MURASOLI TRUST, CHENNAI V. Assistant Director of Income Tax, CHENNAI

ITA 210/CHNY/2014

• Counselvise Citation: 21021714 RSA 2014
• Duration Of Justice: 1 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 16-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 23-01-2014
• Court: TRIBUNAL
• Department Lawyers: M SRINIVASA RAO
• Assessee Lawyers: A KANAKARAJ
• Keywords: Business income; Depreciation; Charitable institution; Capital expenditure
• Section: 11

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. 210 & 211//MDS/2014 / ASSESSMENT YEARS : 2009-10 & 2010-11 MURASOLI TRUST, NEW NO.180, OLD NO.93, KODAMBAKKAM HIGH ROAD, CHENNAI-600 034. PAN AAATM3312K ( /APPELLANT) VS THE ASSISTANT DIRECTOR OF INCOME- TAX (EXEMPTIONS IV), CHENNAI. ( /RESPONDENT) / APPELLANT BY : SHRI A. KANAKARAJ, CA / RESPONDENT BY : SHRI M. SRINIVASA RAO, CIT / DATE OF HEARING : 16.09.2015 ! / DATE OF PRONOUNCEMENT : 06.11.2015 & / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAIN ST THE COMMON ORDER OF THE COMMISSIONER OF INCOME-TAX(APPE ALS) DATED 22.11.2013 FOR THE ASSESSMENT YEARS 2009 -10 AND - - ITA 210 & 211/1 4 2 2010-11. SINCE, COMMON ISSUES ARE INVOLVED IN THES E APPEALS, THESE ARE CLUBBED TOGETHER, HEARD TOGETHER AND DISP OSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. THE FIRST COMMON GRIEVANCE OF THE ASSESSEE IN TH ESE APPEALS IS WITH REGARD TO NON-GRANTING OF EXEMPTION U/S.11 OF THE I.T. ACT, 1961. 3. THE FACTS OF THE CASE ARE THAT THE TRUST FILED I TS RETURN OF INCOME FOR THE ASSESSMENT YEARS 2009-10 AND 2010-11 ON 30.9.2009 AND 30.0.2010 RESPECTIVELY ADMITTING NIL INCOME. THE RETURNS WERE PROCESSED U/S.143(1) OF THE ACT. THE CASE WAS TAKEN UP FOR SCRUTINY AND NOTICE U/S.143(2) WAS ISS UED TO THE ASSESSEE. THE ASSESSMENTS WERE COMPLETED U/S.143(3) DETERMINING TOTAL INCOME OF ` 9,79,71,460/- AND ` 10,57,29,890/- FOR THE ASSESSMENT YEARS 2009-10 AND 2010-11 RESPEC TIVELY. AT THE TIME OF SCRUTINY PROCEEDINGS, THE AO FOUND THAT THE ASSESSEE EXPENDED ` 15,67,818/- AND ` 13,33,979/- TOWARDS CHARITABLE PURPOSE OUT OF THE GROSS RECEIPTS OF ` 16.04 CRORES AND ` 16.05 CRORES, FOR THE ASSESSMENT YEARS 2009-10 AND 2010-1 1 - - ITA 210 & 211/1 4 3 RESPECTIVELY. FURTHER, THE AO FOUND THAT BY RUNNIN G THE NEWSPAPER MURASOLI THE TRUST EARNED A NET SURPLUS OF ` 9,79,71,460/- IN THE ASSESSMENT YEAR 2009-10. ACC ORDING TO THE AO, THE ACTIVITY SQUARELY FALLS WITHIN THE AMBI T OF AMENDED PROVISIONS OF SEC.2(15) OF THE ACT, AS THE ASSESSEE S OBJECT IS OF GENERAL PUBLIC UTILITY AND THE ACTIVITIES OF THE AS SESSEE ARE IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. THEREFORE, THE AO BROUGHT TO TAX THE SURPLUS OF ` 9,79,71,460/- IN THE AY 2009-10 AND ` 10,57,29,890/- IN THE AY 2010-11 AND COMPLETED THE ASSESSMENTS. WHILE COMPLETING THE ASSESSMENT, THE AO ADDED THE SUM OF ` 1,00,000/- (CORPUS DONATION) AS INCOME AND DISALLOWED THE DEPRECIATION OF ` 20,61,256/- ON THE ASSETS PURCHASED IN EARLIER YEARS. ACCORDINGLY, THE AO DE NIED THE EXEMPTION U/S.11 OF THE ACT. AGGRIEVED, THE ASSESS EE WENT IN APPEAL BEFORE THE CIT(APPEALS). HOWEVER, THE CIT(A PPEALS) OBSERVED THAT THE ACTIVITY CARRIED ON BY THE ASSESS EE CANNOT BE CONSIDERED AS CHARITABLE AND DENIED THE EXEMPTION U /S.11 OF THE ACT. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFOR E US. 4. THE LD. AR SUBMITTED THAT THE LOWER AUTHORITIES ARE WRONG IN OBSERVING THAT PRINTING AND PUBLISHING OF MURAS OLI NEWSPAPER - - ITA 210 & 211/1 4 4 AMOUNT TO ADVANCEMENT OF ANY OTHER OBJECT OF GENERA L PUBLIC UTILITY INVOLVING THE CARRYING OF AN ACTIVITY IN TH E NATURE OF TRADE, COMMERCE OR BUSINESS AND TAXING THE ENTIRE INCOME W ITHOUT GRANTING EXEMPTION U/S.11 OF THE ACT. ACCORDING TO THE LD. AR, THE ASSESSEE IS ENGAGED IN VARIOUS ACTIVITIES, WHIC H ARE GIVEN BELOW : (I) TO IMPROVE AND SPREAD TAMIL LANGUAGE, LITERATUR E AND CULTURE AND ALSO TO TAKE STEPS TO MAKE TAMIL AS EFFECTIVE MEDIUM OF COMMUNICATION FOR THE MODERN AGE AND TO CREATE AND ENHANCE PUBLIC AWARENESS AMONG THE COMMON MAN SO AS TO MAKE THEM AS GOOD AND EFFECTIVE CITIZENS OF AN ENLIGHTENED DEMOCRATIC SOCIETY BY INCULCATING GENERAL KNOWLEDGE. (II) TO UTILIZE MODERN EQUIPMENTS, INNOVATIONS AND TECHNOLOGIES LIKE TELEVISION, AUDIO, VIDEO AND RADI O AND OTHER ELECTRONIC MEDIA FOR EFFECTIVELY ACHIEVING TH E ABOVE OBJECT. (III) TO PUBLISH AND RUN NEWSPAPERS, MAGAZINES AND OTHER COMMUNICATION MEDIA LIKE BOOKS, PAMPHLETS AND THE LIKE FOR THE ABOVE SAID OBJECTS WITH WHICH THE TRUST IS FOUNDED. (IV) TO RUN AND ADMINISTER EDUCATIONAL INSTITUTIONS FOR THE BENEFIT OF ALL PEOPLE; SUCH EDUCATIONAL INSTITU TION MAY ALSO BE IN REGARD TO ARTS, ENGINEERING, MEDICAL AND OTHER PROFESSIONAL SUBJECTS. (V) TO RUN DISPENSARIES AND HOSPITALS FOR THE BENEF IT OF THE POOR. (VI) TO ASSIST GENERALLY EVERYONE IN REGARD TO PROV IDING - - ITA 210 & 211/1 4 5 SCHOLARSHIP FOR EDUCATION AND ALSO FINANCIAL ASSIST ANCE FOR THE NEEDY AND INDIGENT TOWARDS MEDICAL AID. THE TRUST ACHIEVES THE OBJECTS CLAUSE (I), IN THE FOLLOWING TWO WAYS: (A)THE TRUST IS AUTHORIZED TO RUN NEWSPAPER AS PER CLAUSE (III) OF THE ABOVE OBJECTS. HENCE THE TRUST IS RUNNING MURASOLI AND THIS IS USED AS A TOOL TO AC HIEVE THE MAIN OBJECT OF IMPROVING AND SPREADING TAMIL LANGUAGE BY INCULCATING GENERAL KNOWLEDGE AMONG THE COMMON MAN. RUNNING OF MURASOLI IS NOT THE MAIN OBJECT BUT IT IS USED AS A TOOL TO IMPROVE AND SPRE AD TAMIL LANGUAGE AS IT SHOWS HOW THE LANGUAGE IS TO B E USED AND IT COACHES THE READS HOW THE LANGUAGE IS T O BE HANDLED. 