE ACTIVITIES OF THE APPELL A NT TRU S T S INCE INCEPTION HAD BEEN ONLY THE UPLIFTMENT OF POOR AND DESTITUTE WOMEN AND WE LFARE OF POOR AND ORPHANED CHILDREN AND ALSO TAKING CARE OF THEIR E DUCATION A ND HE A LTH N E EDS. 6. T H E L EARNED CIT APPEALS OUGHT TO HAVE OBSERVED THAT RIGHT FROM TH E INC E PTION THE A PP E LL A NT TRUST WA S ONL Y STRIVING TO HELP CHILDREN IN DI S TR E S S, CHILD WORK E R S, C HILDR E N IN SLUM S AND AL S O WOMEN A FF ECTED B Y E X PLOITATION AND VIOLENC E A ND W H O H A D NOBODY T O TA K E CAR E OF THEM. 7. THE LEARNED CIT (APPEALS) HAS BASED HIS DECISIO N ON CERTAIN RECEIPTS RATHER THAN GOING INTO THE PURP OSE FOR WHICH IT HAS BEEN SPENT AND BENEFITS DERIVED BY THE POOR AN DOWNTRODDEN. 8. THE LEARNED CIT APPEALS FAILED TO TAKE NOTICE O F THE FACT THAT THE APPELLANT TRUST HAD RECEIVED GRAN TS-IN AID FROM THE CENTRAL SOCIAL WELFARE BOARD IN EARLIE R YEARS. 3. THE FACTS OF THE CASE RELATING TO THE ASSESSMEN T YEAR 2009-10 ARE THAT THE ASSESSEE FILED ITS RETUR N OF INCOME ON 29.9.2009 DECLARING GROSS RECEIPTS OF ` 2,58,40,487/-. THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT, VIDE ORDER DATED 30.12.2011, WHEREIN THE ASSESSING OFFIC ER DENIED EXEMPTION U/S.11. THE ASSESSEE WAS REGISTER ED U/S.12A(A) OF THE ACT VIDE DTE NO.1212(62)/77 DATED ITA 1373 & 1374/13 4 19.5.1997 AND THE MAIN OBJECTS OF THE ASSESSEE ARE RELIEF TO THE POOR, MARGINALIZED AND EXPLOITED WOMEN LIVING I N DIFFICULT CIRCUMSTANCES AND CHILDREN IN DISTRESS ESPECIALLY T HE STREET CHILDREN, CHILD WORKERS AND CHILDREN IN SLUMS. HO WEVER, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS AC TUALLY NOT CARRIED OUT CHARITABLE ACTIVITIES. THE AO HAS GONE THROUGH THE RECEIPTS AND EXPENSES WHICH ARE REPRODU CED BELOW: RECEIPTS FROM: I) INCOME FROM WORKING WOMENS HOSTELS ` 35,68,975/- II) INCOME FROM WOMENS SERVICE CENTRES ` 53,96,757/- III) INCOME FROM CANTEEN ` 26,76,083/- IV) FOREIGN DONATIONS ` 50,29,018/- V) ALL OTHER EXPENSES ` . TOTAL ` 2,58,44,488/- EXPENSES TOWARDS: I) EXPENSES OF WORKING WOMENS HOSTELS ` 21,37,289/- II) EXPENSES OF WOMENS SERVICE CENTRES ` 24,40,083/- III) EXPENSES OF CANTEEN ` 27,35,991/- IV) ALL OTHER EXPENSES ` . TOTAL ` 3,00,21,451/- =========== 4. ACCORDING TO THE AO, THE NATURE OF SERVICES RENDERED ARE IN RELATION TO TRADE, BUSINESS AND COM MERCE. ITA 1373 & 1374/13 5 THUS, THE AO OBSERVED THAT IN VIEW OF THE AMENDED PROVISIONS OF SEC.2(15) OF THE ACT, WITH EFFECT FRO M 1.4.2009, THE ASSESSEE LOOSES THE CHARACTER OF GENERAL PUBLI C UTILITY AND NOT ENTITLED FOR EXEMPTION U/S.11 OF THE ACT. AGAINST THIS, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE TH E CIT(APPEALS). 5. ON APPEAL, THE CIT(APPEALS) OBSERVED THAT THOUGH THE ASSESSEE HAS FORM ITS OBJECTS, WHICH INC LUDES RELIEF TO THE POOR, MARGINALIZED AND EXPLOITED WOME N LIVING IN DIFFICULT CIRCUMSTANCES AND CHILDREN IN DISTRESS ES PECIALLY THE STREET CHILDREN, CHILD WORKERS AND CHILDREN IN SLUM S, THE ASSESSEE HAS UNDERTAKEN THE FOLLOWING ACTIVITIES DU RING THE YEAR: SL. NO NATURE OF ACTIVITY INCOME EXPENDITURE SURPLUS 1. LOCAL CONTRIBUTION ACCOUNT 87,61,830 1,25,01,567 -37,39,737 2. FOREIGN CONTRI- BUTION ACCOUNT 50,29,018 76,80,361 -26,51,283 3. BALWADI 53,750 5,03,617 -4,49,867 4. CANTEEN 26,76,083 27,35,991 -59,908 5. CMS NOON MEAL PROGRAMME 0 26,320 -26,320 6. CRECHE 1,77,667 1,33,398 44,269 7. WORKING WOMENS HOSTELS 35,68,975 21,37,289 41,31,686 8. WELFARE OF STREET CHILDREN 53 10,65,411 -10,65,358 9. ALL WOMEN SERVICE CENTER 53,96,757 24,40,083 29,56,674 ITA 1373 & 1374/13 6 10. FAMILY COUNSELLING 1,80,354 7,97,473 -6,17,119 TOTAL 2,58,44,488 3,00,21,451 -41,76,96 3 5.1. FURTHER THE CIT(APPEALS) OBSERVED THAT THE FIRST TWO (SL.NOS.1 & 2) ARE NOT ACTIVITIES AS SUCH . THEY ARE ONLY HEAD OFFICE ACCOUNT AND FOREIGN CONTRIBUTI ON ACCOUNTS. HENCE, THE REMAINING EIGHT (I.E. SI . NOS. 3 TO 10) ARE THE ONLY ACTIVITIES UNDERTAKEN BY THE ASSESSEE. 5.2. OUT OF THE SAID EIGHT ACTIVITIES, THE EFFECTIVE AND REAL ACTIVITIES ARE RUNNING OF W ORKING WOMENS HOSTELS AND WOMEN SERVICE CENTERS AND TO SOME EXTENT RUNNING OF CANTEEN. THE REMAINING FIVE ACTIVITIES ARE VERY NOMINAL. EVEN THE EXPENSES SHOWN IN THESE FIVE ACTIVITIES ARE ONLY ESTABLISHMENT EXPENSES LIKE SALARIES. 5.3. ACCORDINGLY, THE CIT(APPEALS) CONCLUDED THAT THE PREDOMINANT ACTIVITIES ARE RUNNING OF (I) W ORKING WOMENS HOSTELS, (II) W OMEN SERVICE CENTERS AND (III) CANTEEN . THESE ACTIVITIES, BY NO STRETCH OF ITA 1373 & 1374/13 7 IMAGINATION CAN CONSTITUTE CHARITABLE ACTIVITIES . 5.4. FURTHER, THE CIT(APPEALS) OBSERVED THAT THE RUNNING OF WORKING WOMENS HOSTELS AND W OMENS SERVICE CENTERS ARE INDEPENDENT ACTIVITIES OF THEIR OWN. THE ASSESSEE IS NOT RUNNING AN EDUCATIONAL INSTITUTION. HENCE THESE ACTIVITIES OF RUNNING OF W ORKING WOMENS HOSTELS, W OMEN SERVICE CENTERS AND CANTEEN WILL ONLY AMOUNT TO COMMERCIAL ACTIVITIES AND AIMED AT MAKING PROFITS. WHEN THE PREDOMINANT ACTIVITIES ARE THE COMMERCIAL IN NATURE, THE ASSESSEE ORGANIZATION CANNOT BE TREATED AS THE ONE ENGAGED I N CHARITABLE ACTIVITIES. HENCE THE ASSESSEE SHOULD NOT TO BE CONSIDERED AS A CHARITABLE ORGANIZATION. 5.5. ACCORDING TO THE CIT (APPEALS), THE ASSESSEE HAS BEEN CLAIMING EXEMPTION OF ITS INCOME U/S. 11 OF THE ACT FROM YEAR TO YEAR AND THE SAME WAS BEING ALLOWED BY THE REVENUE UP TO A.Y.2008-09. HOWEVER, CONSEQUENT TO THE AMENDMENT TO SECTION 2(15) OF THE ACT, W.E.F. 01.04.2009, THE ASSESSING OFFICER DISALLOWED THE ASSESSEE'S CLAIM OF EXEMPTIO N ITA 1373 & 1374/13 8 U/ S.11 OF THE ACT ON THE GROUND THAT THE ACTIVITIES O F THE ASSESSEE AMOUNTS TO TRADE, BUSINESS AND COMMERCE AND HENCE, LOOSE THE CHARACTER OF 'GENERAL PUBLIC UTILITY' AS PER THE PROVISO TO SECT ION 2(15) OF THE ACT. 5 .6. THEREFORE, THE CIT(APPEALS) CONCLUDED THAT THE ACTIVITIES CARRIED ON BY THE ASSESSEE DO N OT CONSTITUTE ADVANCEMENT OF AN OBJECT OF GENERAL PUBLIC UTILITY, AS IT INVOLVES CARRYING OF ANY ACT IVITIES WHICH ARE IN THE NATURE OF CARRYING ON OF TRADE, BUSINESS, COMMERCE. ACCORDINGLY HE OBSERVED THAT IN THIS CASE, THE PREDOMINANT ACTIVITIES ARE RUNNIN G OF WORKING WOMENS HOSTELS, WOMEN SERVICE CENTERS AND CANTEEN, WHICH ARE TOTALLY COMMERCIAL IN NATURE AND HENCE, THE ASSESSEE WAS NOT CONSIDERED AS THE ONE ENGAGED IN COMMERCIAL ACTIVITIES AND NOT CHARITABLE ACTIVITIES AND CONFIRMED THE DENIAL OF EXEMPTION UNDER SEC.11 OF THE ACT. SINCE, THE ASSESSEE HAS ALREADY CLAIMED COST OF ITS BUSINESS ASSETS AS APPLICATION OF INCOME IN THE EARLIER YEARS U/S.11 O F THE ITA 1373 & 1374/13 9 ACT, HE DIRECTED THE AO TO WITHDRAW THE DEPRECIATIO N, WHICH WAS ALLOWED ON WRITTEN DOWN VALUE OF THE FIXE D ASSETS AND TO ALLOW DEPRECIATION ONLY ON THE ASSETS ACQUIRED IN THE FINANCIAL YEAR 2008-09 AND RE- COMPUTE THE INCOME OF THE ASSESSEE. