AVM Charities, CHENNAI V. ITO Exemptions Ward 1, CHENNAI

ITA 279/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 8343 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 22-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V M MAHIDAR IRS
• Assessee Lawyers: T BANUSEKAR; B RAMAKRISHNAN
• Keywords: Gift; Business income; Charitable institution; Principle of natural justice; Benefit of exemption
• Section: 80G; 12A; 56; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI . . . , ! . '#'$ , % !& ' [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./I.T.A. NOS.277, 278, 279, 280, 281, 282, 283, 284 , 285 AND 286/CHNY/2018 / ASSESSMENT YEARS : 1997-98, 1998-99, 2006-07, 2008-09, 2009-10, 2010-11, 2011-12, 2012-13, 2013-2 014 AND 2014-15. M/S. AVM CHARITIES, NO.101, DR. RADHAKRISHNAN SALAI, MYLAPORE, CHENNAI 600 004. VS. THE INCOME TAX OFFICER, EXEMPTIONS WARD 1, CHENNAI. [PAN AAATA 0512F] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : SHRI. T. BANUSEKAR, FCA AND SHRI. B. RAMAKRISHNAN, FCA /RESPONDENT BY : SHRI. V.M. MAHIDAR, IRS, JCIT. /DATE OF HEARING : 17-12-2018 ! /DATE OF PRONOUNCEMENT : 02-01-2019 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER THESE ARE APPEALS FILED BY THE ASSESSEE DIRECTED A GAINST A CONSOLIDATED ORDER DATED 29.12.2017 OF LD. COMMISS IONER OF INCOME ITA NOS.277 TO 286/2018 :- 2 -: TAX (APPEALS)-17, CHENNAI. THOUGH THE CONSOLIDATED ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-17 COVERS ASS ESSMENT YEARS 1987-88, 1991-92, 1997-98, 1998-99, 2006-07 AND 200 8-09 TO 2014- 15, APPEALS FILED BY ASSESSEE ARE ONLY FOR ASSESS MENT YEARS 1997-98, 1998-99, 2006-07 AND 2008-09 TO 2014-2015. 2. GROUNDS TAKEN FOR ALL THE YEARS ARE COMMON AND THES E ARE REPRODUCED HEREUNDER:- 1. FOR THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS CONTRARY TO LAW, FACTS, AND CIRCUMSTANCES OF THE CASE AND PRINCIPLES OF NATURAL JUSTICE. 2. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED CONFIRMING, THE DISALLOWANCE OF DEDUCTION CLAIMED U/S 11 OF THE ACT. 3. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED CONFIRMING THE TREATMENT OF INCOME FROM KALYANAMANDAPAM AS BUSINESS INCOME, DESPITE THE DECISION RENDERED IN EARLIER ASSESSMENT YEARS TREAT ING SUCH INCOME AS INCOME FROM PROPERTY AND CONSEQUENTL Y ERRED IN SUSTAINING THE DENIAL OF THE EXEMPTION U/S.11 OF THE ACT, WITHOUT ASSIGNING PROPER REASON AND JUSTIFICATION. 4. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN PRESUMING THAT THE INCIDENTAL ACTIVITIES AS BUSINESS ACTIVITY IN PAGE 15 OF THE IMPUGNED ORDER, WHICH IS UNJUST AND BAD IN LAW. 5. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT THE MISCONSTRUC TION OF THE PROVISIONS OF SECTION 11 (4) AND SECTION 11 (4A) OF THE ACT WOULD LEAD TO DENYING THE EXEMPTION U/S 11 OF THE ACT ITA NOS.277 TO 286/2018 :- 3 -: 6. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE CONSIDERED THE TEST LAID DO WN BY THE APEX COURT IN THE CASE OF THANTHI TRUST AND THE DECISION OF THE JURISDICTIONAL HIGH COURT INCLUDING THE DECISION RENDERED IN THE APPELLANTS OWN CASE. 7. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAVING STATED IN PARA 4.5 OF PAGE 28 OF T HE IMPUGNED ORDER THAT THE 'INCOME HAS BEEN DERIVED FR OM THE KALYANAMANDAPAMS AND WHICH SHALL NOT BE INCLUDE D IN THE TOTAL INCOME OF THE APPELLANT PROVIDED THAT THE INC OME SO DERIVED IS APPLIED FOR CHARITABLE OR RELIGIOUS P URPOSES .. ..' ERRED IN DENYING THE EXEMPTION U/S 11, WITHO UT APPRECIATING THE FACT THAT THE SAID INCOME WAS FULL Y UTILIZED FOR CHARITABLE PURPOSE APPROVED BY THE OBJ ECTS OF THE TRUST BACKED BY VOLUMINOUS DATA INCLUDING TH E AUDITED FINANCIAL STATEMENTS. 8. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FINDING THAT THERE WAS FAILURE ON PART OF THE APPELLANT IN FURNISHING DATA IS PERVERSE AND NOT IN ACCORDANCE WITH THE MATERIAL AVAILABLE ON RECORD. 9. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THE FACT THAT T HE ONLY ISSUE WAS WITH RESPECT TO TREATMENT OF THE INC OME DERIVED FROM KALYANAMANDAPAM AND THERE WAS NO DISPUTE ON THE APPLICATION OF INCOME FOR CHARITABLE PURPOSE. 10. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO APPRECIATE THAT THE PRESUMPTION OF COMMERCIALITY IN LIGHT OF PROVISO BELOW SECTION 2(1 5) OF THE ACT INTO THE ACTIVITIES PURSUED BY THE APPELLAN T WAS WHOLLY UNJUSTIFIED, THEREBY NEGATING THE CONSEQUENT IAL FINDINGS RECORDED IN RELATION THERETO. 