SNR Sons Charitable Trust, CHENNAI V. DCIT, Coimbatore

ITA 3127/CHNY/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6042 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 02-08-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 10-11-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIJAYAPRABHAJCIT
• Keywords: Business income; Charitable institution
• Section: 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI , !' #$ , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI GEORGE MATHAN, JUDICIAL MEMBER ./ I.T.A.NO.3127 /MDS./2016 ( / ASSESSMENT YEAR :2013-14) M/S.SNR SONS CHARITABLE TRUST , 395,SAROJINI NAIDU ROAD, SIHDAPUDUR, COIMBATORE 641 044. VS. THE DCIT(EXEMPTIONS), RACE COURSE ROAD, COIMBATORE. PAN AABTS 1080 P ( $% / APPELLANT ) ( &'$% / RESPONDENT ) / APPELLANT BY : MR.SAROJ KUMAR PARIDA,ADVOCATE /RESPONDENT BY : MS.VIJAYAPRABHA,JCIT, DR ! ' #$% / DATE OF HEARING : 12 - 10 - 201 7 &' #$% / DATE OF PRONOUNCEMENT : 12 - 10 - 201 7 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-2, COIMBA TORE DATED 28.07.2016 PERTAINING TO ASSESSMENT YEAR 2013-14. ITA NO. :- 2 -: 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS F OR ADJUDICATION. 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO CONSIDER THE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE AND A LSO THE SCOPE OF ASSESSMENT UNDER THE PROVISIONS OF LAW. 3. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N HOLDING THAT THE RENTAL INCOME FROM LETTING OUT OF COMMUNITY HALL IS IN THE NATURE OF BUSINESS INCOME BROUGHT TO TAX AS PROVISO TO SECTIO N 2(15) OF THE ACT IS ATTRACTED. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) OUGHT T O HAVE APPRECIATED THAT LETTING OUT OF IMMOVABLE PROPERTY IS ASSESSABLE AS INCOME FROM HOUSE PROPERTY WHICH WILL NOT FALL UNDE R ANY TYPES OF INCOME CONTEMPLATED UNDER PROVISO TO SEC.2( 15). 5. THE COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO ESTABLISH THAT THE RECEIPTS ARE NOT FROM ANY ACTIVITY WHICH INVOLV ES IN THE NATURE OF TRADE, COMMERCE OR BUSINESS OR FROM ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSIN ESS FOR A CESS OR FEE OR ANY OTHER CONSIDERATION. 6. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N NOT CONSIDERING THE SUBMISSION MADE BY THE ASSESSEE IN PROPER PERSP ECTIVE. 7. THE INCOME FROM COMMUNITY HALL CANNOT BE BROUGHT TO TAX AS IT IS FULLY UTILIZED FOR THE OBJECTS OF THE TRUST FOR WHI CH THE TRUST WAS ESTABLISHED AND NO EXCESS INCOME WAS DETERMINED. TH EREFORE THE DECISION OF THE SUPREME COURT [IN THE THANTHI TRUST [(2001) 247 ITR 785/115 TAXMAN 126(SC)] AND SURAT ART SILK CLOTH MA NUFACTURERS ASSOCIATION ((1980)121 ITR 11(1979) 2 TAXMAN 501)] WOULD SQUARELY APPLY TO THE FACTS AND CIRCUMSTANCES OF THE ASSESSE E. 8. THEREFORE THE CONDITIONS FOR EXEMPTION CONTEMPLA TED UNDER SECTION 11(4) AND (4A) OF THE INCOME TAX ACT IS APPLICABLE FOR THE FACTS OF THE ITA NO. :- 3 -: ASSESSEE AND CONSEQUENTLY THE INCOME FROM COMMUNITY HALL IS EXEMPT UNDER SECTION 11 OF THE ACT AND THEREFORE AS SESSING THE INCOME FROM COMMUNITY HALL AS BUSINESS IS NOT WITHI N THE FOUR CORNERS OF LAW. 