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 6 . THE LD. AR SUBMITTED THAT THE ASSESSEE SOCIETY ' S ACTIVIT I ES WOULD FALL STRICTLY ONLY UNDER THE FIRST THREE LIMBS OF SECTION 2(15) , VIZ. RELIEF OF THE POOR , EDUCATION AND MEDICAL RELIEF AND NOT UNDER THE LIMB, ' ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY' . THE ASSESSEE SOCIETY WAS NOT CARRYING ON ANY TRADE, COMMERCE OR BUSINESS . THE CIT(A) ERRED IN NOT APPRECIATING THAT THE ACTIVITIE S OF THE ASSESSEE-SOCIETY , RIGHT FROM INCEPTION , HAD BEEN ONLY THE UPLIFT OF POOR AND DESTITUTE WOMEN AND WELFARE OF P OOR AND ORPHANED CHILDREN AND ALSO TAKING CARE OF THEIR EDU CATION AND HEALTH NEEDS . THE LD. AR FURTHER SUBMITTED THAT THE CIT(A) HAS UPHELD THE ORDER OF THE AO WITHOUT CONSIDERING THE ASSURANCE GIVEN BY THE HON ' BLE FINANCE MINISTER ON THE FLOOR OF THE HOUSE THAT GENUINE TRUSTS WILL NOT BE AFFECT ED BY THE ITA 1373 & 1374/13 10 AMENDMENT TO SECTION 2(15) AND THE BOARD ' S CIRCULAR INCORPORATING THE SAID ASSURANCE. THE FACTS OF THE CASE HAVE NOT BEEN PROPERLY APPRECIATED BY THE LOWER AUTHORIT IES . THE ASSESSEE SOCIETY RENDERED YEOMEN SERVICE IN THE MAT TER OF UPLIFTING THE POOR AND ORPHANED CHILDREN, POOR WOME N AND EMPOWERING THEM BY I MPARTING EDUCATION AND TRAINING TO ACHIEVE ECONOMIC INDEPENDENCE. THE AO AND CIT(A) ME RELY P I CKED UP SOME INCIDENTAL ACTIVITIES WHICH GENERATED SOME SURPLUS . SUCH ACTIVITIES ARE CLOSELY INTERLINKED WITH MAIN OBJECTS OF RELIEF OF THE POOR AND EDUCATION AND THE RE WAS NO PROFIT MOTIVE OR INTENTION TO RUN ANY BUSINESS OR C OMMERCIAL ACTIVITIES . 6.1 I N PROOF OF THE ABOVE , THE LD. AR HAS GIVEN BELOW A LIST OF ACCOLADES RECEIVED BY THE ASSESSEE FROM T HE GOVERNMENT OVER THE YEARS IN APPRECIATION OF THE SE RVICES RENDERED BY THE SOCIETY AND SUBMITTED THAT THE ORDER OF THE CIT(APPEALS) TO BE REVERSED . 1. BEST INSTITUTION AWARD FROM GOVERNMENT OF TAMIL NADU FOR OUTSTANDING SOCIAL SERVICE TOWARDS WOMEN WELFARE DURING INDEPENDENCE DAY CELEBRATIONS IN 200 4. ITA 1373 & 1374/13 11 2. LIFE TIME ACHIEVEMENT AWARD TO THE FOUNDER, DR. KURIAN THOMAS, FOR SERVICE TOWARDS POOR AND DOWN- TRODDEN, WOMEN AND AGED PEOPLE FROM GOVERNMENT OF TAMILNADU, SOCIAL WELFARE AND NUTRITIOUS MEAL PROGRAMME DEPARTMENT. 3. BHARAT JOTHI AWARD FROM INDIA INTERNATIONAL FRI ENDSHIP SOCIETY IN 2008 TO DR. KURIAN THOMAS, DIRECTOR, ASH A NIVAS SOCIAL SERVICE SOCIETY FOR HIS OUTSTANDING PERFORMANCE IN THE FIELD OF SOCIAL SERVICE. 7. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDER OF THE CIT(APPEALS). 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. SEC. 11 OF THE ACT STIPULATES THAT THE INCOME FROM PROPERTY HELD FOR C HARITABLE OR RELIGIOUS PURPOSE SHALL NOT BE INCLUDED IN THE TOTA L INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE I NCOME TO BE GIVEN EFFECT IN THE MANNER AS SPECIFIED THEREIN. TH E TERM 'CHARITABLE PURPOSE' HAS NOT BEEN DEFINED UNDER THE STATUTE; BUT FOR THE INCLUSIVE NATURE OF THE TERM AS SPECIFI ED UNDER S. 2 ITA 1373 & 1374/13 12 (15) OF THE ACT, WHICH AS EXISTED BEFORE THE AMENDM ENT IS AS FOLLOWS : 'SEC. 2(15) : 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY.' AS PER S. 2 OF THE FINANCE ACT, 2008, THE SAID PROV ISION WAS AMENDED ADDING A 'PROVISO' W.E.F. 1ST APRIL, 2009 A S FOLLOWS : '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 ACTI VITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO AN Y TRADE, COMMERCE OR BUSINESS FOR A CESS OR FEE OR AN Y OTHER CONSIDERATION IRRESPECTIVE OF THE NATURE OF U SE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY.' THE DEPARTMENT HAS TAKEN A STAND THAT BY VIRTUE OF THE AMENDMENT AS ABOVE, THE ASSESSEE IS NOT ENTITLED TO EXEMPTION U/S.11 OF THE ACT. 8.1. THE LD. AR SUBMITTED THAT, THE IDEA AND UNDERSTANDING OF THE DEPARTMENT WITH REGARD TO THE SCOPE OF AMENDMENT TO SEC.2(15) IS THOROUGHLY WRONG AND MISCONCEIVED. THERE IS NO TRADE OR BUSINESS IN THE ACTIVITIES PURSUED BY THE ASSESSEE IN RUNNING OF WORKING WOMEN S HOSTELS, WOMENS SERVICE CENTRES AND CANTEEN WILL NO T TAKE IT ITA 1373 & 1374/13 13 OUTSIDE THE PURVIEW OF CHARITY AND HENCE, THAT THE PROVISO ADDED TO SEC.2(15) OF THE ACT, IS NOT AT ATTRACTED TO THE CASE IN HAND. HE ALSO SUBMITTED THAT THE STATUTE, AS IT ST OOD EARLIER, HAD CLARIFIED THE CHARITABLE PURPOSE MENTIONED IN S EC.2(15) OF THE ACT, HAD CLARIFIED THE CHARITABLE PURPOSE MENTI ONED IN S. 2(15) BY THE WORDS 'NOT INVOLVING THE CARRYING ON O F ANY ACTIVITY FOR PROFIT'. BY VIRTUE OF THE EXISTENCE O F THESE CLARIFYING WORDS, IF THERE WAS ANY ELEMENT OF PROFIT IT WAS EN OUGH LIABLE TO BE RECKONED AS CHARITABLE PURPOSE RIGHT FROM THE INCEPTION OF THE ACT IN 1961 TILL 1 ST APRIL, 1984, WHEN THE WORDS 'NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFI T' WERE DELETED. THUS THE CONTENTION IS THAT AFTER 1 ST APRIL, 1984, THERE IS NO ALLERGY TO PROFIT AND IF THE PROFIT FEEDS CHA RITY, IT STANDS CLEARED FOR EXEMPTION UNDER S. 11 OF THE ACT. 8.2. TO ANALYSE THE SCOPE AND OBJECT OF THE AMENDMENT, THE LEARNED COUNSEL PLACED RELIANCE ON T HE 'BUDGET SPEECH' OF THE MINISTER FOR FINANCE, WHICH STATED AS FOLLOWS (298 ITR (ST.) 33, 65 : 'CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THESE ACTIVITIES ARE TAX EX EMPT, ITA 1373 & 1374/13 14 AS THEY SHOULD BE. HOWEVER, SOME ENTITIES CARRYING ON REGULAR TRADE, COMMERCE OR BUSINESS OR PROVIDING SERVICES IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS AND EARNING INCOMES HAVE SOUGHT TO CLAIM THAT THEIR PURPOSES WOULD ALSO FALL UNDER 'CHARITAB LE PURPOSE'. OBVIOUSLY, THIS WAS NOT THE INTENTION OF PARLIAMENT AND HENCE I PROPOSE TO AMEND THE LAW TO EXCLUDE THE AFORESAID CASES. GENUINE CHARITABLE ORGANIZATIONS WILL NOT IN ANY WAY BE AFFECTED' (PAR A 180). 8.3 THE LEARNED COUNSEL POINTS OUT THAT, THE AMENDMENT WAS BROUGHT ABOUT AS A MEASURE OF RATIONALIZATION AND SIMPLIFICATION, STREAMLINING TH E DEFINITION OF CHARITABLE PURPOSE AND NOT AS A MEASURE OF TAXATION . IT IS ALSO STATED THAT THE CONCEPT OF CHARITY IN INDIA IS WIDE R, SIMULTANEOUSLY ADDING THAT, BY VIRTUE OF THE AMENDM ENT, THE POSITION THAT EXISTED PRIOR TO 1ST FEB., 1984 HAS B EEN BROUGHT BACK AND THAT IS ALL. THIS HOWEVER WILL NOT TILT T HE BALANCE IN ANY MANNER IN THE CASE OF THE ASSESSEE SO AS TO TAK E THE ACTIVITIES OUTSIDE THE CHARITABLE PURPOSE, PARTICUL ARLY IN VIEW OF THE FACT THAT IN RUNNING OF WORKING WOMEN HOSTELS, WOMEN SERVICE CENTRES AND CANTEEN WILL NOT CONSTITUTE ANY TRADE OR BUSINESS. ACCORDING TO THE LD. AR, TO PERFORM CHAR ITY, INCOME IS INEVITABLE AND CONTENDED THAT THE ACTIVITIES BEI NG PURSUED BY THE ASSESSEE MAY CONSTITUTE A TRADE OR BUSINESS, IF IT IS NOT ITA 1373 & 1374/13 15 APPLIED FOR THE PURPOSES OF CHARITY. CONTRARY TO T HIS, THE LD. DR SUBMITTED THAT THOUGH THE OBJECT OF THE ASSESSEE IS TO CARRY ON CHARITABLE ACTIVITIES, BUT IT DOES NOT CAR RY THOSE CHARITABLE ACTIVITIES, AND IT WAS ONLY CARRYING ON RUNNING OF WORKING WOMEN HOSTELS, WOMEN SERVICE CENTRES AND CA NTEEN IN A COMMERCIAL MANNER, WHICH CANNOT BE CONSTRUED A S CHARITABLE ACTIVITY. IN OTHER WORDS, IT WAS CONTEN DED BY THE LD. DR THAT THE ASSESSEE CARRIED ON ACTIVITIES IN A BUS INESS ORIENTED MANNER, IT WILL DEFINITELY COME WITHIN THE FOURTH LIMB OF THE AMENDED SEC.2(15) OF THE ACT, WHERE THE PROH IBITION OF ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINE SS FOR ANY ACTIVITY OF RENDERING SERVICE OR ANY OTHER CONSIDER ATION, IRRESPECTIVE OF THE NATURE OF THE USE OR APPLICATIO N OR RETENTION OF THE INCOME OF SUCH ACTIVITY IS SPECIFIED AND HEN CE, NOT ENTITLED TO ANY EXEMPTION. 