3. FACTS APROPOS ARE THAT ASSESSEE A SOCIETY REGISTE RED UNDER SOCIETIES REGISTRATION ACT, 1860 AND HAVING REGISTR ATION U/S.12A OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT), HAD C LAIMED EXEMPTION ITA NOS.277 TO 286/2018 :- 4 -: SECTION 11 OF THE ACT, IN THE RETURNS FILED FOR TH E IMPUGNED ASSESSMENT YEARS. ASSESSEE WAS HAVING INCOME FROM TWO KALYANAMANDAPAMS NAMELY RAJESWARI THIRUMANA KALYANA MANDAPAM (IN SHORT RTK) LOCATED IN DR. RADHAKRISHNAN SA LAI, CHENNAI AND MENA KALYANAMANDAPAM (IN SHORT MENA) LOCATED A T KUMARAN COLONY MAIN ROAD, VADAPALANI, CHENNAI. ASSESSEE W AS ALSO RUNNING A HEALTH CENTRE AT AVM CHARTIES HEALTH CENTRE AT VADA PALANI. APART FROM THESE ASSESSEE HAD GIVEN A PROPERTY OF FIVE ACRES W ITH BUILDING LOCATED AT VALASARAVAKKAM, CHENNAI TO A TRUST CALLED AVM R AJESWARI EDUCATIONAL TRUST, FROM WHICH THE LATTER RAN A SCH OOL CALLED AVICHI. ONE OTHER BUILDING AT P.S. SIVASWAMY ROAD, CHENNAI, OWNED BY THE ASSESSEE WAS GIVEN TO ONE AVM MEDICAL ENT RESEARCH FOUNDATION FOR RUNNING A DIABETIC CENTRE. ASSESSEE ALSO HAD A LI BRARY AT VIRUGAMBAKKAM, CHENNAI RUN BY THE GOVERNMENT. IT AP PEARS BOTH AVM RAJESWARI EDUCATIONAL TRUST AS WELL AS AVM MEDI CAL ENT RESEARCH FOUNDATION WERE TRUSTS HAVING REGISTRATION UNDER SE CTION 12A OF THE ACT. ASSESSEES OFFICE WAS LOCATED IN A BUILDING CA LLED SIVAKAMI BUILDING AT DR. RADHAKRISHNAN SALAI, CHENNAI. FOR THE IMPUG NED ASSESSMENT YEARS AS WELL AS FOR ASSESSMENT YEARS 1987-88 AND 1991-92, LD. ASSESSING OFFICER HAD DENIED EXEMPTION CLAIMED BY T HE ASSESSEE U/S.11 (1) OF THE ACT CONSIDERING IT TO BE PREDOMI NANTLY INTO BUSINESS. FOR ASSESSMENT YEARS 2008-09 TO 2014-15, LD. ASSESS ING OFFICER ALSO ITA NOS.277 TO 286/2018 :- 5 -: APPLIED PROVISO TO SECTION 2(15) OF THE ACT FOR DEN YING SUCH EXEMPTION. FOR ALL THESE YEARS, LD. ASSESSING OFFIC ER TOOK A VIEW THAT INCOME EARNED BY THE ASSESSEE FROM ITS KALYANAMANDA PAM COULD NOT BE TREATED AS INCOME FROM HOUSE PROPERTY BUT ONLY A S INCOME FROM BUSINESS. 4. APPEALS FOR ASSESSMENT YEARS 1997-98, 1998-99 AN D 2006- 07, NOW BEFORE US, ARE SECOND ROUND OF THE PROCEED INGS SINCE ASSESSEE IN ITS FIRST ROUND WAS SUCCESSFUL BEFORE THIS TRIBUNAL WITH REGARD TO ITS CLAIM FOR EXEMPTION U/S.11 OF THE ACT . THIS TRIBUNAL HAD HELD THAT INCOME DERIVED FROM THE TWO KALYANAMANDA PAMS WERE TO BE CONSIDERED AS PROPERTY INCOME AND SUB SECTIONS (4 ) AND (4A) OF SECTION 11 OF THE ACT DID NOT APPLY. AGAINST THESE ORDERS, THE REVENUE HAD MOVED AN APPEAL BEFORE JURISDICTIONAL HIGH COUR T FOR ASSESSMENT YEARS 1997-98 AND 1998-99 AND THEIR LORDSHIPS THROU GH A JUDGMENT REPORTED AS 323 ITR 27 REMITTED THE QUESTION REGARDING ELIGIBILITY OF THE ASSESSEE FOR CLAIMING EXEMPTION U/S.11 OF THE ACT BACK TO THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WITH THE FOLLO WING OBSERVATIONS. 5. FOR THE PURPOSE OF CONSIDERATION, WE MAY REFER T O THE JUDGMENT OF THIS COURT IN THE CASE OF CIT V. SAMYUK THA GOWDA SARASWATHA SABHA REPORTED IN [2000] 245 ITR 2 42 . THAT WAS A CASE WHERE THIS COURT WAS CONSIDERING TH E QUESTION AS TO WHETHER THE LETTING OUT OF PROPERTY AS MARRIAGE HALL BY A CHARITABLE TRUST FOR EARNING INC OME IS A ITA NOS.277 TO 286/2018 :- 6 -: BUSINESS INCOME OR PROPERTY INCOME AND WHETHER SUCH TRUST IS ENTITLED TO THE BENEFIT OF EXEMPTION UNDER SECTI ON 11 OF THE ACT IN RESPECT OF SUCH INCOME. OF COURSE, THE D IVISION BENCH HELD THAT THE SABHA LETS OUT ITS HALL TO VARI OUS PERSONS AND MERELY BY LETTING OUT ITS HALL THE ASSE SSEE HAS NOT LOST HIS CLAIM TO EXEMPTION. IN FACT, THIS JUDG MENT HAS BEEN FOLLOWED BY THIS COURT IN VARIOUS APPEALS. TO QUOTE A FEW, WE MAY REFER TO T. C. NO. 235 OF 1997 DATED NO VEMBER 12, 2001 (DIRECTOR OF WEALTH-TAX (EXEMPTIONS) V. A. V. M. CHARITIES, MADRAS, T. C. NO. 303 OF 1997 DATED SEPT EMBER 18, 2002 (CIT V. A. V. M. CHARITIES, MADRAS). 6. IN THIS CONTEXT, WE MAY ALSO REFER TO YET ANOTHE R JUDGMENT OF THIS COURT IN THE CASE OF CIT V. HALAI NEMON ASS OCIATION REPORTED IN [2000] 243 ITR 439 . IN THAT CASE, THIS COURT WAS CONSIDERING THE PROVISION OF SECTION 22 AND SECTION 56 OF THE INCOME-TAX ACT WITH REFERENCE TO THE INCOME BY LETT ING OUT BUILDING FOR MARRIAGES. HAVING NOTICED THAT THE BUI LDING WAS LET OUT BY THE ASSESSEE TO OTHERS FOR FUNCTIONS SUC H AS MARRIAGES AND OTHER FUNCTIONS AND MAKING AVAILABLE THE PREMISES FOR LIMITED PERIODS, AND CHAIRS, MIKES, ET C., WERE ALSO MADE AVAILABLE TO OTHERS FOR WHICH A CHARGE WA S LEVIED AND THE LETTING OUT IS ONLY FOR A LIMITED PURPOSE A ND FOR A LIMITED PERIOD AND BY WAY OF LICENCE VIS-A-VIS THE LEASE GRANTED IN RESPECT OF THE PROPERTY ON MONTHLY OR YE ARLY BASIS. HAVING REGARD TO THE ABOVE CIRCUMSTANCES, TH IS COURT HAD SAID THAT THE INCOME DERIVED FROM LETTING OUT O F HALLS FOR MARRIAGE PURPOSES WOULD BE A BUSINESS INCOME AS DEF INED UNDER SECTION 28 OF THE ACT. NEVERTHELESS IN SO FAR AS THIS APPEAL IS CONCERNED, THE LAW STOOD AND APPLICABLE T O THE ASSESSMENT YEAR READS AS UNDER : '11.