4.1 FURTHER, ACCORDING TO THE LD. AR, THE ASSESSE E HAS SPENT HUGE AMOUNT TO IMPROVE THE TAMIL LANGUAGE AND CONDU CTED BHARATHIDASAN POETRY COMPETITION EVERY YEAR IN WHIC H MORE THAN 5000 STUDENTS FROM SCHOOLS AND COLLEGES THROUGHOUT THE STATE OF TAMIL NADU AND PUDUCHERRY PARTICIPATED. HE SUBM ITTED THAT MURASOLI NEWSPAPER IS SPREADING TAMIL LANGUAGE AR OUND THE WORLD AND PUBLISHING OF MURASOLI NEWSPAPER CANNOT BE CONSTRUED AS COMMERCIAL ACTIVITY. FURTHER, ACCORDI NG TO THE LD. AR, IT IS NOT A ACTIVITY INVOLVING COMMERCE, TRADE OR BUSINESS AND IT IS DULY DEVELOPMENT OF EDUCATION. HE SUBMITTED THAT MURASOLI NEWSPAPER WAS IN EXISTENCE FROM 1942 AND IT HAS BEC OME THE - - ITA 210 & 211/1 4 6 PROPERTY OF THE TRUST. ACCORDING TO LD. AR, U/S.1 1(4A) OF THE ACT, THE INCOME DERIVED FROM BUSINESS HELD UNDER THE TRU ST WHOLLY FOR CHARITABLE OR RELIGIOUS PURPOSES SHALL NOT BE INCLU DED IN THE TOTAL INCOME OF THE PREVIOUS YEAR OF THE TRUST OR INSTITU TION, IF THE BUSINESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJ ECTS OF THE TRUST. FURTHER, THE LD. AR, SUBMITTED THAT ISSUE OF VIOLAT ION OF SEC.13(1)(C) OF THE ACT WAS NOT RAISED BY THE AO BU T RAISED BY THE CIT(APPEALS) WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE TO GIVE COMMENTS ON IT. THEREFORE, HE SUBMITTED TH AT THE CIT(APPEALS) IS NOT JUSTIFIED IN NOT CONSIDERING TH E NEWSPAPER RUNNING EXPENSES AS CHARITABLE. REGARDING INTEREST ON FIXED DEPOSITS IN THE NAME OF TRUST, THE LD. AR SUBMITTED THAT THE SAME CANNOT BE BROUGHT TO TAX. SIMILARLY, HE SUBMITTED THAT DEPRECIATION ON ASSETS TO BE GRANTED. FOR THIS PUR POSE, THE LD. AR RELIED ON VARIOUS DECISIONS, WHICH ARE KEPT ON R ECORD. 5. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT ACT IVITY OF PUBLISHING OF NEWSPAPER CARRIED ON BY THE ASSESSEE IS A COMMERCIAL ONE. BEING SO, THE ASSESSEE CANNOT BE G RANTED EXEMPTION U/S.11 OF THE ACT. - - ITA 210 & 211/1 4 7 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD AND VARIOUS CASE LAW CITED BY TH E PARTIES. SEC. 11 OF THE ACT STIPULATES THAT THE INCOME FROM PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSE S HALL NOT BE INCLUDED IN THE TOTAL INCOME OF THE PREVIOUS YEAR O F THE PERSON IN RECEIPT OF THE INCOME TO BE GIVEN EFFECT IN THE MAN NER AS SPECIFIED THEREIN. THE TERM 'CHARITABLE PURPOSE' HA S NOT BEEN DEFINED UNDER THE STATUTE; BUT FOR THE INCLUSIVE NA TURE OF THE TERM AS SPECIFIED UNDER S. 2(15) OF THE ACT, WHICH AS EX ISTED BEFORE THE AMENDMENT 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 PU RPOSE, IF IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF REND ERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR FEE OR ANY OTHER CONSIDERATI ON IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY.' - - ITA 210 & 211/1 4 8 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. 