8.4. TO ANALYSE THE ACTIVITIES CARRIED ON BY THE ASSESSEE, WE HAVE TO GO THROUGH THE NATURE OF ACTIV ITIES PURSUED BY THE ASSESSEE AS ENUMERATED IN EARLIER PA RA 3 AND ITA 1373 & 1374/13 16 PERUSAL OF THAT ACTIVITIES CARRIED ON BY THE ASSESS EE, CANNOT BE OUST THE INVOLVEMENT OF TRADE, COMMERCE OR BUSI NESS OR ANY SERVICE IN CONNECTION WITH TRADE, COMMERCE OR BUSINESS AS CONTEMPLATED UNDER THE STATUTE. FURTHER, WE NOT E THAT THERE IS SUBSTANTIAL VARIATION IN THE STATUTORY POS ITION AS IT EXISTED EARLIER TO 1 ST APRIL, 2009, WHERE THE ASSESSEE HAS BEEN GIVEN EXEMPTION U/S.11 OF THE ACT. AND THE POS ITION AVAILABLE AFTER AMENDMENT TO SEC.2(15) BROUGHT INTO EFFECT FROM 1 ST APRIL, 2009. YET ANOTHER IMPORTANT ASPECT TO BE NOTED IN THIS CONTEXT IS THAT, AFTER THE AMENDMENT BY INCORPORATING PROVISO TO S. 2(15), THE 4TH LIMB AS TO THE ADVANCEMENT OF 'ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY' WILL NO LONGER REMAIN AS CHARITABLE PURPOSE, IF IT INVOL VES CARRYING ON OF : (A) ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE O R BUSINESS, (B) ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATI ON TO ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR A FEE OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY. 8.5. THE FIRST LIMB OF EXCLUSION FROM CHARITABLE PURPOSE UNDER CL. (A) WILL BE ATTRACTED, IF THE ACT IVITY PURSUED BY THE INSTITUTION INVOLVES ANY TRADE, COMMERCE OR BUSINESS. ITA 1373 & 1374/13 17 BUT THE SITUATION CONTEMPLATED UNDER THE SECOND LIM B [CL. (B)] STANDS ENTIRELY ON A DIFFERENT PEDESTAL, WITH REGAR D TO THE SERVICE IN RELATION TO THE TRADE, COMMERCE OR BUSIN ESS MENTIONED THEREIN. TO PUT IT MORE CLEAR, WHEN THE M ATTER COMES TO THE SERVICE IN RELATION TO THE TRADE, COMM ERCE OR BUSINESS, IT HAS TO BE EXAMINED WHETHER THE WORDS ' ANY TRADE, COMMERCE OR BUSINESS' AS THEY APPEAR IN THE SECOND LIMB OF CL. (B) ARE IN CONNECTION WITH THE SERVICE REFERRED TO THE TRADE, COMMERCE OR BUSINESS PURSUED BY THE INSTITUT IONS TO WHICH THE SERVICE IS GIVEN BY THE ASSESSEE. IF THE SAID WORDS ARE ACTUALLY IN RESPECT OF THE TRADE, COMMERCE OR B USINESS OF THE ASSESSEE ITSELF, THE SAID CLAUSE [SECOND LIMB O F THE STIPULATION UNDER CL. (B)] IS RATHER OTIOSE. SINCE THE ACTIVITY OF THE ASSESSEE INVOLVING ANY TRADE, COMMERCE OR BUSIN ESS, IS ALREADY EXCLUDED FROM THE CHARITABLE PURPOSE BY VIR TUE OF THE FIRST LIMB [CL. (A)] ITSELF, THERE IS NO NECESSITY TO STIPULATE FURTHER, BY WAY OF CL. (B), ADDING THE WORDS 'OR AN Y ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COM MERCE OR BUSINESS ..................'. AS IT STANDS SO, GIVI NG A PURPOSIVE INTERPRETATION TO THE STATUTE, IT MAY HAVE TO BE RE AD AND ITA 1373 & 1374/13 18 UNDERSTOOD THAT THE SECOND LIMB OF EXCLUSION UNDER CL. (B) IN RELATION TO THE SERVICE RENDERED BY THE ASSESSEE, T HE TERMS 'ANY TRADE, COMMERCE OR BUSINESS' REFERS TO THE TRA DE, COMMERCE OR BUSINESS PURSUED BY THE RECIPIENT TO WH OM THE SERVICE IS RENDERED (AS THERE MAY BE A SITUATION IN VOLVING IN RUNNING OF WORKING WOMENS HOSTEL, WOMENS SERVICE CE NTER AND CANTEEN. 8.6. FURTHER, IN SIMILAR CIRCUMSTANCES, THE CO-ORD INATE BENCH OF THE TRIBUNAL IN THE CASE OF YOUNG WOMENS CHRISTIAN ASSOCIATION OF MADRAS V. JDIT IN ITA NO.823/MDS/2013 DATED OCTOBER 30, 2013 (62 SOT 65) HAS HELD AS UNDER : GE N E R ALLY S PE A KIN G, THE ACTIVITIES CARRIED ON BY THE ASSESSEE SUCH AS R UNNING ORPHANA GES , OLD AGE H O ME S , R E HABILIT A TION CENTRES , DA Y CARE CENTRES FOR ELDERLY , VOCATIONAL TRAINING TO GIRL S FR O M S LUM S , ETC. C A N NOT B E C O N S ID E RED AS ACT I VITIES OF MEDICAL RELIEF OR EDUCATION OR RELIEF OF THE P O OR . IT IS T R U E TH AT THE AC TIVITIE S CARRIED ON BY THE ASSESSEE TAKE CARE OF THE POOR PEOPLE ALSO. BUT THO SE AC TI V IT I E S ITA 1373 & 1374/13 19 C A N N OT B E CLASSIFIED UNDER A N Y OF THE SP E CIFIC ACTIVITIES OF R ELIEF OF THE POOR ; EDUCATI O N O R M E DICA L R ELIEF . T H E CORREC T WAY TO EX PR ESS THE NA TUR E OF THE ACTIVITIES CARRIED ON BY THE AS SE S S E E I S T O SAY TH A T T H E ASSES S EE I S CA RR Y IN G ON 'AD V ANCEMENT O F AN Y OTHE R OBJECT OF G ENERAL PUBLIC UTILIT Y '. WH E N TH AT I S T HE C A SE, TH E A SSE S S EE IS HIT B Y THE PR O VISO GIVEN UNDER SECT I ON 2(15). T H E PRO VI S O R E A D S THAT 'ADVANCEMEN T OF ANY OTHER OBJECT OF G ENERAL PUBLIC UTILIT Y ' SH A LL NOT B E A C H AR IT A B L E PURP OSE , IF IT IN V OLV ES C AR R Y ING ON ANY ACTIVITY IN THE NATURE OF TRAD E , COMM E R CE OR B U SI N ESS, O R A N Y A C T I VIT Y O F RENDERIN G ANY S ERVICE IN R E LATION TO ANY TRADE , COMMERCE OR BU S INE SS FO R CO N S I DERA TIO N , IR R E SP E CTIVE O F TH E A P PLI CA TION OF THE MONE Y. T HEREFORE , THE C A SE OF THE ASSESSEE IS HIT BY PROVISO TO SECTION 2(15) AND THE ASSES SE E IS N O T E NTIT L ED FO R TH E B E NEFIT OF SECTION 11 FOR THAT PART OF INCOME GENERAT ED IN THE HANDS OF THE A S SES S E E FRO M R UN N ING IT S IN T E RNATIONAL ITA 1373 & 1374/13 20 GUEST HOUSE AND WO R KING WOMEN'S HOSTEL. A L TERNA T I V E LY , O N E HAS TO L O OK INT O SECTION 11 (4 A ) . SUB- SECTION (4A) PROVIDE S TH A T EXE MPT ION SHA LL N O T AP PL Y IN RELATION TO AN Y INCOME OF A TRUST OR AN INSTITUTION , BEING PROFITS AND G AIN S OF BUSI N ESS, U NL ESS TH E BUSINESS IS INC I DENTAL TO THE A T TAINMENT OF THE OBJECTIVES OF THE A SS E SSE E AND SE PARA T E BOOKS OF ACCOUNT ARE MAINTAINED BY SUCH TRU S T OR INSTITUTION IN RESPECT OF SUCH BUSINESS. I N T HE PR ESE NT CA S E , THERE I S NO DISPUTE ON THE FACT T H AT THE ASSE S SEE IS CARRYING ON TH E BU SI N E S S O F R U NNIN G A N INT E RNA T IONAL GUEST HOUSE (IGH) AND WORKING WOMEN'S HO STE L ( W W H ). TH E ASSE SS EE I S M A INT A INING SEPARATE A C COUNT S FOR THE ABO V E BU S INES S ACTIVITIE S. BUT , TH E C RU C I A L Q U ES TI O N I S WHETHER RUNNING OF IGH AND WWH IS A BUSINESS INCIDENTAL TO THE ATTAINM E NT O F TH E OBJ ECTIVE S O F TH E TRU S T OR NOT . BY AN Y ST R E T C H OF IMAGINATION , I T IS NOT POSSIBLE TO HOLD T HAT THE BUSINESS OF RUNNIN G I GH A ND WW H A RE INCID E NTAL TO TH E AB OV E S TATED OBJECTIVES OF THE ITA 1373 & 1374/13 21 ASSESSEE-TRU S T . 