(4A) SUB-SECTION (1) OR SUB-SECTION (2) OR SUB- SECTION (3) OR SUB-SECTION (3A) SHALL NOT APPLY IN RELATION TO ANY INCOME, BEING PRO FITS AND GAINS OF BUSINESS, UNLESS (A) THE BUSINESS IS CARRIED ON BY A TRUST WHOLLY FO R PUBLIC RELIGIOUS PURPOSES AND THE BUSINESS CONSISTS OF PRINTING AND PUBLICATION OF BOOKS OR PUBLICATION OF BOOKS OR IS OF A KIND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS BEHALF IN THE OFFICIAL GAZETTE ; OR (B) THE BUSINESS IS CARRIED ON BY AN INSTITUTION WHOLLY FOR CHARITABLE PURPOSES AND THE WORK IN CONNECTION WITH THE BUSINESS IS MAINLY CARRIED ON B Y THE BENEFICIARIES OF THE INSTITUTION AND SEPARATE ITA NOS.277 TO 286/2018 :- 7 -: BOOKS OF ACCOUNT ARE MAINTAINED BY THE TRUST OR INSTITUTION IN RESPECT OF SUCH BUSINESS.' 7. THE CONSIDERATION FOR ENTITLEMENT OF EXEMPTION U NDER SECTION 11(4A), THE PROVISION THAT STOOD PRIOR TO T HE INSERTION OF THE NEW PROVISION OF SECTION 11(4A) TO SECTION 1 1 WITH EFFECT FROM APRIL 1, 1992, SHOWS FOR THE ENTITLEMEN T OF EXEMPTION INCOME BEING PROFITS AND GAINS OF BUSINES S AND THE BUSINESS IS CARRIED ON BY A TRUST WHOLLY FOR PU BLIC RELIGIOUS PURPOSES AND THE BUSINESS CONSISTS OF PRI NTING AND PUBLICATION OF BOOKS OR PUBLICATION OF BOOKS OR IS OF A KIND NOTIFIED BY THE CENTRAL GOVERNMENT IN THIS BEHALF I N THE OFFICIAL GAZETTE OR THE BUSINESS IS CARRIED ON BY A N INSTITUTION WHOLLY FOR CHARITABLE PURPOSES AND THE WORK IN CONNECTION WITH THE BUSINESS IS MAINLY CARRIED ON B Y THE BENEFICIARIES OF THE INSTITUTION. 8. FROM THE READING OF BOTH THE ORDERS OF THE COMMI SSIONER OF INCOME-TAX (APPEALS) AS WELL AS THE TRIBUNAL, WE ARE UNABLE TO FIND AS TO WHETHER THE TRUST IN QUESTION WOULD BE ENTITLED TO EXEMPTION IN TERMS OF THE ABOVE PROVISI ON WITH REGARD TO THE PROFITS AND GAINS OF BUSINESS. 9. IT IS PERTINENT TO POINT OUT THAT THE ABOVE PROV ISION OF SUB- SECTION (4A) WAS REPLACED BY INSERTION OF A NEW PRO VISION WITH EFFECT FROM APRIL 1, 1992, AND THAT SECTION RE ADS AS FOLLOWS : '11.(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.' 10. FOR ENTITLEMENT OF THE SAID NEW PROVISION, THE INCOME BEING THE PROFITS AND GAINS OF BUSINESS AND THE BUS INESS IS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTIVES OF T HE 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. THE CONSIDERATION FOR ENTITLEMENT OF THE PROVISION IS ENTIRELY DIFFERENT WITH REFERENCE TO N EWLY INSERTED PROVISION. 11. THERE IS ABSOLUTELY NO DISCUSSION ABOUT THE APP LICATION OF THE PROVISION TO THE TRUST IN QUESTION BY THE CO MMISSIONER ITA NOS.277 TO 286/2018 :- 8 -: OF INCOME-TAX (APPEALS) AS WELL AS THE TRIBUNAL. IN OUR OPINION, THE ENTIRE ISSUE SHOULD BE RECONSIDERED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) AS TO WHETHER THE TRUST IN QUESTION IS ENTITLED TO THE EXEMPTION IN R ESPECT OF THE ASSESSMENT YEAR BY APPLYING THE RELEVANT PROVISIONS . IN THAT CASE, IF THE COMMISSIONER OF INCOME-TAX (APPEALS) C OMES TO THE CONCLUSION THAT THE INCOME IS A PROPERTY INC OME, THEN HE HAS TO FIND OUT THE ACTUAL QUANTUM OF TAX COMPON ENT WITH REFERENCE TO THE ACTUAL PROFIT AND THE AMOUNTS SPEN T TOWARDS THE OBJECT OF THE TRUST. IN THE ABSENCE OF ANY OF THE DISCUSSION, WE ARE OF THE VIEW THAT WE HAVE TO ONLY REMAND THE MATTER AFTER SETTING ASIDE BOTH THE ORDERS OF T HE COMMISSIONER OF INCOME-TAX (APPEALS) AND THE TRIBUN AL FOR FRESH CONSIDERATION. 12. ACCORDINGLY, THE ORDERS OF THE COMMISSIONER OF INCOME- TAX (APPEALS) AND THE TRIBUNAL ARE SET ASIDE AND TH E MATTER IS REMANDED TO THE COMMISSIONER OF INCOME-TAX (APPE ALS) FOR FRESH CONSIDERATION. WE MAY MAKE IT CLEAR THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) SHOULD CONSIDE R THE MATTER AFRESH BY CONSIDERING BOTH THE JUDGMENTS OF THIS COURT REPORTED IN CIT V. HALAI NEMON ASSOCIATION [2 000] 243 ITR 439 (MAD) AND CIT V. SAMYUKTHA GOWDA SARASWATHA SABHA REPORTED IN [2000] 245 ITR 242 (MA D) WITH REFERENCE TO THE PROVISION. WE MAY ALSO POINT OUT THAT ALL THE PROVISIONS RELATING TO EXEMPTION PRIOR TO 1 989 AND THEREAFTER PRIOR TO 1992 AND AFTER APRIL 1, 1992, H AVE BEEN CONSIDERED BY THE SUPREME COURT IN THE CASE OF ASST . CIT V. THANTHI TRUST REPORTED IN [2001] 247 ITR 785 AND TH AT JUDGMENT ALSO BE TAKEN NOTE OF BY THE COMMISSIONER OF INCOME-TAX (APPEALS). WE ALSO MAKE IT CLEAR THAT BO TH THE REVENUE AS WELL AS THE ASSESSEE ARE ENTITLED TO PLA CE WHATEVER JUDGMENTS WHICH THEY INTEND TO RELY BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS) FOR HIS CONSIDERATION. FOR ASSESSMENT YEAR 2006-07, THIS TRIBUNAL ITSELF H AD SET ASIDE THE QUESTION REGARDING ELIGIBILITY OF THE ASSESSEE FOR CLAIMING EXEMPTION U/S.11 OF THE ACT BACK TO THE LD. COMMISSIONER OF I NCOME TAX (APPEALS) FOR RE-CONSIDERATION, FOLLOWING THE ABOVE REFERRED JUDGMENT ITA NOS.277 TO 286/2018 :- 9 -: OF HONBLE JURISDICTIONAL HIGH COURT. APPEALS FOR A SSESSMENT YEARS 2008-09 TO 2014-15, ARE FIRST ROUND. 