3. THE BRIEF FACTS OF THE ISSUE ARE THAT THE LD. ASSESSING OFFICER CHARGED INCOME OF THE TRUST FROM A COMMUNITY HALL T O TAX. THE BACKGROUND FACTS ARE THAT THE ASSESSEE IS A REGISTERED CHARITA BLE TRUST U/S 12A, RUNNING MEDICAL AND OTHER EDUCATIONAL INSTITUTIONS. THE TRU ST OWNS A COMMUNITY HALL WHICH IS RENTED OUT FOR MARRIAGE PURPOSES AND IN TH E RETURN FILED FOR THIS YEAR, INCOME DERIVED FROM THE COMMUNITY HALL WAS AL SO CLAIMED EXEMPT U/S 11 ALONG WITH OTHER INCOMES. THE RETURN WAS TAKEN U P FOR SCRUTINY. DURING THE ASSESSMENT PROCEEDINGS, THE AO TOOK UP THE ISSU E OF EXEMPTION CLAIMED IN RESPECT OF INCOME FROM COMMUNITY HALL AND CALLED UPON THE ASSESSEE TO SUBSTANTIATE THE CLAIM OF THIS EXEMPTION. THE ASSES SEE FILED VARIOUS SUBMISSIONS AND ARGUMENTS TO THE EFFECT THAT RUNNIN G OF KALYANA MANTAPAM WAS INCIDENTAL TO THE ACHIEVEMENT OF TRUST OBJECTIV ES OF PROVIDING EDUCATION AND MEDICAL RELIEF AND THAT THIS INCOME WAS IN THE NATURE OF INCOME FROM HOUSE PROPERTY. THE AO WAS HOWEVER NOT CONVINCED W ITH THE ARGUMENTS OF THE APPELLANT AND TOOK A STRONG VIEW THAT RUNNING O F THE COMMUNITY HALL IS A SEPARATE BUSINESS ACTIVITY AND IT DOES NOT FIT IN T O ANY ACTIVITY INCIDENTAL TO PROVIDING EDUCATION, MEDICAL RELIEF OR ANY RELIEF T O THE POOR. ON THE OTHER HAND, IT IS AN ACTIVITY TOWARDS ADVANCEMENT OF GENE RAL PUBLIC UTILITY AND PROVISO INSERTED TO SECTION 2(15) CLEARLY COVERS TH IS ACTIVITY. HE FURTHER OBSERVED THAT OTHER CONDITIONS FOR TREATING IT AS A N ACTIVITY OUTSIDE THE ITA NO. :- 4 -: PURVIEW OF CHARITABLE PURPOSE ARE SATISFIED IN VIEW OF IT BEING RUN ON COMMERCIAL LINES. THE AO ALSO HELD THAT THE ACTIVIT Y OF LETTING OUT COMMUNITY HALL IS AN ACTIVITY TOTALLY UNRELATED TO CHARITABLE OBJECTS OF THE TRUST AND IN SUCH CIRCUMSTANCES, PROVISIONS OF SECTION 11(4A) AL SO MAKE THE APPELLANT INELIGIBLE TO EXEMPTION U/S 11 IN RESPECT OF INCOME FROM COMMUNITY HAIL. THEREFORE, THE AO DENIED EXEMPTION AND BROUGHT NET INCOME FROM COMMUNITY HAIL RS 96,33,743/- TO TAX. AGGRIEVED BY THIS ORDER, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A). ON APPEAL, THE LD.CIT(A) UPHELD THE ACTION OF THE LD. ASSESSING OFFICER BY FOLLOWIN G THE DECISION OF CHENNAI TRIBUNAL IN ASSESSEE'S OWN CASE IN THE ASSESSMENT Y EAR 2010-11. AGAINST THE ORDER OF LD.CIT(A), NOW THE ASSESSEE IS IN AP PEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IT IS NOTICED THAT SIMILAR ISSUE WAS DECIDE D BY THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2010-11 IN I.T.A.NO.2630/MDS./2014 VIDE ORDER DATED 12.06.2015 WHEREIN THE TRIBUNAL HELD THAT:- FROM THE ABOVE IT IS APPARENT THAT RUNNING OF THE COMMUNITY HALL BY THE ASSESSEE IS NOT AN ACTIVITY RELATABLE TO EDUCAT ION, MEDICAL RELIEF, AND RELIEF TO POOR AS PROVIDED UNDER THE ACT. AT T HE MOST, IT CAN BE STRETCHED TO BE AN ACTIVITY FOR ADVANCEMENT OF ANY OTHER OBJECTS OF GENERAL PUBLIC UTILITY. HOWEVER, THE MATERIALS ON RECORD SHOW THAT THIS ACTIVITY OF THE ASSESSEE OF HIRING OUT THE COM MUNITY HALL EXCLUSIVELY FOR MARRIAGES AND HIGH LEVEL CONSUMER E XHIBITION AT A PRE- DETERMINED FEE IS A COMMERCIAL IN NATURE. IT CANNO