'INCIDENT A L' M EA N S OFFS H O O T OF TH E M A IN ACTI V I T I ES; INHE RE NT B Y -PRODUCT OF PRINCIPAL ACTIVITIES . ACTIVITIES TO COMPLIMENT AND SUPPORT THE MAIN OBJEC TIVES ARE NOT IN THE NATURE OF INCIDENTAL TO THE BUSINESS . THEY ARE SUPPORTING ACTIVITIES, AT THE MA X IMUM . THE GENESIS OF INCID E N TA L ACT I VITIES MU S T BE FROM THE PRIN C IPAL ACTIVITIES THEMSELVES . THERE CANNOT BE ONE SOURCE FOR TH E PR I NCIPAL ACTIVITIES AND ANOTHER SOURCE FOR INCIDENTAL ACTIVITIES. IN THE PRESENT CASE, EVEN IF ACTIVITIES OF THE ASSE SSEE WERE STATED TO BE RELI E F O F P OO R , MEDICAL RELIEF AND EDUCATION , IT WAS NOT POSSIBLE TO CONCLUDE THAT RUNNING OF BUSINESS IN THE FORM OF I GH AND WWH WERE BUSINESS INCIDENTAL TO THE CARRYING ON OF MAIN OBJECTIVE O F THE A SSESS E E - TR U ST . T HER E FORE, THE ASSESSEE IS NOT PROT E CTED BY THE PROVISION STATED IN SECTION 11 (4A ), E IT H E R. 8.7. THUS, AS OBSERVED EARLIER, RUNNING OF WORKING WOMENS HOSTEL, WOMENS SERVICE CENTER AND CANTEEN IS A COMMERCIAL LINE WHICH CANNOT BE CONSIDERED AS CHARI TABLE ITA 1373 & 1374/13 22 ACTIVITY, SO AS TO GRANT EXEMPTION U/S.11 OF THE AC T. ACCORDINGLY, WE ARE IN AGREEMENT WITH THE LOWER AUT HORITIES AND WE DENY THE EXEMPTION UNDER SEC.11 OF THE ACT. 8.8. NOW, COMING TO THE DENIAL OF DEPRECIATION ON THE ASSETS PURCHASED BEFORE THE FINANCIAL YEAR 2008-09, WE ARE OF THE OPINION THAT THE INCOME OF THE ASSESSEE HAS TO BE COMPUTED IN ACCORDANCE WITH STRICT PRINCIPLES OF AC COUNTING AFTER DENYING EXEMPTION U/S.11 OF THE ACT. IF WRIT TEN DOWN VALUE OF ASSETS IS ALREADY ZERO, FOR ALLOWING DEPRE CIATION, THE SAME CANNOT BE CONSIDERED IN THE ASSESSMENT YEAR UN DER CONSIDERATION. ACCORDINGLY, THE APPEAL OF THE ASSE SSEE FOR THE ASSESSMENT YEAR 2009-10 IS DISMISSED. 9. NOW, WE TAKE UP THE APPEAL IN ITA NO.1373/MDS/2013: IN THE ASSESSMENT YEAR 2006-07, THE ASSESSEE FILED ITS RETURN OF INCOME ON 30.10.20 06 CLAIMING THE INCOME OF ` 1,56,35,700/- AS EXEMPT UNDER SEC.11 OF THE ACT. THERE IS A SHORT FALL IN APPLICATION OF INCOME OF ` 2,02,45,684/-. IN THE MEMO OF INCOME FILED ALONG WITH THE RETURN OF INCOME, THE ASSESSEE STATED THAT IT EXERCISED AN ITA 1373 & 1374/13 23 OPTION U/S.11(2) OF THE ACT. THE ASSESSEE DID NOT FILE FORM 10 ALONG WITH RETURN OF INCOME AND NOT ENCLOSE D A COPY OF THE RESOLUTION PASSED BY THEM. THE ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT THE ASSESSMENT WAS TAKEN FOR SCRUTINY U/S.143(2) OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED REVISED RETURN ON 29.9.2008 ADMITTING GROSS RECEIPTS OF ` 10,39,40,926 /- T HE ASSESSEE FILED FORM 10 DATED 19.9.2008 ALONG WITH THE REVISED RETURN ACCUMULATING AN INCOME OF ` 3,35,36,029/-. IN FORM 10 THE ASSESSEE MENTIONED THE PURPOSE/PURPOSES OF ACCUMULATION OF INCOME AS FOLLOWS, AND CLAIMED EXEMPTION U/S.11(2) OF THE IT ACT.: TO CARRY ON THE PROGRAMS IN THE INTEGRATED DEVELOPMENT PROGRAMME FOR STREET CHILDREN BY CONTACTING AND COUNSELLING CONSTRUCTION OF SHELTER HOMES, VOCATIONAL TRAINING AND RUNNING OF NON-FORMAL EDUCATION CENTRES FOR IMPARTING INFORMAL EDUCATION, PROGRAMMES FOR DISADVANTAGED CHILDREN IN PRE-SCHOOL, PROGRAMMES FOR WOMEN WELFARE THROUGH SELF HELP GROUPS, PROGRAMMES FOR DOMESTIC WORKERS TRAINING, CONSTRUCTION AND RUNNING OF WORKING WOMENS HOSTEL, YOUTH DEVELOPMENT ITA 1373 & 1374/13 24 PROGRAMMES, ETC. IN THE REVISED RETURN THE ASSESSEE TRUST HAS INCLUD ED THE INCOME OF ` 1,56,35,700/- WHICH WAS CLAIMED AS EXEMPT U/S 10(34) IN THE ORIGINAL RETURN. AFTER TA KING THIS INCOME INTO CONSIDERATION, THE TRUST WORKED OU T THE SHORTFALL IN APPLICATION TO ` 3,35,36,029/- FROM ` 2,02,45,684/- IN THE ORIGINAL RETURN FILED, WITHDRA WING THE EXEMPTION CLAIMED U/S.10(34). 10. THE ASSESSEE TRUST FILED A PETITION FOR CONDONA TION OF DELAY IN FILING FORM 10 BEFORE DIT(E), CHENNAI ON 26.09.2008 FOR ACCUMULATION OF INCOME AND FILED A COPY OF FORM 10 FOR ` 3,35,36,029/- ALONG WITH REVISED MEMO OF INCOME, CO PY OF ACCOUNTS FOR THE YEAR ENDED 31/03/2006 AND COPY OF RESOLUTION DATED 19.9.2008. A REPORT ON ASSESSEES CONDONATION PETITION WAS SUBMITTED TO THE DIT(E). THE CONDONATION WAS NOT RECEIVED TILL 31.12.2008. HENC E, THE ASSESSMENT UNDER SEC.143(3) WAS COMPLETED ON 31.12. 2008 REJECTING THE FORM 10 FILED BY THE ASSESSEE. THE C IT(A) VIDE ITA NO.103/08-09 DATED 31.12.2009 DISMISSED THE APP EAL BY ITA 1373 & 1374/13 25 THE ASSESSEE. THE ASSESSEE THEN WENT TO ITAT AGAIN ST THE ORDER OF THE CIT(A) WHICH RESTORED THE ENTIRE ISSUE TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE CASE AFRESH VIDE ITA NO.253/MDS/10 DATED 24.03.2010. 11. IN THE MEANWHILE, THE DIT(E) HAS CONDONED THE DELAY IN ASSESSEES FILING OF FORM NO. 10, VIDE DI T(E) NOS.26(10)/08-09 DATED 11.11.2009. 12. WHILE PASSING ORDER GIVING EFFECT TO THE ORDER OF THE TRIBUNAL, THE AO OBSERVED THAT THERE IS VIOLATI ON OF PROVISIONS OF SEC.11(2) OF THE ACT AND NOT GRANTED EXEMPTION OF ITS INCOME. HE BROUGHT SHORTFALL OF ` 3,35,36,030/- BEING THE UNSPENT INCOME OF THE SOCIETY WHILE APPLYING 85% OF INCOME, TO TAX, IS AS PER LAW. HOWEVER, ON APPEAL, THE CIT (APPEALS), ON THIS ISSUE AS IN ASSESSMENT YEAR 2009-10, OBSERV ED THAT THE ASSESSEE IS NOT A CHARITABLE SOCIETY TO GRANT E XEMPTION, AS THE PREDOMINANT ACTIVITIES OF THE ASSESSEE IS CO MMERCIAL IN NATURE, THE ASSESSEE CANNOT BE CONSTRUED AS ENGAGED IN CHARITABLE ACTIVITIES. ACCORDINGLY, THE CIT(A) DIR ECTED THE AO TO WITHDRAW THE EXEMPTION GRANTED TO THE ASSESSEE U /S.11 OF THE ACT AND ENHANCE THE ASSESSMENT. FURTHER, HE DI RECTED ITA 1373 & 1374/13 26 THE AO NOT TO GRANT DEPRECIATION ON THE WRITTEN DOW N VALUE OF THE ASSETS CARRIED FORWARD IN EARLIER YEARS, AS THE ASSESSEE HAS ALREADY CLAIMED THE COST OF FIXED ASSETS AS APP LICATION OF INCOME WHILE CLAIMING THE EXEMPTING U/S.11 OF THE A CT. THE AO IS DIRECTED TO ALLOW THE DEPRECIATION ONLY ON TH E ASSETS PURCHASED DURING THE FINANCIAL YEAR 2005-06 AS PER THE RATES APPLICABLE. AGAINST THIS, THE ASSESSEE IS IN APPEA L BEFORE US. 13. THE LD. AR SUBMITTED THAT T HE ASSESSEE-SOCIETY WAS FRAMED ON 13.07.1976 AND IS DULY REGISTERED WIT H THE DISTRICT REGISTRAR , CHENNAI . THE SOCIETY WAS FRAMED WITH THE FOLLOWING OBJECTIVES : I) TO ASSIST PEOPLE , TO INITIATE , ORGANIZE , ESTABLISH AND EXECUTE DEVELOPMENTAL PROGRAMMES AIMED AT THE RELIEF , AND DEVELOPMENT OF THE POOR OF ALL CASTES AND CREEDS AN D TO CREATE AN AWARENESS IN THEM TO IMPROVE THE I R SOCIO-ECONOMIC STATUS . I I) TO CO-OPERATE AND CO-ORDINATE WITH THE VAR I OUS DEPARTMENTS OF STATE AND CENTRAL GOVERNMENT , NON- GOVERNMENTAL AGENCIES , LOCAL BODIES AT VARIOUS LEVELS TO ENABLE THE SOCIETY , TO CARRY OUT DEVELOPMENTAL PROGRAMMES ON THE BASIS OF SELF-HELP AND MUTUAL HELP . III ) TO ORGANIZE AND ENCOURAGE EDUCATIONAL ENVIRONMENTAL HYGIENE