5. AS ALREADY MENTIONED BY US, THE PRIMARY REASON, FOR DENYING THE EXEMPTION CLAIMED BY THE ASSESSEE U/S.11(1) O F THE ACT, WAS THAT ITS INCOME CONSISTED OF RENT RECEIVED ON RUNNING OF TWO KALYANAMANDAPAM WHICH WAS RUN AS A BUSINESS. AS PE R THE LD. ASSESSING OFFICER THESE PROPERTIES WERE NOT SETTLED BY THE SETTLOR AS TRUST PROPERTY AND HENCE COULD NOT BE CONSIDERED A S PROPERTIES HELD UNDER TRUST. FURTHER, AS PER THE LD. ASSESSING OF FICER, OBJECTS OF THE ASSESSEE DID NOT AUTHORIZE RUNNING OF KALYANAMANDAP AM IN A COMMERCIAL MANNER. ACCORDING TO THE LD. ASSESSING OFFICER THE ACTIVITY OF RUNNING KALYANAMANDAPAMS WERE NOT INCIDENTAL TO ANY OF ITS MAIN OBJECTS BUT WAS INDEPENDENT IN NATURE. LD. ASSESSIN G OFFICER TOOK A VIEW THAT ASSESSEE, BY RUNNING THESE KALYANAMANDA PAMS, WAS INTO A BUSINESS AND THIS WAS ITS PREDOMINANT ACTIVITY. ACCORDING TO THE LD. ASSESSING OFFICER, INCOME OF THE ASSESSEE LOST THE EXEMPTION UNDER SECTION 11(1) OF THE ACT BY APPLICATION OF SUB SEC TION (4A) OF SECTION 11 OF THE ACT. IN CONTRA, AS WELL AS AGREEING WITH THE LD. ASSESSING OFFICER, ON A NUMBER OF ASPECTS, LD. COMMISSIONER O F INCOME TAX (APPEALS), IN HIS CONSOLIDATED ORDER FOR ASSESSMEN T YEARS 1987-88, 1991-92, 1997-98, 1998-99, 2006-07 AND 2008-09 TO 2014-2015, ITA NOS.277 TO 286/2018 :- 10 -: AFTER CONSIDERING THE JUDGMENT OF HONBLE JURISDICT IONAL HIGH COURT IN ASSESSEES CASE REFERRED (SUPRA), CAME TO THE FOLL OWING CONCLUSIONS:- (I) AS PER THE OBJECTS CLAUSE OF THE ASSESSEE SOCIE TY ITS MAIN OBJECT WAS MEDICAL RELIEF. (II) THE LAND FOR KALYANAMANDAPAMS WERE ACQUIRED BY THE ASSESSEE SUBSEQUENT TO ITS FORMATION IN 1959, AN D BUILDING CONSTRUCTED THEREON. SUCH KALYANAMANDAPAMS ACQUIRE D BY THE ASSESSEE AFTER ITS FORMATION, COULD NOT BE CON SIDERED AS PROPERTY HELD UNDER TRUST. (III) RENTALS RECEIVED FROM KALYANAMANDAPAMS WERE I N THE NATURE OF BUSINESS INCOME, SINCE THERE WAS NO LANDL ORD TO TENANT RELATIONSHIP BETWEEN THE CUSTOMERS WHO WERE MAKING ONE TIME PAYMENT FOR ITS USE. HENCE, THE INC OME OF THE ASSESSEE WAS RIGHTLY CONSIDERED BY THE LD. ASSE SSING OFFICER AS EMANATING FROM BUSINESS ACTIVITY. (IV) BY VIRTUE OF JUDGMENT OF HONBLE APEX COURT IN THE CASE OF ACIT VS. THANTHI TRUST, 247 ITR 785, ASSESSEE MIGHT BE ENTITLED TO CLAIM THE BENEFIT OF SECTION 11 (1) OF THE ACT ON ITS BUSINESS INCOME FOR ASSESSMENT YEARS 1997-98, 1998- 99, 2006-07 AND 2008-2009, SUBJECT TO IT FULFILLING OTHER ITA NOS.277 TO 286/2018 :- 11 -: REQUIREMENTS FOR CLAIMING SUCH BENEFIT. (V) FROM ASSESSMENT YEARS 2009-10 TO 2014-15, ASSES SEE WAS HIT BY FIRST PROVISO TO SECTION 2(15) OF THE ACT, W HICH WAS INTRODUCED BY FINANCE ACT, 2008. ASSESSEE BEING AN INSTITUTION INVOLVED IN ACTIVITIES OF GENERAL PU BLIC UTILITY, IT COULD NOT BE CONSIDERED AS CHARITY. (VI) DETAILS OF APPLICATION OF THE INCOME EARNED T OWARDS ANY CHARITABLE PURPOSE WERE NOT FURNISHED, THOUGH ASSE SSEE CLAIMED EXPENDITURE ON HEALTH CENTRE, MEDIAL RELIE F AND AVICHI SCHOOL. FURTHER, THE OBJECT CLAUSE OF THE AS SESSEE DID NOT ENABLE IT TO PURSUE EDUCATIONAL ACTIVITIES. TH US EVEN FOR ASSESSMENT YEARS 1997-98, 1998-99, 2006-07 AND 2008 -09, ASSESSEE BECAME INELIGIBLE FOR CLAIMING THE BENEF IT UNDER SECTION 11(1) OF THE ACT. (VII) DETAILS WITH REGARD TO AMOUNT SPENT ON CHARITABLE A CTIVITIES WERE NOT PRODUCED. EFFECTIVELY, LD. COMMISSIONER OF INCOME TAX (APPEAL S), HELD THAT ASSESSEE WAS NOT ELIGIBLE FOR EXEMPTION CLAIMED BY IT U/S.11(1) OF THE ACT FOR ANY OF THE IMPUGNED ASSESSMENT YEARS. ITA NOS.277 TO 286/2018 :- 12 -: 6. NOW BEFORE US, LD. AUTHORISED REPRESENTATIVE STRONG LY ASSAILING THE ORDERS OF THE LOWER AUTHORITIES SUBMI TTED THAT MAIN OBJECT OF THE ASSESSEE SOCIETY, AS CONTAINED IN ITS MEMO RANDUM OF ASSOCIATION INDICATED CARRYING OUT ANY ACTIVITY, CALCULATED TO PROMOTE ANY OBJECT WHICH WAS WHOLLY CHARITABLE IN NATURE, APART FROM DOING MEDICAL RELIEF. ACCORDING TO HIM, THE CHARITABLE A CTIVITY ALLOWED BY THE MAIN OBJECT DID NOT EXCLUDE EDUCATION. AS PER THE LD. AUTHORISED REPRESENTATIVE, ASSESSEE HAD NO GRIEVANCE IN SO FA R AS, INCOME FROM THE KALYANAMANDAPAMS BEING TREATED AS BUSINESS REC EIPTS BY THE LOWER AUTHORITIES. HOWEVER, ACCORDING TO HIM, THE KALYANAMANDAPAMS WERE NOTHING BUT PROPERTY HELD UNDER TRUST AND IN COME AND EARNINGS THEREFROM WERE USED PURELY FOR CHARITY. ACCORDI NG TO HIM, IT WAS IN CORRECT TO SAY THAT PROPERTY SETTLED AT THE TIME O F FORMATION OF TRUST OR SOCIETY, ALONE COULD BE CONSIDERED AS PROPERTY UND ER TRUST. AS PER THE LD. AUTHORISED REPRESENTATIVE, PROPERTY HELD UNDER TRUST, WOULD INCLUDE LAND AND BUILDINGS ACQUIRED BY A TRUST FROM ITS IN COME, SUBSEQUENT TO ITS FORMATION AS WELL. CONTENTION OF THE LD. AUTHOR ISED REPRESENTATIVE, WAS THAT THE MAIN ACTIVITIES OF THE ASSESSEE WERE PROVIDING MEDICAL RELIEF AND EDUCATION HELP. ACCORDING TO THE LD. A UTHORISED REPRESENTATIVE, RUNNING OF SCHOOLS AND GIVING CONTR IBUTIONS TO ORGANIZATIONS PURSUING ACTIVITIES OF MEDICAL RELIE F AND EDUCATION, WHICH ITA NOS.277 