6.1 THE LD. AR SUBMITTED THAT, THE IDEA AND UNDER STANDING OF THE DEPARTMENT WITH REGARD TO THE SCOPE OF AMENDMEN T TO SEC.2(15) IS THOROUGHLY WRONG AND MISCONCEIVED. TH ERE IS NO TRADE OR BUSINESS IN THE ACTIVITIES PURSUED BY THE ASSESSEE IN PUBLISHING OF NEWSPAPER WILL NOT TAKE IT 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 A LSO SUBMITTED THAT THE STATUTE, AS IT STOOD EARLIER, HAD CLARIFIE D THE CHARITABLE PURPOSE MENTIONED IN SEC.2(15) OF THE ACT, HAD CLAR IFIED THE CHARITABLE PURPOSE MENTIONED IN S. 2(15) BY THE WOR DS 'NOT INVOLVING THE CARRYING ON OF ANY ACTIVITY FOR PROFI T'. BY VIRTUE OF THE EXISTENCE OF THESE CLARIFYING WORDS, IF THERE W AS ANY ELEMENT OF PROFIT IT WAS ENOUGH LIABLE TO BE RECKONED AS CH ARITABLE 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 PROFIT' WERE DELETED. THUS THE CONTENT ION IS THAT AFTER - - ITA 210 & 211/1 4 9 1 ST APRIL, 1984, THERE IS NO ALLERGY TO PROFIT AND IF THE PROFIT FEEDS CHARITY, IT STANDS CLEARED FOR EXEMPTION UNDER SEC. 11 OF THE ACT. 6.2. TO ANALYSE THE SCOPE AND OBJECT OF THE AMENDM ENT, THE LEARNED COUNSEL PLACED RELIANCE ON THE '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 G ENERAL PUBLIC UTILITY. THESE ACTIVITIES ARE TAX EXEMPT, AS THEY SHOULD BE. HOWEVER, SOME ENTITIES CARRYING ON REGUL AR TRADE, COMMERCE OR BUSINESS OR PROVIDING SERVICES I N RELATION TO ANY TRADE, COMMERCE OR BUSINESS AND EAR NING INCOMES HAVE SOUGHT TO CLAIM THAT THEIR PURPOSES WO ULD ALSO FALL UNDER 'CHARITABLE PURPOSE'. OBVIOUSLY, TH IS WAS NOT THE INTENTION OF PARLIAMENT AND HENCE I PROPOSE TO AMEND THE LAW TO EXCLUDE THE AFORESAID CASES. GENUI NE CHARITABLE ORGANIZATIONS WILL NOT IN ANY WAY BE AFF ECTED' (PARA 180). 6.3 THE LEARNED COUNSEL POINTED OUT THAT, THE AMENDMENT WAS BROUGHT ABOUT AS A MEASURE OF RATIONA LIZATION AND SIMPLIFICATION, STREAMLINING THE DEFINITION OF CHARITABLE PURPOSE AND NOT AS A MEASURE OF TAXATION. IT IS ALS O STATED THAT THE CONCEPT OF CHARITY IN INDIA IS WIDER, SIMULTANE OUSLY ADDING THAT, BY VIRTUE OF THE AMENDMENT, THE POSITION THAT EXISTED PRIOR TO 1ST FEB., 1984 HAS BEEN BROUGHT BACK AND THAT IS AL L. THIS - - ITA 210 & 211/1 4 10 HOWEVER WILL NOT TILT THE BALANCE IN ANY MANNER IN THE CASE OF THE ASSESSEE SO AS TO TAKE THE ACTIVITIES OUTSIDE THE C HARITABLE PURPOSE, PARTICULARLY IN VIEW OF THE FACT THAT IN P UBLISHING OF NEWSPAPER WILL NOT CONSTITUTE ANY TRADE OR BUSINESS . ACCORDING TO THE LD. AR, TO PERFORM CHARITY, INCOME IS INEVIT ABLE AND CONTENDED THAT THE ACTIVITIES BEING PURSUED BY THE ASSESSEE MAY CONSTITUTE A TRADE OR BUSINESS, IF IT IS NOT APPLIE D FOR THE PURPOSES OF CHARITY. CONTRARY TO THIS, THE LD. DR SUBMITTED THAT THOUGH THE OBJECT OF THE ASSESSEE IS TO CARRY ON CHARITABLE AC TIVITIES, BUT IT DOES NOT CARRY THOSE CHARITABLE ACTIVITIES, AND IT WAS ONLY CARRYING ON PUBLISHING OF NEWSPAPER IN A COMMERCIAL MANNER, WHICH CANNOT BE CONSTRUED AS CHARITABLE ACTIVITY. IN OTH ER WORDS, IT WAS CONTENDED BY THE LD. DR THAT THE ASSESSEE