AND HEALTH PROGRAMMES , FAR THE WEAKER SECTIONS OF THE SOCIETY WITH SPECIAL REFERENCE TO WOMEN AND CHILDREN IN ITA 1373 & 1374/13 27 THE CITY SLUMS . IV) TO ASSIST AND ORGANIZE LOCAL GROUPS OF ALL COMM UNITIES , ESPECIALLY WOMEN IN DIFFICULT CIRCUMSTANCES AND CHI LDREN IN DISTRESS IRRESPECTIVE OF CASTE OR CREED TO DEVELOP CO- OPERATION AND COLLABORATION IN ORDER TO SOLVE THEIR SOCIAL AND ECONOMIC PROBLEMS . V ) TO PROVIDE VOCATIONAL TRAINING IN TAILOR I NG , EMBRO I DERY , HANDICRAFTS ACQUIRE SELF - RELIANCE AND OPPORTUNITIES FOR GAINFUL SELF-EMPLOYMENT AND REHABILITATION FOR THE SOCIALLY , I NTELLECTUALLY AND PHYSICALLY HANDICAPPED PERSONS . VI) TO ENCOURAGE COMMUNITY HEALTH PRACTICES AND TO IMPART HEALTH CARE AND SOC I A L AWARENESS EDUCATION TO THE WEAKER SECTIONS AND MARGINALIZED SECTIONS OF THE PEOPLE ES PECIALLY THE WOMEN AND CHILDREN FROM CHENNAI CITY SLUMS IN T HE FIELD OF HIV / AIDS , DRUG ABUSE , ALCOHOL . VII) TO ORGANIZE WOMEN INTO MADHAR SANGAMS , SELF-HELP GROUPS AND DOMESTIC WORKERS BOTH IN THE ORGANIZED A ND UNORGANIZED SECTORS , RESIDENTIAL AND NON-RESIDENTIAL AND CREATE PUBLIC OPINION AND CONDUCT SOCIAL AWARENESS PROGRAMMES . V I II ) TO I MPART EDUCATION BOTH FORMAL AND NON-FORMAL FOR THE CHILDREN AND WOMEN OF THE WEAKER SECTIONS OF THE CO MMUNITY ORGANIZING SPONSORSHIP AND SCHOLARSHIP PROGRAMMES A ND OTHER RELEVANT MEANS AND METHODS WHEREVER IT IS NEC ESSARY. IX) TO ORGANIZE SAVINGS SCHEMES AND CREDIT SOCIETIE S PROCURE INSURANCE POLICIES AND PROMOTE CO-OPERATIVE EFFORTS TO ENHANCE THEIR PURCHASING POWER AND TO IMPROVE THEIR SOCIO- ECONOMIC STATUS OF THE COMMUNITIES. ITA 1373 & 1374/13 28 13.1 THE LD. AR SUBMITTED THAT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 30 . 10 . 2006 ADMITTING INCOME OF ` NIL AFTER CLAIMING EXEMPTION U/S 11 OF THE ACT . THE ASSESSING OFFICER OBSE R VED THAT THE ASSESSEE HAD FAILED TO APPLY THE REQUISIT E 85% OF THE INCOME FOR TAXABLE PURPOSES U/S. 11 (1) OF THE ACT AND FORM NO . 10 FOR THE ACCUMULATION OF UNSPENT INCOME FOR FUTUR E YEARS , WAS NOT FILED ALONG WITH THE RETURN . THE ASSESSEE FILED FORM NO . 10 SUBSEQUENTLY ALONG WITH AN APPLICATION TO THE DIRECTOR OF INCOME TAX (EXEMPTIONS) CONDONING THE D ELAY IN FILING FORM NO . 1 O . THE ASSESSING OFFICER HELD THAT NO ORDER OF CONDONATION BY THE DIT WAS RECEIVED AND COMPLETED T HE ASSESSMENT HOLDING THAT THE ASSESSEE WAS NOT ENTITL ED FOR EXEMPTION U/S 11 OF THE ACT . THE ASSESSEE FILED AN APPEAL AGAINST THE ORDER OF THE ASSESSING OFFICER BEFORE T HE CIT(A), WHO DISMISSED THE APPEAL BY ORDER DATED 31 . 12 . 2009 . ON FURTHER APPEAL BEFORE THE TRIBUNAL , VIDE ITS ORDER DATED 24 . 03 . 2010 IN ITA NO . 253/MDS/10 , RESTORED THE ENTIRE ISSUE TO ASSESSING OFFICER FOR FRESH ADJUDICATION . IN THE MEANWHILE THE DIT (E) HAD PASSED ORDER DATED 11 . 11 . 2009 CONDONING ITA 1373 & 1374/13 29 THE DELAY IN THE APPELLANT ' S FILING OF FORM NO.1 O . 13.2 THE ASSESSING OFFICER IN THE COURSE OF THE FR ESH ASSESSMENT HELD THAT THE PURPOSES FOR ACCUMULATION MENTIONED BY THE ASSESSEE IN FORM NO . 10 WAS ONLY A REPETITION OF THE OB J ECTS OF THE TRUST AND WERE NOT SPECIFIC. THE ASSESSEE FILED FORM NO . 10 DATED 19 . 08.2008 ALONG WITH A R EVISED RETURN ON 29 . 09 . 2008 SHOWING ACCUMULATION TO THE EXTENT OF ` 3,35 , 36 , 029/ - , STATING THE PURPOSE OF ACCUMULATION AS UNDER : ' TO CARRY ON THE PROGRAMME I N THE INTEGRATED DEVELOPMENT PROGRAMME FOR STREET CHILDREN BY CONTAC TING AND COUNSELLING , CONSTRUCTION OF SHELTER HOMES , VOCATIONAL TRAINING AND RUNNING OF N ON-FORMAL EDUCATION CENTRES FOR IMPARTING INFORMAL EDUCATION , PROGRAMMES FOR DIS-ADVANTAGED CHILDREN IN FREE-SCHOOL, PROGRAMME F OR WOMEN WELFARE THROUGH HELP-HELP GROUPS , PROGRAMMES FOR DOMESTIC WORKERS TRAINING , CONSTRUCTION AND RUNNING OF WORKING WOMEN HOSTEL , YOUTH DEVELOPMENT PROGRAMMES ETC ' 13.3 THE ASSESSING OFFICER HELD THAT THE PURPOSES SPECIFIED IN FORM NO . 10 WERE NOT SPECIFIC AND THEREFORE THE ASSESSEE WAS NOT ENTITLED TO THE BENEFIT OF ACCUMUL ATION OF INCOME AND EXEMPTION U/S. 11 . THE ASSESSING OFFICER RELIED ITA 1373 & 1374/13 30 ON THE DECISION OF THE CALCUTTA HIGH COURT IN THE C ASE OF DIT(EXEMPTIONS) VS. TRUSTEES OF SINGHANIA CHARITABL E TRUST (199 ITR 819) AND AND THAT OF THE MADRAS HIGH COURT THE CASE OF CIT V. MCT MUTHIAH CHETTIAR FAMILY TRUST (2 45 ITR 400) TO SUPPORT THE STAND. THE ASSESSEE RELIED ON THE DECISIONS OF THE DELHI HIGH COURT IN THE CASES OF DIT(EXEMPTIONS) V. MAMTA HEALTH INSTITUTE FOR MOTHE R & CHILDREN (293 ITR 380)(DELHI) AND CIT V. HOTEL & RE STAURANT ASSOCIATION (261 ITR 190)(DELHI) . 13.4 ON APPEAL , THE CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER AND CONFIRMED THE DENIAL OF EXEMP TION FOR THE ' EXCESS ' AC CUMULATION. IT IS SUBMITTED THAT THE CIT(A) HAS NOT APPRECIATED THAT THE ASSESSEE HAD NOT REPRODUC ED ALL THE OBJECTS IN A MECHANICAL FASHION . THE PURPOSE MENTIONED IN FORM NO . 10 CLEARLY REFERRED TO THE CONSTRUCTION OF CENTRE HOMES , NON-FORMAL EDUCATION CENTRES AND WORKING WOMEN ' S HOSTELS ETC ., WHICH IS AN ON-GOING PROCESS . THE CONSTRUCTION OF THE BUILDINGS TO ACHIEVE THE CHARITABLE OBJECTS INVOLVED CAPITAL EXPEND I TURE AND OTHER INC I DENTAL EXPENDITURE NECESSARY FOR THE CREATION OF NEW ASSETS . THE ANNUAL REPORTS ITA 1373 & 1374/13 31 OF THE ASSESSEE SOCIETY WILL BEAR OUT THESE FACTS . THE DECISIONS RELIED ON BY THE CIT(A) ARE NOT APPL I CABLE TO THE FACTS OF THE ASSESSEE ' S CASE. IN THOSE CASES , THE ASSESSEE HAD SIMPLY PRODUCED ALL THE OBJECT CLAUSES. IN CIT V. MCT MUTHIAH CHETTIAR FAMILY TRUST CITED SUPRA, THE MADR AS HIGH COURT OBSERVED THAT THE ASSESSEE HAD VERBATIM REPEA TED ALL THE OBJECTS OF THE TRUST AS UNDER : ' (I) TO ESTABLISH AND MAINTAIN AND MANAGE HOSPITALS , CLINICS , LABORATORIES AND MEDICAL RESEARCH CENTRES AND TO PR OVIDE THE POOR WITH MEDICAL RELIEF , SURGICAL ADVICE AND AID ; ( I I) TO ACQUIRE OR TAKE OVER ANY HOSPITALS , CLINICS, LABORATORIES OR RESEARCH CENTRES AND TO MAINTAIN AND MANAGE THEM ; ( III) TO ESTABLISH , MAINTAIN AND MANAGE EDUCATIONAL INSTITUTIONS OR LIBRARIES FOR IMPARTING TECHNICAL KNOWLEDGE OR S CIENTIFIC KNOWLEDGE , OR KNOWLEDGE IN ANY SUBJECT OR LANGUAGE ; (I V ) T O AWARD SCHOLARSHIPS OR STIPENDS TO STUDENTS TO ENA BLE THEM TO PROSECUTE THEIR STUDIES IN INDIA OR IN FORE IGN COUNTRIES AND TO AWARD PRIZES TO STUDENTS FOR PROFICIENCY IN ANY SUBJECT OR LANGUAGE; ( V) TO RENDER SUBSTANTIAL FINANCIAL AID TO ANY EXIST ING HOSPITAL OR EDUCATIONAL INSTITUTIONS ; ( V I) TO GIVE SUBSTANTIAL DONATIONS TO ANY RELIEF FUND BY WAY OF CHARITY . ' THE HON ' BLE COURT HELD THAT MERE REPETITION OF ALL THE OBJE CT CLAUSES WOULD NOT BE SUFFICIENT COMPLIANCE . ITA 1373 & 1374/13 32 13.5 ACCORDING TO THE LD. AR, IN THE ASSESSEES CA SE , THE PURPOSE OF CONSTRUCTION OF BUILDINGS TO CONDUCT THE CHARITABLE ACTIVITY OF THE ASSESSEE HAVE BEEN CLEAR LY SPELT OUT . THE CIT(A) OUGHT TO HAVE ACCEPTED THE ASSESSEE ' S RELIANCE ON THE DECISIONS OF THE DELHI HIGH COURT IN THE CAS ES OF DIT(EXEMPTION) V. DAULAT RAM EDUCATION SOCIETY (278 ITR 260), DIT V. MITSUI AND CO. ENVIRONMENTAL TRUST ( 303 ITR 111) , BHARAT KRISHAK SAMAJ V. DDIT(EXEMPTION) ( 306 ITR 153) , DIT(EXEMPTION) V. MAMTA HEALTH INSTITUTE FOR MOTHER AND CHILDREN ( 293 ITR 380) AND CIT V. HOTEL AND RESTAURANT ASSOCIATION (261 ITR 190). IT IS CLEAR THAT IN THE ASSESSEE'S CASE THE ACCUMULATION WAS FOR FINANCING ON-GOING PR OJECTS INVOLVING CONSTRUCTION OF BUILDINGS AND ACQUISITION OF OTHER ASSETS ESSENTIAL FOR ACHIEVING THE CHARITABLE OBJEC TS OF THE ASSESSEE SOCIETY . 