TO 286/2018 :- 13 -: WERE ALL HAVING REGISTRATION U/S.12A OF THE ACT, WA S NOTHING BUT ACTIVITIES PREDOMINATELY IN THE FIELD OF HEALTH CA RE AND EDUCATION. CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE WAS THAT ASSESSEE WAS SUBJECTED TO THE AUDIT MANDATED UNDER THE ACT FOR T RUSTS CLAIMING EXEMPTION UNDER SECTION 11(1) OF THE ACT, EVERY YEA R, AND HAD FILED ITS RETURNS SHOWING APPLICATION OF FUNDS. THESE R ETURNS AND ACCOUNTS, WHICH WERE PRODUCED BEFORE THE LD. ASSESSING OFFICE R, AS PER THE LD. AUTHORISED REPRESENTATIVE, PROVED APPLICATION OF F UNDS FOR MEDICAL RELIEF, EDUCATION AND HEALTH. AS PER THE LD. AUTHO RISED REPRESENTATIVE, ASSESSEE HAD RECEIVED VERY NOMINAL RENTED FOR TH E HEALTH CENTRE, DIABETIC AND ENT CENTRE, SCHOOL AND LIBRARY. ACCORD ING TO HIM, FIVE ACRES OF PROPERTY WITH A BUILDING OF 40,000 SQ.FT, LOCATED AT A PRIME AREA WAS GIVEN OUT BY THE ASSESSEE FOR RUNNING AVICHI SCHOOL, FOR AN ANNUAL RENT OF H1,00,000/-. AS PER THE LD. AUTHO RISED REPRESENTATIVE, THIS BY ITSELF WAS A CLEAR DEMONST RATION OF CHARITY DONE IN THE FIELD OF EDUCATION. ACCORDING TO HIM, IF LET OUT AT MARKET RATES, THIS PROPERTY WOULD HAVE FETCHED THE ASSES SEE CRORES OF RUPEES. SIMILARLY, ACCORDING TO HIM, HEALTH CENT RE AS WELL AS DIABETIC AND ENT CENTRE WERE RENTED OUT FOR NOMINAL RENT F OR USE IN THE MEDICAL FIELD. ALL THESE AS PER THE LD. AUTHORISED REPRESENTATIVE ESTABLISHED THAT THE PREDOMINANT OF THE OBJECT OF THE ASSESSEE WAS NOTHING BUT EDUCATION AND MEDICAL RELIEF. THUS, AC CORDING TO HIM, ITA NOS.277 TO 286/2018 :- 14 -: LOWER AUTHORITIES FELL IN ERROR IN HOLDING THAT A SSESSEE AS NOT ELIGIBLE FOR EXEMPTION CLAIMED BY IT U/S.11(1) OF THE ACT AN D HIT BY PROVISO TO SECTION 2(15) OF THE ACT. 7. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT 96% OF THE INCOME OF THE ASSESSEE WAS FROM RENTING OUT THE PROPERTIES. ACCORDING TO HIM, RENTAL INCOME RECEIV ED BY THE ASSESSEE FROM RTK AND MENA FOR PREVIOUS YEAR ENDING 31 ST MARCH, 2014 CAME TO H6,70,01,000/-. AS PER THE LD. DEPARTMENTAL REPR ESENTATIVE, ASSESSEE WAS CLEARLY RUNNING A BUSINESS IN THE GUIS E OF CHARITY. ACCORDING TO HIM, OBJECT CLAUSE OF THE ASSESSEE DID NOT HAVE ANY EDUCATION IN IT. AS PER THE LD. DEPARTMENTAL REPRES ENTATIVE, DONATIONS GIVEN BY THE ASSESSEE TO OTHER TRUSTS HAVING 80G RE GISTRATION COULD AT BEST BE CONSIDERED AS EQUIVALENT TO CONTRIBUTION GI VEN BY AN INDIVIDUAL ON WHICH 50% DEDUCTION WAS AVAILABLE, THAT TOO TO T HE EXTENT ALLOWABLE UNDER SECTION 80G OF THE ACT. RELYING ON A SURVEY CONDUCTED BY THE DEPARTMENT IN THE PREMISES OF THE ASSESSEE ON 16.07.2018, LD. DEPARTMENTAL REPRESENTATIVE SUBMIT TED THAT RESULTS OF SUCH SURVEY CLEARLY INDICATED THAT ASSESSEE HAD LEA SED OUT ITS PROPERTY AT DR. RADHAKRISHNAN SALAI, MYLAPORE TO A FIRM CALL ED M/S. CINE FILM DISTRIBUTORS FOR A SUM OF H4,80,000/- WHICH WAS LES S THAN ITS MARKET RATE. AS PER THE LD. DEPARTMENTAL REPRESENTATIVE T HE SAID FILM ITA NOS.277 TO 286/2018 :- 15 -: DISTRIBUTORS HAD SUBLET THIS PROPERTY FOR A SUM O F H1,14,00,000/- AND ONE OF PARTNERS OF THIS FILM DISTRIBUTION FIRM, NA MELY SHRI. M. SARAVANAN WAS A TRUSTEE OF THE ASSESSEE TRUST. ACC ORDING TO HIM, APART FROM ALL THE REASONS MENTIONED LD. COMMISSION ER OF INCOME TAX (APPEALS) FOR DENYING THE ASSESSEE THE BENEFIT OF SECTION 11(1) OF THE ACT, THERE WAS THUS A VIOLATION OF THE NATURE ME NTIONED IN SECTION 13(1) ( C) OF THE ACT. 8. AD LIBITUM REPLY OF THE AUTHORISED REPRESENTATIVE WAS THAT THE SURVEY WAS DONE BY THE DEPARTMENT ON 16.07.201 8 AND COULD AT THE BEST BE USED FOR ANY PROCEEDINGS SUBSEQUENT TO THE SAID DATE. ACCORDING TO HIM, THE SAID SURVEY REPORT CANNOT HAV E ANY BEARING ON THESE APPELLATE PROCEEDINGS. FURTHER, ACCORDING TO THE LD. AUTHORISED REPRESENTATIVE, IF SAME RATE OF RENTALS AS PROJECT ED BY THE LD. DEPARTMENTAL REPRESENTATIVE TO HAVE BEEN RECEIVED BY THE ASSESSEE FOR RTK WAS APPLIED TO THE AVACHI SCHOOL PREMISES , IT SHOULD HAVE RECEIVED RENTALS OF MORE THAN H30,00,00,000/-. AC CORDING TO HIM, RTK WAS SITUATED IN 20 GROUNDS EQUIVALENT TO 1.10 ACRE OF LAND, WHEREAS AVICHI SCHOOL WAS SITUATED IN FIVE ACRES OF LAND WITH A 40,000 SQ.FT. BUILDING, WHICH WAS GIVEN ON A NOMIN AL RENT OF H1,00,000/-, FOR RUNNING A CHARITABLE SCHOOL. ACCOR DING TO HIM, ASSESSEE HAD FORGONE THE RENT WHICH OTHERWISE IT C OULD HAVE EARNED, ITA NOS.277 TO 286/2018 :- 16 -: AS ITS COMMITMENT TO EDUCATION. THUS, AS PER THE LD. AUTHORISED REPRESENTATIVE, PROPORTION OF RENTAL INCOME RECEIVE D BY THE ASSESSEE VIZ-A-VIZ ITS GROSS RECEIPTS COULD NOT BE TAKEN AS A MEASURE FOR DECIDING THE CHARITABLE NATURE OF THE ASSESSEE. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. ASSESSEE HAS NOT DISPUTED THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX (APP EALS) THAT RENTALS RECEIVED FROM ITS KALYANAMANDAPAM HAD TO BE CONS IDERED UNDER THE HEAD INCOME FROM BUSINESS. IN FACT HONBLE JURISDIC TIONAL HIGH COURT WHILE REMITTING THE QUESTION BACK TO THE LD. COMMIS SIONER OF INCOME TAX (APPEALS) FOR ASSESSMENT YEARS 1997-98, 98-99 E TC, HAD INDICATED THAT INCOME OF THE ASSESSEE FROM THE KALYANAMANDA PAM WAS MORE IN THE NATURE OF BUSINESS INCOME, BY VIRTUE OF THE JU DGMENT OF THEIR LORDSHIPS IN THE CASE OF CIT VS.HALAI NEMON ASSOCIATION, (2000) 243 ITR 439. THIS VIEW WAS TAKEN BY THEIR LORDSHIPS OVERRULING THE OPINION OF THIS TRIBUNAL IN THE EARLIER ROUND, WHEREIN CO-O RDINATE BENCH HELD THE INCOME FROM KALYANAMANDAPAM AS INCOME FROM HOUS E PROPERTY. FOR TAKING THIS VIEW, IN THE EARLIER ROUND, THIS TR IBUNAL HAD RELIED ON A JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS. SAMYUKTHA GOWDA SARASWATHA SABHA, (2000) 245 ITR 24 2 , WHICH WAS ALSO DULY CONSIDERED BY THEIR LORDSHIPS WHEN THE QU ESTION WAS ITA NOS.277 TO 286/2018 :- 17 -: REMITTED BACK TO THE LD. COMMISSIONER OF INCOME TA X (APPEALS). OBVIOUSLY, ASSESSEE CANNOT NOW RAISE A PLEA AGAIN ST THE FINDING OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT INCOME OF THE ASSESSEE FROM RENTING OUT KALYANAMANDAPAMS WERE BU SINESS INCOME, AND IT HAS WISELY DONE SO. HOWEVER, IT IS PEEVED ON THE VIEW TAKEN BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT SUCH BUSINESS INCOME COULD NOT BE CONSIDERED AS INCOME EARNED F ROM A PROPERTY HELD UNDER THE TRUST, THEREBY DISENTITLING THE ASS ESSEE FROM TAKING ADVANTAGE OF SUB SECTION (4) OF SECTION 11 OF THE A CT. SECTION 11(4) AND 11(4A) OF THE ACT, AS IT WAS STOOD IN THE PERIO D COVERED BY THE APPEALS BEFORE US AND WHICH ARE APPOSITE ARE REPROD UCED HEREUNDER:- SECTION 11(4) OF THE ACT:- FOR THE PURPOSES OF THIS SECTION 'PROPERTY HELD U NDER TRUST' INCLUDES A BUSINESS UNDERTAKING SO HELD, AND WHERE A CLAIM IS MADE THAT THE INCOME OF ANY SUCH UNDERTAKING SHALL NOT BE INCLUDED IN THE TOTAL INCO ME OF THE PERSONS IN RECEIPT THEREOF, THE ASSESSING OFFIC ER SHALL HAVE POWER TO DETERMINE THE INCOME OF SUCH UNDERTAK ING IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT RELAT ING TO ASSESSMENT ; AND WHERE ANY INCOME SO DETERMINED IS IN EXCESS OF THE INCOME AS SHOWN IN THE ACCOUNTS OF TH E UNDERTAKING, SUCH EXCESS SHALL BE DEEMED TO BE APPL IED TO PURPOSES OTHER THAN CHARITABLE OR RELIGIOUS PURPOSES . SECTION 11(4A) OF THE ACT:- 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 INCIDENTA L TO THE ITA NOS.277 TO 286/2018 :- 18 -: ATTAINMENT OF THE OBJECTIVES OF THE TRUST OR, AS TH E CASE MAY BE, INSTITUTION, AND SEPARATE BOOKS OF ACCOUNT ARE MAINTAINED BY SUCH TRUST OR INSTITUTION IN RESPECT OF SUCH BUSINESS. LD.CIT(APPEALS) WAS OF THE OPINION THAT KALYANAMAND APAM HAVING BEING BUILT BY THE ASSESSEE SUBSEQUENT TO ITS FORMA TION IN THE YEAR 1959, COULD NOT BE CONSIDERED AS PROPERTY UNDER TR UST. LD. AUTHORISED REPRESENTATIVE, DURING THE COURSE OF HIS ARGUMENTS HAS STATED THAT THE LAND IN WHICH KALYANAMANDAPAM WERE BUILT WAS PART OF THE ORIGINAL SETTLEMENT AND THE BUILDING WERE BU ILT THEREIN BY THE ASSESSEE FROM ITS INCOME. BE THAT AS IT MAY, THERE IS NO DISPUTE THAT THE LAND AND BUILDING WAS OWNED BY THE ASSESSEE SO CIETY, WHETHER IT WAS PART OF ORIGINAL SETTLEMENT OR NOT. IN OUR OPI NION, ONCE INCOME OF A TRUST IS USED BY IT TO ACQUIRE A PROPERTY, THE P ROPERTY SO ACQUIRED WILL BE PROPERTY HELD UNDER TRUST. INCOME FROM S UCH PROPERTY WILL BE INCOME FROM PROPERTY UNDER THE TRUST. THUS, IN OUR OPINION, RENTAL INCOME RECEIVED BY THE ASSESSEE FROM KALYANAMANDAPA M THOUGH IT WAS IN THE NATURE OF INCOME FROM BUSINESS, SUCH INC OME WAS NOTHING BUT INCOME FROM PROPERTY HELD UNDER TRUST. 10. NOW THE QUESTION IS WHETHER ASSESSEE CAN BE DENI ED THE EXEMPTION CLAIMED BY IT U/S.11(1) OF THE ACT BY VIR TUE OF SUB SECTION ITA NOS.277 TO 286/2018 :- 19 -: (4A) THEREOF. FOR ANSWERING THIS QUESTION WE HAVE TO SEE WHETHER RENTING OUT THE KALYANAMANDAPAMS COULD BE CONSIDER ED AS INCIDENTAL TO THE ATTAINMENT OF THE OBJECTS OF THE ASSESSEE. OBJECTS OF THE ASSESSEE AS IT APPEAR IN ITS MEMORANDUM OF ASSOCI ATION IS REPRODUCED HEREUNDER:- 3. THE OBJECTS FOR WHICH THE SOCIETY IS ESTABLISHED ARE :- A) TO PROVIDE FOR, CARRY OUT, AND - DO ALL SUCH ACT S AND THINGS AS WILL OR ARE LIKELY OR CALCULATED TO, PROM OTE THE OBJECTS AND PURPOSES OF A WHOLLY AND SOCIETY CHARI TABLE NATURE. B) TO PROVIDE MEDIAL RELIEF IN ITS MOST COMPREHENSI VE SENSE AND OTHER RELIEF WHATSOEVER, BUT OF A WHOLLY CHARITABLE NATURE TO THE PUBLIC IRRESPECTIVE OF NAT IONALITY CASTE, CREED, COLOUR, SECT OR ANY OTHER DISTINCTIO N WHATSOEVER. C) WITHOUT PREJUDICE TO THE ABOVE COMPREHENSIVE OBJECTS EXPRESSED IN GENERAL TERMS AND, WITHOUT LIM ITING, IN ANY WAY, THE SCOPE OR EXTENT THEREOF, TO ESTABLI SH, PROMOTE, PROVIDE FOR AND MAINTAIN MATERNITY HOMES NURSING