CARRIED O N ACTIVITIES IN A BUSINESS ORIENTED MANNER, IT WILL DEFINITELY COME WITHIN THE FOURTH LIMB OF THE AMENDED SEC.2(15) OF THE ACT, WH ERE THE PROHIBITION OF ACTIVITY IN THE NATURE OF TRADE, COM MERCE OR BUSINESS FOR ANY ACTIVITY OF RENDERING SERVICE OR A NY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF THE US E OR APPLICATION OR RETENTION OF THE INCOME OF SUCH ACTIVITY IS SPEC IFIED AND HENCE, NOT ENTITLED TO ANY EXEMPTION. - - ITA 210 & 211/1 4 11 6.4. TO ANALYSE THE ACTIVITIES CARRIED ON BY THE AS SESSEE, WE HAVE TO GO THROUGH THE NATURE OF ACTIVITIES PURSUED BY THE ASSESSEE AS ENUMERATED AND PERUSAL OF THAT ACTIVITI ES CARRIED ON BY THE ASSESSEE, CANNOT BE OUST THE INVOLVEMENT OF TRADE, COMMERCE OR BUSINESS OR ANY SERVICE IN CONNECTION WITH TRADE, COMMERCE OR BUSINESS AS CONTEMPLATED UNDER THE STA TUTE. FURTHER, WE NOTE THAT THERE IS SUBSTANTIAL VARIATIO N IN THE STATUTORY POSITION AS IT EXISTED EARLIER TO 1 ST APRIL, 2009, WHERE THE ASSESSEE HAS BEEN GIVEN EXEMPTION U/S.11 OF THE ACT . AND THE POSITION AVAILABLE AFTER AMENDMENT TO SEC.2(15) BRO UGHT 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 INVOLVES 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 OTH ER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF THE INCOME FROM SUCH ACTIVITY. 6.5. THE FIRST LIMB OF EXCLUSION FROM CHARITABLE P URPOSE UNDER CL. (A) WILL BE ATTRACTED, IF THE ACTIVITY PU RSUED BY THE - - ITA 210 & 211/1 4 12 INSTITUTION INVOLVES ANY TRADE, COMMERCE OR BUSINES S. BUT THE SITUATION CONTEMPLATED UNDER THE SECOND LIMB [CL. ( B)] STANDS ENTIRELY ON A DIFFERENT PEDESTAL, WITH REGARD TO TH E SERVICE IN RELATION TO THE TRADE, COMMERCE OR BUSINESS MENTION ED THEREIN. TO PUT IT MORE CLEAR, WHEN THE MATTER COMES TO THE SERVICE IN RELATION TO THE TRADE, COMMERCE 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 BUSI NESS PURSUED BY THE INSTITUTIONS TO WHICH THE SERVICE IS GIVEN B Y THE ASSESSEE. IF THE SAID WORDS ARE ACTUALLY IN RESPECT OF THE TR ADE, COMMERCE OR BUSINESS OF THE ASSESSEE ITSELF, THE SAID CLAUSE [SECOND LIMB OF THE STIPULATION UNDER CL. (B)] IS RATHER OTIOSE. SINCE THE ACTIVITY OF THE ASSESSEE INVOLVING ANY TRADE, COMMERCE OR BU SINESS, IS ALREADY EXCLUDED FROM THE CHARITABLE PURPOSE BY VIR TUE OF THE FIRST LIMB [CL. (A)] ITSELF, THERE IS NO NECESSITY TO STI PULATE FURTHER, BY WAY OF CL. (B), ADDING THE WORDS 'OR ANY ACTIVITY O F RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSIN ESS ..................'. AS IT STANDS SO, GIVING A PURP OSIVE INTERPRETATION TO THE STATUTE, IT MAY HAVE TO BE READ AND UNDERSTOOD THAT THE - - ITA 210 & 211/1 4 13 SECOND LIMB OF EXCLUSION UNDER CL. (B) IN RELATION TO THE SERVICE RENDERED BY THE ASSESSEE, THE TERMS 'ANY TRADE, COM MERCE OR BUSINESS' REFERS TO THE TRADE, COMMERCE OR BUSINESS PURSUED BY THE RECIPIENT TO WHOM THE SERVICE IS RENDERED (AS T HERE MAY BE A SITUATION INVOLVING IN PUBLISHING OF NEWSPAPER. 