13.6. THE LD. AR, FURTHER SUBMITTED THAT THE CIT(A ) ALSO ERRED IN NOT APPRECIATING THAT THE DIT (E) HAD COND ONED THE DELAY AFTER APPLYING HIS MIND TO THE ISSUE OF ELIGI BILITY OF THE ASSESSEE FOR EXEMPTION AND THE GENUINENESS OF THE P URPOSES MENTIONED IN FORM NO . 1 O. ONCE THE DIT(E) HAD ADMITTED THE ITA 1373 & 1374/13 33 FORM NO . 10 FILED BY THE ASSESSEE , THE ASSESSING OFFICER AND THE CIT(A) COULD NOT GO INTO THE CORRECTNESS OF THE DECISION OF THE DIT(E) . IT IS ALSO SUBMITTED THAT THE DIT(E) HAS ONLY FOLLOWED THE CBDT CIRCULAR NO . 273 DATED 03.06 . 1980 IN THIS MATTER . 13.7 FURTHER, THE LD. AR SUBMITTED THAT THE CIT(A) WAS TOTALLY IN ERROR BY ENHANCING THE ASSESSMENT ON THE GROUND THAT THE ACTIVITIES OF RUNNING WORKING WOMEN ' S HOSTELS , WOMEN SERVICE CENTRES AND CANTEEN AMOUNTED TO BUSINESS AC TIVITIES . FOR THIS PURPOSE , STRANGELY , THE CIT(A) HAS RELIED ON REASONS GIVEN BY THE ASSESSING OFFICER FOR DENYING EXEMPTIO N U/S 11 WHOLLY . AT THE OUTSET IT IS SUBMITTED THAT THE CIT(A) WENT WRONG IN RELYING ON THE REASONS GIVEN BY THE ASSESS ING OFFICER FOR THE ASSESSMENT YEAR 2009-10, WHICH ITSE LF WAS A SEPARATE MATTER CHALLENGED IN APPEAL BEFORE THE CIT (A) . MOREOVER THE AO, HAD RELIED ON THE AMENDMENTS MADE TO SECTION 2(15) BY THE FINANCE ACT 2008 WITH EFFECT F ROM 01 . 04 . 2009 . BY THIS AMENDMENT THE DEFINITION OF CHARITABLE PURPOSE WAS ALTERED TO EXCLUDE ANY ACTIVITY IN THE NATURE OF BUSINESS WHERE THE PURPOSE OF THE CHARITABLE INSTIT UTION WAS ITA 1373 & 1374/13 34 AN OBJECT OF GENERAL PUBLIC UTILITY. THE CIT(A) THE REFORE ACTED CONTRARY TO THE PROVISIONS OF LAW AS IT STOOD FOR T HE ASSESSMENT YEAR 2006-07 . THE ENHANCEMENT, IT IS SUBMITTED , IS THEREFORE NOT SUSTAINABLE IN LAW. THE LD. AR HAS BROUGHT TO OUR NOTICE THAT THE C.I . T . (A) HIMSELF HAS NOT MADE ANY SUCH ENHANCEMENT FOR THE ASSESSMENT YEAR 2008-09 WHILE DISPOSING OF THE APPEAL FOR THAT YEAR. 14. ON THE OTHER HAND, THE LD. DR RELIED ON THE OR DER OF THE CIT(APPEALS). FURTHER, HE RELIED ON THE ORD ER OF THE TRIBUNAL IN ITA NOS. 1464/MDS/2006, CO NO.178/MDS/2 006, 1426/MDS/2006 ETC. IN THE CASE OF ESTATE OF M.M.ISP AHANI & OTHERS, DATED 20.7.2007, WHEREIN THE TRIBUNAL FOLLO WED ITS EARLIER ORDER IN THE CASE OF ESTATE OF MALIGAL MERC HANT V. ADIT & OTHERS IN ITA NOS.1524 & 2312 TO 2320/MDS/20 04 DATED 7.6.2005 AND HELD AS UNDER: TAKING INTO CONSIDERATION THE ENTIRE CONSPECTUS OF THE FACTS, WE ARE OF THE OPINION THAT IT IS SINE QU O NON FOR ENABLING THE BENEFIT OF SECTION 11(2) THAT TRUST MUST SPECIFY ITS PURPOSES WHILE MAKING APPLICATION FOR EXEMPTION IN FORM NO.10. BENEFIT O F SECTION 11(2) CANNOT BE EXTENDED IF TRUST ONLY REPEATS THE OBJECT FOR WHICH IT IS CREATED. ORDINA RILY ASSESSEE IS REQUIRED TO SPEND 75% OF THE INCOME. HOWEVER, IF FOR SOME SPECIFIED PURPOSE IT FEELS THA T SUCH INCOME BE ACCUMULATED TO ACHIEVE SOME ITA 1373 & 1374/13 35 OBJECTIVE OF THE TRUST, IT SHOULD SPECIFY THOSE OBJECTIVES AND PURPOSES CLEARLY IN THE APPLICATION. DE HORS SUCH SPECIFICATION, BENEFIT UNDER SECTION 11(2) CANNOT BE AVAILED OF. WE HAVE PERUSED THE REASONING STATED IN THE IMPUGNED ORDER. WE ARE INCLINED TO AGREE WITH THE VIEW TAKEN BY THE REVENUE AUTHORITIES. AS SUCH, WE UPHOLD THE IMPUGNED ORDER. FURTHER HE SUBMITTED THAT THE SAID ORDER OF THE TRI BUNAL TO BE FOLLOWED AND THE ISSUE TO BE DECIDED IN FAVOUR OF T HE REVENUE. 15. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. THE LOWER AUTHORITIES DENIED THE BENEFIT OF SEC.11 ON THE REA SON THAT THE ASSESSEE HAS NOT SPECIFIED THE SPECIFIC PURPOSES FOR WHICH THE ACCUMULATION OF INCOME IS SOUGHT FOR. IN THE ABSENCE OF MENTIONING OF SPECI FIC PURPOSES, FOR WHICH THE ACCUMULATION IS SOUGHT FOR , THE AMOUNT OF ACCUMULATION IS SOUGHT FOR AND THE PERIOD FOR WHICH THE ACCUMULATION IS SOUGHT FOR, TH E AO HELD THAT THE ASSESSEE IS NOT ENTITLED TO EXEMPTION U/S.11 OF THE ACT AND HE BROUGHT THE SHORTFALL, WHILE APPLYING THE 85% OF THE TRUST INCO ME OF ` 3,35,36,028/- TO TAX. THEREFORE, IT IS APPROPRIAT E ITA 1373 & 1374/13 36 TO EXAMINE SEC.11(2) OF THE ACT WHICH READS AS FOLLOWS: SEC.11 (2) WHERE EIGHTY-FIVE PER CENT OF THE INCOME REFERRED TO IN CLAUSE (A) OR CLAUSE (B) OF SUB-SECTION (1) READ WITH THE EXPLANATION TO THAT SUB-SECTION IS NOT APPLIED, OR IS NOT DEEMED TO HAVE BEEN APPLIED, TO CHARITABLE OR RELIGIOUS PURPOSES IN INDIA DURING THE PREVIOUS YEAR BUT IS ACCUMULATED OR SET APART, EITH ER IN WHOLE OR IN PART, FOR APPLICATION TO SUCH PURPOS ES IN INDIA, SUCH INCOME SO ACCUMULATED OR SET APART SHALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCO ME, PROVIDED THE FOLLOWING CONDITIONS ARE COMPLIED WITH, NAMELY:- (A) SUCH PERSON SPECIFIES, BY NOTICE IN WRITING GIVEN TO THE ASSESSING OFFICER IN THE PRESCRIBED MANNER, THE PURPOSE FOR WHICH THE INCOME IS BEING ACCUMULATED OR SET APART AND THE PERIOD FOR WHICH THE INCOME IS TO BE ACCUMULATED OR SET APART, WHICH SHALL IN NO CASE EXCEED TEN YEARS; 16. THERE IS NO DISPUTE THAT IT IS MANDATE FOR SEC.11 OF THE ACT TO SPECIFY THE PURPOSE AND PERIOD FOR WHICH ACCUMULATION IS SOUGHT FOR. THE ABOVE POSITION WAS UPHELD BY THE JURISDICTIONAL HIGH COUR T IN THE CASE OF CIT V. MCT MUTHIAH CHETTIAR FAMILY TRUST (SUPRA), WHEREIN IT WAS HELD AS UNDER: 'THE TR U ST IS ALLOW E D TO ACCUMULAT E ITS INCOM E FOR A MAX I MUM P E RIOD OF T E N YEA RS . THE CONDIT I ON IS THAT THE TRUST SHOULD SPECIFY IN THE PRESCRIBED FORM T HE PURPOS E FOR WHICH TH E IN COME I S ACCUMULATED OR SET APART. IT IS NO T ENO U G H FOR THE TRUST EE S TO R E P E AT TH E O BJ E CTS OF TH E TRUST , BUT TH E Y MUST SPECIFY A PARTICULAR PURPOS E FOR WHICH THE INCOME IS BEING ACCUMULATED .' ITA 1373 & 1374/13 37 SIM IL A R V I EW WAS ALSO EXPRESSED BY THE HIGH COURT OF C A LCUTTA I N THE CAS E OF DIT(E) VS SINGHANIA CHARITABLE TRUST (199 ITR I89)(CAL) , WHEREIN IT WAS HELD AS UNDER: ' DOUBTL E SS , IT IS NOT N E C E SSARY THAT TH E ASSESSEE HAS TO MENTION ONLY ON E S P EC IFI C OBJ E CT . TH E R E CAN B E S E TTIN G APART AND ACCUMULATION OF IN C OME FOR MOR E O B JE CT S TH A N ONE BUT WHAT EVE R O BJ E CT S OR PURPO SES MIGHT B E, ASSESSE E M U S T SPE CIFY IN NOTIC E C ON C R E T E NATUR E OF PURPOS E S FOR WHICH A CC UMULATION IS BE I NG MADE . PLURALITY OF TH E PURPOS E S FOR ACCUMULATION MAY NOT B E PR EC LUD E D BUT IT MUST D E P E ND ON TH E EX ACT AND PR E CI SE PURPOSES FOR W HICH T HE A C CUMULATION IS INTENDED FOR TH E STATUTORY P E RIOD OF TEN YEARS . TH E GENERATING OF THE OBJECTS OF THE TRUST CANNOT TAKE THE PLACE OF SPECIFICITY OF THE NEED FOR ACCUMULATION. 