T BE CONSIDERED ITA NO. :- 5 -: AS AN ACTIVITY RELATED TO OR INCIDENTAL TO EDUCATIO N, MEDICAL RELIEF, RELIEF TO POOR ETC. MOREOVER IT IS APPARENT THAT TH E COMMUNITY HALL IS NOT ATTACHED OR FORMING PART OF THE EDUCATIONAL INS TITUTIONS OR HOSPITALS OWNED BY THE ASSESSEE WHEREBY IT CAN BE S AID THAT DURING THE SPARE TIME WHEN THE ASSET IS NOT USED FOR EDUCA TION/MEDICAL RELIEF ETC., IT IS COMMERCIALLY EXPLOITED. IF THE ASSET IS USED FOR EDUCATION/MEDICAL RELIEF ETC., AND DURING THE SPARE TIME THE ASSET IS COMMERCIALLY EXPLOITED, IN SUCH EVENT, PROBABLY IT COULD BE SAID THAT SUCH ACTIVITY TO BE INCIDENTAL TO THE OBJECTS OF ED UCATION/MEDICAL RELIEF ETC., OF THE ASSESSEE TRUST. IN THE GIVEN C ASE BEFORE US THE KALYANA MANDAPAM IS A DISTINCT AND SEPARATE ASSET S PECIALLY DESIGNED TO CONDUCT SUCH COMMERCIAL ACTIVITY. LOOKI NG AT THE NATURE OF THIS ACTIVITY CONDUCTED BY THE ASSESSEE TRUST, I T CAN BE CONSIDERED ONLY AS A COMMERCIAL ACTIVITY OF THE ASSESSEE TRUST . FURTHER THE CASE LAWS RELIED BY THE ASSESSEE WOULD NOT BE APPLICABLE TO THE CASE OF THE ASSESSEE, BECAUSE SECTION-2(15) OF THE ACT WAS SUBSEQUENTLY AMENDED. FURTHER, SECTION-11(4) OF THE ACT PROVIDE S AS FOLLOWS WHICH HAS BEEN POINTED OUT BY THE LD. ASSESSING OFF ICER IN HIS ORDER:- SECTION.11(4) FOR THE PURPOSES OF THIS SECTION PRO PERTY HELD UNDER TRUST INCLUDES A BUSINESS UNDERTAKING SO HELD, AND WHERE A CLAIM IS MADE THAT THE INCOME OF ANY SUCH UNDERTAKING SHALL NOT BE INCLUDE D IN THE TOTAL INCOME OF THE PERSONS IN RECEIPT THEREOF, THE [ASSESSING] OFF ICER SHALL HAVE POWER TO DETERMINE THE INCOME OF SUCH UNDERTAKING IN ACCORDA NCE WITH THE PROVISIONS OF THE ACT RELATING TO ASSESSMENT; AND WHERE ANY IN COME SO DETERMINED IS IN EXCESS OF THE INCOME AS SHOWN IN THE ACCOUNTS OF TH E UNDERTAKING, SUCH EXCESS SHALL BE DEEMED TO BE APPLIED TO PURPOSES OT HER THAN CHARITABLE OR RELIGIOUS PURPOSES. IN THE CASE GUJARAT INDUSTRIAL CORPORATION VS. ACIT IN 129 ITD 73 (2010) AHMADABAD IT HAS HELD THAT THE WORD INCLUDES OCCU RRING AT SECTION 11(4) MEANS THAT THERE IS A REFERENCE OF PROPERTY OR BUSI NESS OF A TRUST WHICH IS A BUSINESS UNDERTAKING IN ADDITION TO THE OTHER PROPE RTIES OF THE TRUST. IN THIS ITA NO. :- 6 -: GIVEN CASE BEFORE US, THE COMMUNITY HALL OR MARRIAG E HALL WHATEVER MAY BE CALLED IS THE ASSET OF THE SEPARATE BUSINESS OF THE ASSESSEE WHICH FALLS APART FROM THE OTHER CHARITABLE ACTIVITIES CONDUCTED BY T HE ASSESSEE. THEREFORE CONSIDERING THE FACTS AND CIRCUMSTANCE OF THE CASE, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE REVENU E. 5. RESPECTFULLY APPLYING THE RATIO LAID DOWN IN TH E ABOVE ORDER OF TRIBUNAL, WE ARE INCLINED TO DISMISS ALL THE GRO UNDS RAISED BY THE ASSESSEE IN ITS APPEAL. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT AFTER CONCLUSION OF HEARING ON 12TH OCTOBER, 2017, AT CHENNAI. SD/ - SD/ - ( !' #$ ) (GEORGE MATHAN) ) / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER ( ' / CHENNAI ) / DATED: 12 TH OCTOBER, 2017. K S SUNDARAM * #+, - ,# / COPY TO: 1 . / APPELLANT 3. ! .# () / CIT(A) 5. ,12 #3 / DR 2. / RESPONDENT 4. ! .# / CIT 6. 24 5' / GF