6.6. 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/201 3 DATED OCTOBER 30, 2013 (62 SOT 65) HAS HELD AS UNDER : GENERALLY SPEAKING, THE ACTIVITIES CARRIED ON BY THE ASSESSEE SUCH AS RUNNING ORPHANAGES, OLD AGE HOMES, REHABILITATION CENTRES, DAY CARE CENTRES FOR ELDERL Y, VOCATIONAL TRAINING TO GIRLS FROM SLUMS, ETC. CANNO T BE CONSIDERED AS ACTIVITIES OF MEDICAL RELIEF OR EDUCA TION OR RELIEF OF THE POOR. IT IS TRUE THAT THE ACTIVITIES CARRIED ON BY THE A SSESSEE TAKE CARE OF THE POOR PEOPLE ALSO. BUT THOSE ACTIVITIES CANNOT BE CLASSIFIED UNDER ANY OF THE SPECIFIC ACTIVITIES OF RELIEF OF THE POOR; EDUCATION OR MEDICAL RELIEF. THE CORRECT WAY TO EXPRESS THE NATURE OF THE ACTIV ITIES CARRIED ON BY THE ASSESSEE IS TO SAY THAT THE ASSES SEE IS CARRYING ON 'ADVANCEMENT OF ANY OTHER OBJECT OF GEN ERAL PUBLIC UTILITY'. WHEN THAT IS THE CASE, THE ASSESSE E IS HIT BY - - ITA 210 & 211/1 4 14 THE PROVISO GIVEN UNDER SECTION 2(15). THE PROVISO READS THAT 'ADVANCEMENT OF ANY OTHER O BJECT OF GENERAL PUBLIC UTILITY' SHALL NOT BE A CHARITABLE P URPOSE, IF IT INVOLVES CARRYING ON ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSIN ESS FOR CONSIDERATION, IRRESPECTIVE OF THE APPLICATION OF T HE MONEY. THEREFORE, THE CASE OF THE ASSESSEE IS HIT BY PROV ISO TO SECTION 2(15) AND THE ASSESSEE IS NOT ENTITLED FOR THE BENEFIT OF SECTION 11 FOR THAT PART OF INCOME GENER ATED IN THE HANDS OF THE ASSESSEE FROM RUNNING ITS INTERNAT IONAL GUEST HOUSE AND WORKING WOMEN'S HOSTEL. ALTERNATIVELY, ONE HAS TO LOOK INTO SECTION 11 (4A ). SUB- SECTION (4A) PROVIDES THAT EXEMPTION SHALL NOT APPL Y 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 T HE ASSESSEE AND SEPARATE BOOKS OF ACCOUNT ARE MAINTAIN ED BY SUCH TRUST OR INSTITUTION IN RESPECT OF SUCH BUS INESS. IN THE PRESENT CASE, THERE IS NO DISPUTE ON THE FA CT THAT THE ASSESSEE IS CARRYING ON THE BUSINESS OF RUNNING AN INTERNATIONAL GUEST HOUSE (IGH) AND WORKING WOMEN'S HOSTEL (WWH). THE ASSESSEE IS MAINTAINING SEPARATE ACCOUNTS FOR THE ABOVE BUSINESS ACTIVITIES. BUT, TH E CRUCIAL QUESTION IS WHETHER RUNNING OF IGH AND WWH IS A - - ITA 210 & 211/1 4 15 BUSINESS INCIDENTAL TO THE ATTAINMENT OF THE OBJECT IVES OF THE TRUST OR NOT. BY ANY STRETCH OF IMAGINATION, IT IS NOT POSSIBLE TO HOLD THAT THE BUSINESS OF RUNNING IGH AND WWH ARE INCIDENTAL TO THE ABOVE STATED OBJECTIVES OF THE ASSESSEE-TRUST. 'INCIDENTAL' MEANS OFFSHOOT OF THE MAIN ACTIVITIES; INHERENT BY-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 MAXIMUM. THE GENESIS OF INCIDENTAL ACTIVITIES MUST BE FROM THE PRINCIPAL AC TIVITIES THEMSELVES. THERE CANNOT BE ONE SOURCE FOR THE PRIN CIPAL ACTIVITIES AND ANOTHER SOURCE FOR INCIDENTAL ACTIVI TIES. IN THE PRESENT CASE, EVEN IF ACTIVITIES OF THE ASSE SSEE WERE STATED TO BE RELIEF OF POOR, MEDICAL RELIEF AND EDU CATION, IT WAS NOT POSSIBLE TO CONCLUDE THAT RUNNING OF BUSINE SS IN THE FORM OF IGH AND WWH WERE BUSINESS INCIDENTAL TO THE CARRYING ON OF MAIN OBJECTIVE OF THE ASSESSEE-TRUST . THEREFORE, THE ASSESSEE IS NOT PROTECTED BY THE PRO VISION STATED IN SECTION 11 (4A), EITHER. 6.7. THUS, AS OBSERVED EARLIER, PUBLISHING OF NEWSP APER IS A COMMERCIAL LINE WHICH CANNOT BE CONSIDERED AS CHARI TABLE ACTIVITY, SO AS TO GRANT EXEMPTION U/S.11 OF THE AC T. ACCORDINGLY, - - ITA 210 & 211/1 4 16 WE ARE IN AGREEMENT WITH THE LOWER AUTHORITIES AND WE DENY THE EXEMPTION U/S.11 OF THE ACT. 6.8 REGARDING DEPRECIATION, WE HAVE TO MAKE IT CLEA R THAT THE CLAIM OF DEPRECIATION TO BE GRANTED ON WRITTEN DOWN VALUE OF THE ASSETS. IN OTHER WORDS, IF THE ASSESSEE HAS ALREAD Y CLAIMED CAPITAL EXPENDITURE ON ACQUISITION OF ASSETS AS APP LICATION OF INCOME IN EARLIER YEARS AND THE VALUE OF THE ASSETS ON WHICH DEPRECIATION CLAIMED HAS BEEN FULLY ALLOWED AS EXPE NDITURE OR APPLICATION IN THE EARLIER YEARS THAT CANNOT BE ANY CLAIM OF DEPRECIATION ONCE AGAIN. THE PRESENT CLAIM OF DEPR ECIATION CANNOT BE A DOUBLE DEDUCTION OVER AND ABOVE THE FUL LY VALUE OF THE ASSETS, IF IT WAS GRANTED AS APPLICATION OF INC OME IN EARLIER YEARS. WITH THESE OBSERVATIONS, THIS GROUND IS ALL OWED FOR STATISTICAL PURPOSES. 6.9 REGARDING TAXABILITY OF INTEREST INCOME, IT IS TO BE TAXED UNDER THE HEAD INCOME FROM OTHER SOURCES AND IT I S NOT AN EXEMPTED INCOME AND THERE IS NO REASON TO EXEMPT TH E SAME FROM TAXATION AS THE ASSESSEE IS NOT ENTITLED EXEMP TION U/S.11 OF THE ACT, IN VIEW OF THE JUDGMENT OF THE SUPREME COU RT IN THE CASE OF BANGALORE CLUB V. CIT (350 ITR 509). - - ITA 210 & 211/1 4 17 6.10. TO SUM UP, THE INCOME OF THE ASSESSEE FOR THESE TWO ASSESSMENT YEARS IS DIRECTED TO COMPUTE BY THE ASSE SSING OFFICER IN ACCORDANCE WITH LAW AND IT IS NEEDLESS T O MENTION HEREIN THAT WHEN THE INCOME IS COMPUTED IN ACCORDAN CE WITH LAW AS BUSINESS INCOME IN THE LIGHT OF THE ABOVE FINDIN GS, USUAL DEDUCTIONS ARE ALLOWABLE UNDER THE PROVISIONS OF TH E ACT WHILE COMPUTING THE INCOME UNDER THE HEAD BUSINESS. MO RE SO, DEDUCTION UNDER SECTIONS 30 TO 38 OF THE ACT, IS TO BE ALLOWED, IF IT IS NOT ALREADY GRANTED TO THE ASSESSEE. 7. IN VIEW OF THIS, ALL OTHER GROUNDS RAISED BY THE ASSESSEE IN THESE APPEALS ARE ONLY ACADEMIC AND DO NOT REQUI RE ANY ADJUDICATION. 8. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON FRIDAY, THE 6 TH OF NOV., 2015 AT CHENNAI. SD/- SD/- ( '# $%& ' ) ( ' & ( ) ) *+,-..-/-01234-54-6-37 *+,-234-5889-4 :7 % '; /JUDICIAL MEMBER ';<=>>8?2@-2@A1BC14 '% /CHENNAI, D' /DATED, THE 6 TH NOV., 2015. MPO* - - ITA 210 & 211/1 4 18 'E FGHG /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. I*7 /CIT(A) 4. I /CIT 5. GJ$ K /DR 6. $LM /GF.-