17. CONSIDERING THE ABOVE POSITION OF LAW, WE ARE INCLINED TO UPHOLD THE ORDER OF THE CIT(APPEALS ) ON THIS ISSUE. 18. FURTHER, THE CIT(APPEALS) ENHANCED THE ASSESSMENT ON THE ASSESSEE BECAUSE THE ACTIVITIES CARRIED ON BY THE ASSESSEE IS IN COMMERCIAL MANNER AND THE ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S. 11 OF THE ACT, IN TOTO. 19. THE ISSUE BEFORE US IS WHETHER, ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND HAVING REGARD TO THE TERMS OF THE TRUST DEED, IT CAN BE SAID THAT THE ACTIVITIES CARRIED ON BY ITA 1373 & 1374/13 38 THE ASSESSEE IN THE FORM OF RUNNING OF WORKING WOME NS HOSTEL, WOMENS SERVICE CENTER AND CANTEEN WERE ITS ELF HELD UNDER THE TRUST. FOR THIS PURPOSE IT IS PROPER TO G O THROUGH THE OBJECTS FOR WHICH ASSESSEE-TRUST IS FORMED. AIMS A ND OBJECTIVES OF THE TRUST ARE AS UNDER: I) TO ASSIST PEOPLE , TO INITIATE , ORGANIZE , ESTABLISH AND EXECUTE DEVELOPMENTAL PROGRAMMES AIMED AT THE RELIEF , AND DEVELOPMENT OF THE POOR OF ALL CASTES AND CREEDS AN D TO CREATE AN AWARENESS IN THEM TO IMPROVE THE I R SOCIO-ECONOMIC STATUS . I I) TO CO-OPERATE AND CO-ORDINATE WITH THE VAR I OUS DEPARTMENTS OF STATE AND CENTRAL GOVERNMENT , NON- GOVERNMENTAL AGENCIES , LOCAL BODIES AT VARIOUS LEVELS TO ENABLE THE SOCIETY , TO CARRY OUT DEVELOPMENTAL PROGRAMMES ON THE BASIS OF SELF-HELP AND MUTUAL HELP . III ) TO ORGANIZE AND ENCOURAGE EDUCATIONAL ENVIRONMENTAL HYGIENE AND HEALTH PROGRAMMES , FAR THE WEAKER SECTIONS OF THE SOCIETY WITH SPECIAL REFERENCE TO WOMEN AND CHILDREN IN THE CITY SLUMS . IV) TO ASSIST AND ORGANIZE LOCAL GROUPS OF ALL COMM UNITIES , ESPECIALLY WOMEN IN DIFFICULT CIRCUMSTANCES AND CHI LDREN IN DISTRESS IRRESPECTIVE OF CASTE OR CREED TO DEVELOP CO-OPERATION AND COLLABORATION IN ORDER TO SOLVE THEIR SOCIAL AND ECONOMIC PROBLEMS . V ) TO PROVIDE VOCATIONAL TRAINING IN TAILOR I NG , EMBRO I DERY , HANDICRAFTS ACQUIRE SELF - RELIANCE AND OPPORTUNITIES FOR GAINFUL SELF-EMPLOYMENT AND REHABILITATION FOR THE SOCIALLY , ITA 1373 & 1374/13 39 I NTELLECTUALLY AND PHYSICALLY HANDICAPPED PERSONS . VI) TO ENCOURAGE COMMUNITY HEALTH PRACTICES AND TO IMPART HEALTH CARE AND SOC I A L AWARENESS EDUCATION TO THE WEAKER SECTIONS AND MARGINALIZED SECTIONS OF THE PEOPLE ES PECIALLY THE WOMEN AND CHILDREN FROM CHENNAI CITY SLUMS IN T HE FIELD OF HIV / AIDS , DRUG ABUSE , ALCOHOL . VII) TO ORGANIZE WOMEN INTO MADHAR SANGAMS , SELF-HELP GROUPS AND DOMESTIC WORKERS BOTH IN THE ORGANIZED A ND UNORGANIZED SECTORS , RESIDENTIAL AND NON-RESIDENTIAL AND CREATE PUBLIC OPINION AND CONDUCT SOCIAL AWARENESS PROGRAMMES . V I II ) TO I MPART EDUCATION BOTH FORMAL AND NON-FORMAL FOR THE CHILDREN AND WOMEN OF THE WEAKER SECTIONS OF THE CO MMUNITY ORGANIZING SPONSORSHIP AND SCHOLARSHIP PROGRAMMES A ND OTHER RELEVANT MEANS AND METHODS WHEREVER IT IS NEC ESSARY. IX) TO ORGANIZE SAVINGS SCHEMES AND CREDIT SOCIETIE S PROCURE INSURANCE POLICIES AND PROMOTE CO-OPERATIVE EFFORTS TO ENHANCE THEIR PURCHASING POWER AND TO IMPROVE THEIR SOCIO- ECONOMIC STATUS OF THE COMMUNITIES. 20. IT IS TO BE NOTED THAT SECTION 11(1) OF THE A CT GRANTS EXEMPTION TO THE INCOME DERIVED FROM PROPERT Y HELD UNDER TRUST WHOLLY FOR CHARITABLE OR RELIGIOUS PURP OSES, TO THE EXTENT TO WHICH SUCH INCOME IS APPLIED TO SUCH PURP OSES IN INDIA. THERE IS NO EXHAUSTIVE DEFINITION OF THE WOR DS PROPERTY HELD UNDER TRUST IN THE ACT; HOWEVER, SUB-SECTION (4) SAYS THAT FOR THE PURPOSES OF SECTION 11, THE WORDS PRO PERTY HELD ITA 1373 & 1374/13 40 UNDER TRUST INCLUDES A BUSINESS UNDERTAKING SO HE LD. SUB- SECTION (4A) AS IT STANDS AMENDED BY THE FINANCE (N O. 2) ACT, 1991, WITH EFFECT FROM APRIL 1, 1992, IS IN THE FO LLOWING TERMS: (4A) SUB-SECTION (1) OR SUB-SECTION (2) OR SUB- SECTION (3) OR SUB-SECTION (3A) SHALL NOT APPLY IN RELATION TO ANY INCOME OF A TRUST OR AN INSTITUTION , BEING PROFITS AND GAINS OF BUSINESS, UNLESS THE BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF THE TRUST OR, AS THE CASE MAY BE, INSTITUTION, AND SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED BY SUCH TRUST OR INSTITUTION IN RESPECT OF SUCH BUSINESS. 21. THUS, IF A PROPERTY IS HELD UNDER TRUST, AND SUCH PROPERTY IS A BUSINESS, THE CASE WOULD FALL U/S. 11 (4) AND NOT U/S. 11(4A) OF THE ACT. SECTION 11(4A) OF THE ACT W OULD APPLY ONLY TO A CASE WHERE THE BUSINESS IS NOT HELD UNDER TRUST. THUS, THERE IS DIFFERENCE BETWEEN PROPERTY OR BUSIN ESS HELD UNDER TRUST AND BUSINESS CARRIED ON BY OR ON BEHALF OF THE TRUST. 22. THIS DISTINCTION WAS RECOGNIZED BY THE SUPREM E COURT IN THE CASE OF ADDL. CIT VS. SURAT ART SILK C LOTH MANUFACTURERS ASSOCIATION (1980) 121 ITR 1 WHEREIN IT WAS OBSERVED THAT IF A BUSINESS UNDERTAKING IS HELD UND ER TRUST FOR A CHARITABLE PURPOSE, THE INCOME THEREFROM WOULD BE ENTITLED ITA 1373 & 1374/13 41 TO THE EXEMPTION U/S. 11(1) OF THE ACT. IN THE PRE SENT CASE, THE FINDING OF THE CIT(A) IS THAT RUNNING OF WORKI NG WOMENS HOSTEL, WOMENS SERVICE CENTER AND CANTEEN WAS NOT HELD UNDER TRUST, BUT IT WAS BUSINESS COMMENCED/CARRIED ON BY THE SOCIETY, SUBSEQUENT TO THE FORMATION OF TRUST. THOU GH THE BUSINESS WAS COMMENCED BY THE SOCIETY AND IT WAS CA RRIED ON BY THE SOCIETY AFTER ITS FORMATION, IT CANNOT BE SAID TO CONSTITUTE PROPERTY HELD UNDER TRUST. U/S. 11(4), I T IS ONLY THE BUSINESS WHICH IS HELD UNDER THE TRUST THAT WOULD E NJOY EXEMPTION IN RESPECT OF ITS INCOME U/S. 11(1) OF TH E I.T. ACT AND THERE IS A DISTINCTION BETWEEN THE OBJECTS OF A TRUST AND THE POWERS GIVEN TO THE TRUSTEES TO EFFECTUATE THE PURPOSE OF THE TRUST. THOUGH THE OBJECTS OF THE TRUST WERE CHA RITABLE, THEY WERE MERE POWERS CONFERRED UPON THE TRUSTEES TO CAR RY ON THE BUSINESS AND THE PROFITS FROM SUCH BUSINESS WOULD B ENEFIT THE CHARITABLE OBJECTS. THE EXEMPTION U/S. 11 CANNOT BE GRANTED ON THE REASON THAT THE BUSINESS ITSELF WAS NOT IN E XISTENCE AT THE TIME OF FORMATION OF THE TRUST AND THE PROPERTY HELD UNDER TRUST AT THE TIME OF FORMATION OF THE TRUST WAS NOT SPELT OUT IN THE MEMORANDUM OF ASSOCIATION OF THE ASSESSEE. THE ITA 1373 & 1374/13 42 RUNNING OF WORKING WOMENS HOSTEL, WOMENS SERVICE CENTER AND CANTEEN WAS NOT AT ALL IN EXISTENCE AT THE TIME OF FORMATION OF THE TRUST SO AS TO SAY THAT THE BUSINE SS IS PROPERTY HELD UNDER TRUST. THUS, THE ACTIVITIES REL ATING TO RUNNING OF WORKING WOMENS HOSTEL, WOMENS SERVICE CENTER AND CANTEEN WAS NOT EVEN IN THE CONTEMPLATION OF TH E MEMORANDUM OF ASSOCIATION ON THE BASIS OF WHICH THE SOCIETY IS FORMED AND, THEREFORE, COULD NOT HAVE BE EN SETTLED UPON TRUST. THE BUSINESS CARRIED ON BEHALF OF A TRU ST RATHER INDICATES A BUSINESS WHICH IS NOT HELD IN TRUST, TH AN A BUSINESS OF THE TRUST RUN BY THE ASSESSEE. IN THIS CASE, THE ACTIVITIES VIZ., RUNNING OF WORKING WOMENS HOSTEL, WOMENS SERVICE CENTER AND CANTEEN WAS CARRIED ON BY THE A SSESSEE FOR AND ON BEHALF OF THE TRUST AND IT WAS NOT BUSIN ESS HELD UNDER TRUST. SECTION 11(1) OF THE ACT CONFERS EXEMP TION FROM TAX ONLY WHERE THE PROPERTY IS ITSELF HELD UNDER TR UST OR OTHER LEGAL OBLIGATION; IT DOES NOT APPLY TO CASES WHERE A TRUST OR LEGAL OBLIGATION IS NOT CREATED ON ANY PROPERTY BUT ONLY THE INCOME DERIVED FOR A CHARITABLE OR RELIGIOUS PURPOS E. SURPLUS FUNDS OF A TRUST, WHICH WAS CLAIMED TO BE EXEMPT ON THE ITA 1373 & 1374/13 43 FOOTING THAT IT WAS PROPERTY HELD UNDER TRUST WITHI N THE MEANING OF SEC. 11(1) OF THE ACT, WAS NOT PROPERTY HELD UNDER TRUST SINCE THE PROPERTY FROM WHICH THE SURPLUS WAS GENERATED WAS ITSELF NOT HELD UNDER TRUST. IN OTHER WORDS, ME RELY CARRYING ON BUSINESS FOR AND ON BEHALF OF THE TRUST AND APPL YING THE PROFITS OF THE SAME FOR THE OBJECT OF THE TRUST DOE S NOT ENTITLE FOR EXEMPTION U/S. 11(4) OF THE ACT UNLESS THE BUSI NESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTS OF THE TRUST. 23. WE NOW PROCEED TO CONSIDER THE QUESTION WHETHER THE SAID ACTIVITIES CARRIED ON BY THE ASSES SEE WERE INCIDENTAL TO THE ATTAINMENT OF THE OBJECTS OF THE TRUST. WE FAIL TO SEE ANY CONNECTION BETWEEN THE ACTIVITIES RELATI NG TO RUNNING OF WORKING WOMENS HOSTEL, WOMENS SERVICE CENTER AND CANTEEN CARRIED ON AND THE ATTAINMENT OF THE OB JECTS OF THE TRUST, WHICH ARE BASICALLY TO PROMOTE CAUSE OF CHARITY, MISSION ACTIVITIES, WELFARE, EMPLOYMENT, DIFFUSION OF USEFUL KNOWLEDGE, UPLIFTMENT AND EDUCATION AND TO CREATE A N AWARENESS OF SELF-RELIANCE AMONG THE MEMBERS OF THE PUBLIC AND OTHER OBJECTS ENUMERATED IN THE PRECEDING PARAG RAPH IN 19. THE MERE FACT THAT WHOLE OR SOME PART OF THE I NCOME FROM ITA 1373 & 1374/13 44 RUNNING OF WORKING WOMENS HOSTEL, WOMENS SERVICE CENTER AND CANTEEN IS USED FOR CHARITABLE PURPOSES WOULD NOT RENDER THE BUSINESS ITSELF BEING CONSIDERED AS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTS. WE ARE IN AGREEMENT WITH THE DEPARTMENT THAT THE APPLICATION OF INCOME GENERATED BY THE BUSINESS IS NOT RELEVANT CONSIDERATION AND WHAT IS RELEVANT IS WHETHER THE ACTIVITY IS SO INEXTRICABLY CONNECTED O R LINKED WITH THE OBJECTS OF THE TRUST THAT IT COULD BE CONSIDERE D AS INCIDENTAL TO THOSE OBJECTIVES . 24. IT WAS CONTENDED BY THE LD. AR THAT THE SURPL US FUNDS GENERATED FROM THE RUNNING OF WORKING WOMEN S HOSTEL, WOMENS SERVICE CENTER AND CANTEEN WAS SPENT TOWARD S CHARITABLE ACTIVITIES AND THEREFORE, THE ASSESSEE I S ENTITLED FOR EXEMPTION U/S. 11(4) OF THE I.T. ACT. WE ARE UNA BLE TO ACCEPT THIS CONTENTION. INITIALLY, THE ASSESSEE CAR RIED ON THE BUSINESS ITSELF WHICH IS NOT AT ALL PROPERTY HELD U NDER TRUST. THIS ACTIVITY IS A BUSINESS ACTIVITY AND THE PROVIS IONS OF SECTION 11(4A) OF THE ACT IS APPLICABLE. 25. IT WAS CONTENDED THAT IF THE PROFITS OF THE BUSINESS CARRIED ON BY THE TRUST ARE UTILIZED BY TH E TRUST FOR THE ITA 1373 & 1374/13 45 PURPOSES OF ACHIEVING THE OBJECTIVES OF THE TRUST, THEN THE BUSINESS SHOULD BE CONSIDERED TO BE INCIDENTAL TO T HE ATTAINMENT OF THE OBJECTS OF THE TRUST AS OBSERVED BY THE SUPREME COURT IN THE CASE OF ACIT VS. THANTHI TRUST (2001) 247 ITR 785 WHICH IS AS UNDER: AS IT STANDS, ALL THAT IT REQUIRES FOR THE BUSINE SS INCOME OF A TRUST OR INSTITUTION TO BE EXEMPT IS TH AT THE BUSINESS SHOULD BE INCIDENTAL TO THE ATTAINMENT OF OBJECTIVES OF THE TRUST OR INSTITUTION. A BUSINE SS WHOSE INCOME IS UTILIZED BY THE TRUST OR THE INSTITUTION FOR THE PURPOSES OF ACHIEVING THE OBJECTIVES OF THE TRUST ..IN ANY EVENT, IF THERE BE ANY AMBIGUITY IN THE LANGUAGE EMPLOYED, THE PROVISION MUST BE CONSTRUED IN A MANNER THAT BENEFITS THE ASSESSEE. 26. PRIMA FACIE THE ABOVE OBSERVATION WOULD APPEAR TO SUPPORT THE ASSESSEES CASE IN THE SENSE THAT EV EN IF RUNNING OF WORKING WOMENS HOSTEL, WOMENS SERVICE CENTER AND CANTEEN IS HELD NOT TO CONSTITUTE A BUSINESS HE LD UNDER TRUST, BUT ONLY AS A BUSINESS CARRIED ON BY OR ON B EHALF OF THE TRUST, SO LONG AS THE PROFITS GENERATED BY IT ARE A PPLIED FOR THE CHARITABLE OBJECTS OF THE TRUST, THE CONDITION IMPO SED U/S. 11(4A) OF THE ACT SHOULD BE HELD TO BE SATISFIED, E NTITLING THE TRUST TO THE TAX EXEMPTION. ITA 1373 & 1374/13 46 27. IN OUR OPINION, THESE OBSERVATIONS HAVE TO BE UNDERSTOOD IN THE LIGHT OF THE FACTS BEFORE THE SUP REME COURT IN THE CASE OF THANTHI TRUST (SUPRA), WHEREIN THE T RUST CARRIED ON THE BUSINESS OF A NEWSPAPER AND THAT BUSINESS IT SELF WAS HELD UNDER TRUST. THE CHARITABLE OBJECT OF THE TRUS T WAS THE IMPARTING OF EDUCATION WHICH FALLS U/S. 2(15) OF TH E ACT. THE NEWSPAPER BUSINESS WAS INCIDENTAL TO THE ATTAINMENT OF THE OBJECT OF THE TRUST, NAMELY THAT OF IMPARTING EDUCA TION AND THE PROFITS OF THE NEWSPAPER BUSINESS ARE UTILIZED BY T HE TRUST FOR ACHIEVING THE OBJECT OF IMPARTING EDUCATION. IN TH IS CASE, THERE IS NO SUCH NEXUS BETWEEN THE ACTIVITIES CARRI ED ON AND THE OBJECTS OF THE ASSESSEE THAT CAN CONSTITUTE AN ACTIVITY INCIDENTAL TO THE ATTAINMENT OF THE OBJECTS, NAMELY , TO PROMOTE CAUSE OF CHARITY, MISSION ACTIVITIES, WELFARE, EMPL OYMENT, DIFFUSION OF USEFUL KNOWLEDGE, UPLIFTMENT AND EDUCA TION AND TO CREATE AN AWARENESS OF SELF-RELIANCE AMONG THE MEMB ERS OF THE PUBLIC ETC. WE ARE THEREFORE, OF THE OPINION TH AT THE OBSERVATIONS OF THE SUPREME COURT MUST BE UNDERSTOO D AND APPRECIATED IN THE BACKGROUND OF THE FACT IN THAT C ASE AND SHOULD NOT BE EXTENDED INDISCRIMINATELY TO ALL CASE S. BEING ITA 1373 & 1374/13 47 SO, WE ARE INCLINED TO HOLD THAT THE ASSESSEE IS NO T ENTITLED FOR ANY EXEMPTION U/S. 11 OF THE I.T. ACT. 28. FOR THE REASONS MENTIONED IN PARAGRAPH 8.8 OF THIS ORDER, THE ASSESSEE IS NOT ENTITLED FOR DEPREC IATION ON THE OPENING BALANCE OF WRITTEN DOWN VALUE OF THE ASSETS , WHICH WERE PURCHASED IN EARLIER YEARS. ACCORDINGLY, THIS GROUND RAISED BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2006 -07 IS DISMISSED AND THIS APPEAL OF THE ASSESSEE IS ALSO D ISMISSED. 29. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSE E ARE DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 17 TH OF JULY, 2015 AT CHENNAI. SD/- SD/- ( $% &'( ) ) ( $ ( * + ) ,-.//.0.12345.65.7.48 ,-.345.699:.5 ;8 ' )< /JUDICIAL MEMBER ! )<=>>9?3@.3@A2BC25 $' /CHENNAI, D) /DATED, THE 17 TH JULY, 2015. MPO* ITA 1373 & 1374/13 48 )E FGHG /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. I8 /CIT(A) 4. I /CIT 5. GJ& K /DR 6. &LM /GF.