HOMES, HOSPITALS, GENERAL AND FOR THE TREAT MENT OF CHILDRENS DISEASES, PROVIDE FACILITIES FOR SURGICAL OPERATIONS. OUT-PATIENT. DISPENSARIESSUPPLY OF MEDI CINES AND AFTER-TREATMENT CARE AND TO TAKE CARE OF AND PR OVIDE FOR ORPHANS, THE AGED, THE INFIRM AND THE DESTITUTE D) FOR ANY OF THE PURPOSES OF THE SOCIETY I. TO ACQUIRE, BY ACCEPTING AS GIFT, PURCHASE, LEASE, EXCHANGE OR OTHERWISE, LANDS, BUILDINGS AND STRUCTURES OF ANY TENURE OR DESCRIPTION, TO SELL, MORTGAGE, EXCHANGE, LEASE, LET OUT, HIRE OR OTHERWISE DEAL WITH ITA NOS.277 TO 286/2018 :- 20 -: SUCH PROPERTY; AND TO BUILD CONSTRUCTIONS ON LANDS AND EXTEND, IMPROVE AND REPAIR BUILDINGS AND STRUCTURES AND OTHERWISE DEAL WITH THE PROPERTY; AND TO RECEIVE RENT AND OTHER INCOME FROM PROPERTY II. TO MAKE DONATIONS TO SUCH PERSONS OR BODIES AND IN SUCH CASES, AND EITHER OF CASH OR OTHER. ASSETS AS THE SOCIETY MAY THINK DIRECTLY OR INDIRECTLY CONCLUSIVE TO ANY OF ITS OBJECTS. III. TO DO ALL SUCH ACTS AS MAY BE NECESSARY FOR THE BENEFIT OF THE SOCIETY OR IN ITS INTEREST TO DERIVE BENEFITS FROM ITS ASSETS CONSISTENTLY ALWAYS WITH THE CHARITABLE NATURE OF THE SOCIETY'S OBJECTS. IV TO OPEN CURRENT. DEMAND DEPOSIT, FIXED DEPOSIT AND OTHER ACCOUNTS WITH ANY SCHEDULED BANK AND OPERATE SAME; V. TO RECEIVE GIFTS, DONATIONS, CONTRIBUTIONS, SUBSCRIPTIONS, WHETHER IN CASH OR IN KIND. VI. TO DO, SUBJECT ALWAYS TO THE PROVISIONS OF THE SOCIETIES REGISTRATION ACT, 1860 AND TO THE RULES AND REGULATIONS OF THIS SOCIETY, ALL SUCH OTHER OR FURTHER ACTS AND THINGS AS SHALL OR MAY BE CONDUCIVE OR INCIDENTAL TO THE ATTAINMENT OF CHARITABLE OBJECTS FOR WHICH THIS SOCIETY IS FORMED. BY VIRTUE OF CLAUSE (D) ABOVE, ASSESSEE CAN PURCHAS E, BUILD AND LET OUT PROPERTIES FOR ITS OTHER PURPOSES. THE PURPOSE MEN TIONED IN CLAUSE (A) CLEARLY INDICATE PROMOTION OF ANY OBJECT WHICH WAS WHOLLY AND SOLELY CHARITABLE IN NATURE. NO DOUBT LD. COMMISSIONER OF INCOME TAX ITA NOS.277 TO 286/2018 :- 21 -: (APPEALS) HAD MENTIONED THIS TO BE A VERY WIDE EXPR ESSIONS, DISENTITLING IT FROM CLAIMING EXEMPTION U/S.11 OF THE ACT. IT IS TRUE THAT CLAUSE (A) IS OF A WIDE AMPLITUDE. HOWEVER WHA T WE NEED TO REMEMBER IS THAT THE ASSESSEE WAS HAVING REGISTRATI ON U/S.12A OF THE ACT SINCE 11.04.1975, AND SUCH REGISTRATION STILL CONTINUED. IF THE MAIN OBJECT OF THE ASSESSEE WAS TOO WIDE, AS MENTIO NED BY LD. COMMISSIONER OF INCOME TAX (APPEALS), IT WOULD NOT HAVE BEEN GIVEN SUCH REGISTRATION. HAVING GIVEN SUCH REGISTRATION, WHICH WAS ALIVE SINCE 1975, REVENUE CANNOT NOW TURN BACK AND SAY THAT THE MAIN OBJECT WAS VERY WIDE AND ASSESSEE COULD NOT BE GIVEN BENE FIT OF SECTION 11(1) OF THE ACT. ACTIVITY OF RENTING OUT KALYANAMA NDAPAM IN OUR OPINION COULD BE CONSTRUED AS ONLY INCIDENTAL TO TH E ATTAINMENT OF ITS MAIN OBJECT. ASSESSEE THEREFORE COULD TAKE ADVANTA GE OF SUB SECTION (4) OF SECTION 11 OF THE ACT. THERE IS NO DISPUTE THAT ASSESSEE HAD MAINTAINED SEPARATE BOOKS FOR ITS KALYANAMANDAPAM. THE AUDITED ACCOUNTS FILED ALONG WITH ITS RETURN CLEARLY SHOW S EPARATE INCOME AND EXPENDITURE FOR EACH OF THE ACTIVITIES, INCLUDING K ALYANAMANDAPAM. SUB SECTION 4A WOULD NOT APPLY TO THE ASSESSEE ONCE ITS BUSINESS IS CONSIDERED AS INCIDENTAL TO THE ATTAINMENT OF ITS MAIN OBJECTS. ITA NOS.277 TO 286/2018 :- 22 -: 11. NOW COMING TO THE QUESTION WHETHER THE PREDOMINANT ACTIVITY OF THE ASSESSEE WAS CHARITY AND IF SO WHAT WAS THE NATURE OF CHARITY. IT IS NOT DISPUTED THAT APART FROM THE T WO KALYANAMANDAPAMS, ASSESSEE WAS HAVING PROPERTIES FROM WHICH A SCHOOL, A HEALTH CENTRE AND A LIBRARY WERE RUN. IT MIGHT BE TRUE THAT THE SCHOOL WAS RUN BY ANOTHER TRUST. HOWEVER, REN TAL RECEIVED BY THE ASSESSEE FOR RUNNING THE SCHOOL CALLED AVICHI SCHOO L WAS NOMINAL. WE FIND GREAT STRENGTH IN THE ARGUMENT OF THE LD. AUTH ORISED REPRESENTATIVE, THAT PROPERTY FROM WHICH THE SCHOOL WAS RUN, IF GIVEN OUT ON MARKET RATES, WOULD FETCH TENS OF CRORES IN INCOME, AND FORGOING SUCH INCOME FOR EDUCATIONAL PURPOSE, WAS N OTHING BUT CHARITY IN THE NATURE OF EDUCATION. ESPECIALLY SO, SINCE T HE SCHOOL WAS RUN BY A TRUST WHICH WAS UNDISPUTEDLY HAVING REGISTRATION U/S.12A OF THE ACT. APART FROM THIS ASSESSEE HAD EARNED LITTLE REVENUE FROM ITS DIABETIC CENTRE. IT HAD ALSO GIVEN OUT A PREMISES TO THE GO VERNMENT FOR A LIBRARY. ALL THE ACTIVITIES OF THE ASSESSEE WERE E ITHER IN THE FIELD OF EDUCATION OR IN FIELD OF MEDICAL CARE. NET REVENUE EARNED BY THE ASSESSEE AND ITS EXPENDITURE IN THE FIELD OF MEDIC AL AID, HEALTH CARE AND DONATIONS AS COMPILED FROM ITS INCOME AND EXPE NDITURE ACCOUNT AND BALANCE SHEET READS AS UNDER:- ITA NOS.277 TO 286/2018 :- 23 -: ASSESSM ENT YEAR NET REVENUE RAJESWARI KALYANAMANDAPAM A/C- DONATIONS AND MEDICAL AID CHARITABLE EXPENDITURE 1997-98 8,46,748 4,90,315 3,21,091 80,373 3,11,531 1998-99 18,09,985 3,42,045 3,36,118 1,27,689 89,802 2006-07 60,54,507 4,71,500 2,69,468 74,000 1,63,009 2008-09 1,10,03,311 4,06,548 2,81,730 2,24,270 5,17,000 2009-10 1,13,75,508 8,51,108 2,61,353 5,04,676 5,85,000 2010-11 73,00,106 10,86,304 1,26,421 4,93,000 13,16,500 2011-12 2,88,61,952 45,73,439 --- 1,27,000 2,31,33,490 2012-13 1,80,01,123 61,87,543 --- 1,34,000 35,32,000 2013-14 73,40,730 58,83,146 --- 3,35,000 27,72,000 2014-15 4,13,29,717 1,17,57,158 --- 3,47,483 41,87,090 NET REVENUE INCLUDES WHAT THE ASSESSEE RECEIVED AS RENTALS FROM ITS KALYANAMANDAPAMS ALSO. SUBMISSION OF THE ASSESSEE THAT DONATIONS GIVEN WERE ALL TO ORGANIZATION ENGAGED IN EITHER ED UCATION OR MEDICAL RELIEF, WHICH WERE HAVING REGISTRATION UNDER SECTI ON 80G OF THE ACT WAS NOT REBUTTED BY THE REVENUE. NO DOUBT, LD. DEP ARTMENTAL ITA NOS.277 TO 286/2018 :- 24 -: REPRESENTATIVE HAS RAISED AN ARGUMENT THAT SUCH D ONATIONS CAN AT BEST BE TREATED AS DONATION GIVEN BY AN INDIVIDUAL FOR WHICH BENEFIT TO THE EXTENT GIVEN UNDER SECTION 80G ALONE COULD BE C LAIMED. HOWEVER, A READING OF SECTION 11(1) OF THE ACT CLEARLY SHOW THAT, TYPES OF INCOME MENTIONED IN CLAUSES (A) TO (D) THEREIN HAV E TO BE EXCLUDED WHILE COMPUTING THE TOTAL INCOME OF A PERSON IN RE CEIPT OF SUCH INCOME. EXCLUSION IS AVAILABLE TO ANY PERSON IRRES PECTIVE OF STATUS. VIZ WHETHER AN INDIVIDUAL, HUF, AOP, FIRM OR COMPANY. VIDE CLAUSE (A), INCOME WHICH IS APPLIED FOR CHARITABLE PURPOSE OR R ELIGIOUS PURPOSE IS NECESSARILY TO BE EXCLUDED DONATIONS GIVEN TO A TR UST HAVING 12A REGISTRATION WHICH IS PURSUING AN OBJECT OF MEDICAL RELIEF, EDUCATION OR RELIEF TO POOR, IS IN OUR OPINION EQUIVALENT TO USI NG THE MONEY FOR SUCH PURPOSE. INTENTION REMAINS THE SAME. NO DOUBT, L D. COMMISSIONER OF INCOME TAX (APPEALS) HAS OBSERVED THAT ASSESSEE COU LD NOT PRODUCE EVIDENCE FOR THE CHARITY DONE BY IT. HOWEVER, IT I S NOT DISPUTED THAT ASSESSEE HAD MAINTAINED BOOKS OF ACCOUNTS AND PR ODUCED THE BOOKS AND RECORDS BEFORE LD. ASSESSING OFFICER. SU CH BOOKS WERE SUBJECT TO AUDITS AND ASSESSEE HAD FILED AUDIT R EPORTS IN FORM 10A OF THE ACT. IN SUCH CIRCUMSTANCES, WE FIND NO REASON TO UPHOLD THE FINDING OF THE LOWER AUTHORITIES THAT PREDOMINANT A CTIVITY OF THE ASSESSEE WAS NOT CHARITY. ITA NOS.277 TO 286/2018 :- 25 -: 12. COMING TO THE APPLICATION OF PROVISO TO SECTION 2(1 5) OF THE ACT, SAID SECTION IS REPRODUCED HEREUNDER:- 2 (15) 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, AND THE ADVANCEMENT OF A NY OTHER OBJECT OF GENERAL PUBLIC UTILITY ; [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 NAT URE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF REN DERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR ANY OTHER CONSIDERAT ION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, O R RETENTION, OF THE INCOME FROM SUCH ACTIVITY, UNLESS - (I) SUCH ACTIVITY IS UNDERTAKEN IN THE COURSE OF ACTUAL CARRYING OUT OF SUCH ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY; AND (II) THE AGGREGATE RECEIPTS FROM SUCH ACTIVITY OR ACTIVITIES DURING THE PREVIOUS YEAR, DO NOT EXCEED TWENTY PER CENT OF THE TOTAL RECEIPTS, OF THE TRUST OR INSTITUTION UNDERTAKING SUCH ACTIVITY OR ACTIVITIE S, OF THE PREVIOUS YEAR ] FIRST PROVISO APPLIES TO AN ASSESSEE ENGAGED IN ADV ANCEMENT OF GENERAL PUBLIC UTILITY OTHER THAN RELIEF TO THE POO R, EDUCATION, MEDICAL RELIEF, PRESERVATION OF ENVIRONMENT AND PRESERVATI ON OF MONUMENTS. AS ALREADY MENTIONED BY US, ASSESSEES CHARITABLE A CTIVITIES WERE DIRECTLY OR INDIRECTLY IN THE NATURE OF RELIEF TO THE POOR OR EDUCATION OR MEDICAL RELIEF. IT WAS NOT AN ORGANIZATION WHICH W AS PURSUING AN ACTIVITY OF GENERAL PUBLIC UTILITY, DIFFERENT FROM EDUCATION, MEDICAL RELIEF OR RELIEF TO THE POOR. FIRST PROVISO TO SECT ION 2(15) OF THE ACT IS ATTRACTED ONLY WHERE AN ASSESSEE CARRIES ON ACTIVIT IES WHICH WAS OF ITA NOS.277 TO 286/2018 :- 26 -: GENERAL PUBLIC UTILITY OTHER THAN THOSE MENTIONED S PECIFICALLY IN THE DEFINITION OF CHARITABLE PURPOSE GIVEN IN SECTION 2 (15) OF THE ACT. IN THE CIRCUMSTANCES, WE ARE OF THE OPINION THAT ASSE SSEE WAS ELIGIBLE FOR THE EXEMPTION CLAIMED BY IT U/S.11(1) OF THE ACT FOR THE IMPUGNED ASSESSMENT YEARS. ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE LD. ASSESSING OFFICER IS DIRECTED TO GIVE ASSES SEE THE EXEMPTION CLAIMED BY IT U/S.11(1) OF THE ACT FOR THE IMPUGNED ASSESSMENT YEARS. 13. IN THE RESULT, THE APPEALS OF THE ASSESSEE FOR ALL THE ASSESSMENT YEARS ARE ALLOWED. ORDER PRONOUNCED ON WEDNESDAY, THE SECOND DAY OF JANUARY 2019, AT CHENNAI. SD/- SD/- ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( ! . '#'$ ) (ABRAHAM P. GEORGE) % / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED:02 JANUARY, 2019 KV &' ()*) / COPY TO: 1 . / APPELLANT 3. +,' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF ITA NOS.277 TO 286/2018 :- 27 -: