The Willington Charitable Trust, CHENNAI V. Addl. CIT, CHENNAI

ITA 873/CHNY/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 8747 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 08-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 20-04-2015
• Court: TRIBUNAL
• Department Lawyers: V VIVEKANDANCIT
• Assessee Lawyers: S SRIDHAR
• Keywords: Gift; Charitable institution; Retrospective amendment
• Section: 263; 10; 11

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI , ! ' . #$ % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.873/MDS./2015 / ASSESSMENT YEAR : 2010-11 M/S.THE WILLINGDON CHARITABLE TRUST, NO.603,6 TH FLOOR, RANI SEETHAI HALL, CHENNAI 600 006. VS. THE DY.DIRECTOR OF INCOME TAX, EXEMPTIONS, CHENNAI. [PAN AAATT 0683 N ] ( () / APPELLANT) ( *+() /RESPONDENT) / APPELLANT BY : MR.S.SRIDHAR,ADVOCATE /RESPONDENT BY : MR.V.VIVEKANDAN,CIT DR / DATE OF HEARING : 08 - 06 - 201 6 / DATE OF PRONOUNCEMENT : 20 - 07 - 2016 , / 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 (EXEMPTIONS),CHENNA I PASSED U/S.263 OF THE ACT DATED 30.03.2015 PERTAINING TO A SSESSMENT YEAR 2010-11. MA NO.222/15 :- 2 -: 2. THE GROUND IN THIS APPEAL IS WITH REGARD TO ASS UMPTION OF JURISDICTION OF COMMISSIONER OF INCOME TAX (EXEMPTI ONS) U/S.263 OF THE ACT AND THEREAFTER, OBSERVING THAT THERE IS A F AILURE ON THE PART OF THE AO TO APPLY THE CORRECT PROVISIONS OF LAW TO TH E FACTS OF THE ASSESSEE CASE, AND HENCE SET ASIDE THE ASSESSMENT O RDER DATED 28.02.2013 FOR THE YEAR 2010-11 ON THE REASON THAT THE AO IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E AND CONSEQUENTLY DIRECT THE AO TO MAKE FRESH ASSESSMENT AFTER KEEPI NG IN VIEW THE LAW RELATING TO CHARITY IN PROVISO TO SECTION 2(15) OF THE ACT WITH EFFECT FROM 01.04.2009. 3. THE FACTS OF THE CASE ARE THAT THE ORIGINAL ASS ESSMENT IN THIS CASE WAS FRAMED U/S.143(3) OF THE ACT VIDE ORDER DA TED 28.02.2013. THE CIT GOING THROUGH THE ABOVE SAID ORDER OF THE A .O, WAS OF THE OPINION THAT THE AO HAD NOT MADE SUFFICIENT ENQUIRY WHILE FRAMING THE SAID ASSESSMENT ORDER. AO ALSO FAILED TO CONSIDER THE DECISION OF THE MADRAS HIGH COURT IN ASSESSEE'S OWN CASE REPORTED I N (2011) 330 ITR 0024 WHEREIN HELD THAT COMMERCIAL ACTIVITY IS BEING CARR IED ON BY THE ASSESSEE BY USING BUILDING A A KALYANAMANDAPAMS, AUDITORIUMS AN D WORKING WOMEN HOSTEL AND THE AO FAILED TO EXAMINE THE APPLICABILI TY OF THE FIRST AND SECOND PROVISO TO SEC.2(15) OF THE ACT, WHICH WAS INTRODUC ED WITH EFFECT FROM 01.04.2009. 3.1 FURTHER, ACCORDING TO CIT, THE ASSESSEE FAILED TO APPLY THE ACCUMULATED INCOME OF ` 1.25 CRORE AS MENTIONED IN FORM NO.10 DATED MA NO.222/15 :- 3 -: 24.10.2000 WITHIN THE STIPULATED PERIOD OF 10 YEARS U/S. 11 (3)(C) OF THE INCOME TAX ACT. THIS PROVES THAT THERE WAS LAC K OF ENQUIRY ON THE ISS UE BY THE AO. AS PER THE PROVISIONS OF SEC.11(3)(C) , IF THE ACCUMULATED AMOUNT IS NOT SPENT WITHIN A PERIOD OF 10 YEARS, OR IN THE YEAR IMMEDIATELY FOLLOWING THE EXPIRY THEREOF, THE SAME WOULD GET TA XED. THAT PERIOD ENDS IN A.Y 2010-11. BUT, THE AO FAILED IN HIS DUTY TO BRIN G THIS AMOUNT OF ` 1.25 CRORE TO TAX. UNDOUBTEDLY, THIS OMISSION ON THE PAR T OF THE AO RENDERED MADE THE ASSESSMENT ORDER ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF REVENUE. 3.2. REGARDING THE NEXT ISSUE WHEREBY THE AO HAS AL LOWED APPLICATION ON ACCOUNT OF CAPITAL WORK-IN-PROGRESS TO THE EXTENT OF ` 9,12,60,6981- IN THE ASSESSMENT ORDER, THE AR OF THE ASSESSEE HAS NOT RA ISED ANY OBJECTION EITHER WRITTEN OR ORAL -- BEFORE THE CIT(E). THIS G OES TO SHOW THAT THE ASESSEE ADMITS THAT HIGHER CLAIM OF CAPITAL WORK-I N-PROGRESS HAS BEEN ALLOWED BY THE AO EVEN THOUGH SUCH CLAIM WAS NOT MA DE IN ITS RETURN OF INCOME. SINCE NO OBJECTION HAS BEEN RAISED BY THE A SSESSEE BEFORE CIT(E), IT INDIRECTLY AMOUNTS TO ADMISSION ON THE PART OF THE ASSESSEE THAT ACTION U/S 263 IS PROPER ON THIS ISSUE. IT IS ALSO A WELL SETT LED PROPOSITION OF LAW THAT THE CAPITAL WORK-IN-PROGRESS MADE OUT OF BORROWED FUNDS CANNOT BE CONSIDERED AS APPLICATION OF INCOME AS SUCH APPLICATION WAS OU T OF LOAN FUNDS AND NOT OUT OF INCOME OF THE TRUST. THE ASSESSING OFFICER H AS NOT FURNISHED ANY REASON AS TO WHY HE HAS ALLOWED EXCESS APPLICATION TO THE EXTENT OF ` 7,41,93,451/- ( ` 9,12,60,698 ` 1,70,67,247) ESPECIALLY WHEN THE ASSESSEE HAS NOT MADE ANY SUCH CLAIM. MA NO.222/15 :- 4 -: 3.3 NOW, THE MOST IMPORTANT ISSUE IS APPLICABILITY OF PROVISOS TO SEC.2(15) OF THE IT ACT AND THE FAILURE ON THE PART OF THE ASSES SING OFFICER TO CONSIDER THE SAME. THE MAIN OBJECTS OF THE ASSESSEE SOCIETY, AS APPEARING IN ITS MEMORANDUM OF ASSOCIATION ARE AS FOLLOWS:- (I). TO ESTABLISH, RUN OR MAINTAIN EDUCATIONAL, TEC HNICAL OR TECHNOLOGICAL INSTITUTIONS OF ALL KINDS IN INDIA FO R THE BENEFIT OF THE PUBLIC. (II). TO INSTITUTE AND MAINTAIN OR SUPPORT HOSPITAL S, CRECHES AND DISPENSARIES. (II,). TO MAINTAIN HOMES FOR ORPHANS, TO SUPPORT AN D EDUCATE PUPILS AND STUDENTS AND DESTITUTE CHILDREN. (IV). TO AWARD SCHOLARSHIPS AND STIPENDS FOR EDUCAT ION AND TO INSTITUTE LECTURESHIPS AND ARRANGE LECTURES AND ARR ANGE OR SUPPORT CULTURAL ACTIVITIES OF A CHARITABLE NATURE ENSURING FOR THE BENEFIT OF THE PUBLIC AND ALSO TO ESTABLISH ENDOWME NTS FOR SUCH PURPOSES. (V). TO PROVIDE RELIEF FOR THE POOR AND THE DISTRES SED. (VI). TO PROVIDE FOR THE CARRYING OUT OF PROTECTION OR ANIMALS USEFUL TO MANKIND AND GENERALLY TO SPEND AMOUNTS FOR CHARI TABLE PURPOSES ENSURING FOR THE BENEFIT OF THE PUBLIC. (VII). TO COLLECT AND MAINTAIN A FUND TO BE CONTRIB UTED BY VOLUNTARILY DONATIONS AND SUBSCRIPTIONS FOR THE OBJECTS AND PUR POSES OF THE TRUST. (VIII). TO ACCEPT ANY GIFTS OR PROPERTY MOVABLE OR IMMOVABLE ON SUCH TERMS AND CONDITIONS AS MAY BE AGREED TO BETWEEN TH E DONOR OR DONORS AND THE TRUST BUT SO AS NOT TO INCUR ANY LIA BILITY ON THE PART OF THE TRUST OR MEMBERS OF THE TRUST BOARD AND PROVIDED ALSO THAT THE CONDITIONS AGREED TO ARE OF A CHARITABLE N ATURE ENSURING FOR THE BENEFIT OF THE PUBLIC. MA NO.222/15 :- 5 -: (IX) TO ACT AS TRUSTEES AND MANAGERS OF ANY INSTITU TION OR TRUST HAVING SIMILAR OBJECTS IN FIT AND PROPER CASES. (X) TO CONSTRUCT AND MAINTAIN ANY BUILDINGS OR WORK S NECESSARY OR CONVENIENT FOR THE PURPOSE OF THE TRUST. (XI). TO INCORPORATE WITH ITSELF ANY INSTITUTION, S OCIETY OR ASSOCIATION HAVING OBJECTS WHOLLY OR IN PART, SIMILAR TO THOSE OF THE TRUST AND ARE OF A CHARITABLE NATURE ENSURING FOR THE BENEFIT OF THE PUBLIC AND TO COOPERATE WITH ANY PERSON OR BODY OF PERSONS IN ADI OF SUCH OBJECT, PROVIDED SUCH OBJECT IS OF A CHARITABL E NATURE ENSURING FOR THE BENEFIT OF THE PUBLIC. (XII). TO DO SUCH OTHER LAWFUL ACTS AND THINGS AS M AY BE NECESSARY OR INCIDENTAL AND CONDUCIVE TO THE ATTAINMENT OF TH E ABOVE AIMS AND OBJECTS OR ANY OF THEM 3.4. AGAINST THE AFORESAID BACKDROP, CIT(E) FURTHER OBSERVED THAT ALTHOUGH THE ASSESSEE SOCIETY IS HAVING NUMBER OF LOFTY OBJE CTS IN ITS MEMORANDUM OF ASSOCIATION, IN PRACTICE, IT IS NOT CARRYING OUT AN Y OF THE CHARITABLE OBJECTS MENTIONED THEREIN. THE ACTIVITIES PRESENTLY UNDERTA KEN ARE PREDOMINANTLY FOR THE ADVANCEMENT OF GENERAL PUBLIC UTILITY. FOR EX AMPLE, THE TWO MARRIAGE HALLS VIZ. RAJAH MUTHIAH HALL AND RANI MEYYAMMAI HA LL ARE UTILIED FOR CONDUCTING MARRIAGES, SOCIAL FUNCTIONS, CORPORATE M EETINGS AND OTHER ASSEMBLIES. THE TARIFFS CHARGED ARE HIGH ENOUGH TO ATTRACT ONLY PEOPLE WITH BETTER AND HIGHER ECONOMIC STATUS. THE RUNNING OF H OSTELS FOR STUDENTS AND WORKING WOMEN ARE ALSO ON COMMERCIAL LINES WHERE AC COMMODATION IS GIVEN BOTH WITH A/C FACILITIES AND NON A/C FACILITIES ON COLLECTION OF PRESCRIBED FEES. THESE COLLECTIONS ARE THE MAIN SOURCES OF THE SOCIE TY AND EVEN AFTER MEETING ALL RELATED EXPENSES THERE IS HUGE SURPLUS LEFT AT THE END OF THE YEAR. THESE ACTIVITIES SQUARELY FALL WITHIN THE LAST LIMB OF CH ARITY VIZ. ADVANCEMENT OF ANY MA NO.222/15 :- 6 -: OTHER OBJECT OF GENERAL PUBLIC UTILITY. IN FACT, T HE HONBLE HIGH COURT OF MADRAS IN THE ASSESSES OWN CASE IN DIT(E) VS. WIHINGDON CHARITABLE TRUST 330 ITR 24 (MAD.) HAS CATEGORICALLY HELD IN PARA 10.1 AS UNDER: IT IS NOT IN DISPUTE THAT THE ASSESSEE TRUST HOLDS THE PROPERTY IN TRUST. IT IS ALSO NOT IN DISPUTE THAT THE COMMERCIA L ACTIVITY IS BEING CARRIED ON BY THE ASSESSEE BY USING THE BUILDING AS MARRIAGE HALLS, AUDITORIUMS ETC. 3.5 ACCORDING TO CIT, THE ASSESSEE-SOCIETY IS ENG AGED IN COMMERCIAL ACTIVITIES OF RUNNING MARRIAGE HALLS, AUDITORIUMS, WORKING WOMEN HOSTEL AND HOSTEL FOR GIRLS. LOOKING AT THE ASSESSEES ACTIVIT IES THE INEVITABLE CONCLUSION THAT COULD BE DRAWN IS THAT ACTIVITIES OF THE SOCIE TY CLEARLY FALL IN THE LAST LIMB OF THE DEFINITION OF CHARITY U/S.2(15) OF THE L.T. ACT, I.E. ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THE PROVIS IONS OF SECTION 2(15) DEFINING CHARITABLE PURPOSE UNDERWENT A CHANGE WI TH EFFECT FROM 1/4/2009 BY THE FINANCE ACT, 2008 WHICH INTRODUCED FIRST PRO VISO TO SECTION 2(15). SECOND PROVISO TO THE SAID SECTION WAS ALSO INTRODU CED BY FINANCE ACT, 2010 WITH RETROSPECTIVE EFFECT FROM 1/4/2009. THE AMENDE D PROVISIONS OF SECTION 2(15) WITH RELEVANT PROVISOS INTRODUCED ARE EXTRACT ED HEREUNDER FOR READY REFERENCE: SECTION 2(15): CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF, PRESERVATION OF ENVIRONM ENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST, AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY . MA NO.222/15 :- 7 -: PROVIDED THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERA L PUBLIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE, I F IT INVOLVES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS, FOR A CESS OR FEE OR A NY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION, OR RETENTION, OF THE INCOME FROM SUCH ACTIVITY PROVIDED FURTHER THAT THE FIRST PROVISO SHALL NOT APPLY IF THE AGGREGATE VALUE OF THE RECEIPTS FROM THE ACTIVITIES REFERRED TO THEREIN IS TEN LAKH RUPEES OR LESS IN THE PREVIOUS YEAR. 3.6 PRIOR TO THE SAID AMENDMENT THERE WERE FOUR LI MBS OF CHARITY AND ALL LIMBS HAD EQUAL WEIGHTAGE IN THE SCHEME OF THE ACT. THEY WERE (I) RELIEF TO THE POOR (II) EDUCATION (III) MEDICAL RELIEF AND (I V) THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. HOWEVER, W. E.F. 01.04.2009, TWO MORE ADDITIONAL LIMBS WERE ADDED TO THE CONCEPT OF CHARI TY. THEY ARE (I) PRESERVATION OF ENVIRONMENT (INCLUDING WATERSHEDS, FORESTS AND WILDLIFE) AND (II) PRESERVATION OF MONUMENTS OR PLACES OR OBJECTS OF ARTISTIC OR HISTORIC INTEREST. WHILE ADDING THESE TWO LIMBS TO THE DEFIN ITION OF CHARITY, THE LEGISLATURE TOOK AWAY CERTAIN ACTIVITIES OF GENERA L PUBLIC UTILITY OUTSIDE THE SCOPE OF SECTION 2(15) OF THE IT. ACT BY INSERTING TWO PROVISOS TO SECTION 2(15) OF THE L.T. ACT. 3.7 THE LD. CIT HAD GONE THROUGH THE MEMORANDUM O F THE FINANCE BILL, 2008, READ AS UNDER: MA NO.222/15 :- 8 -: 2 14.1 SECTION 2(15) OF THE ACT DEFINES CHARITABL E PURPOSE TO INCLUDE RELIEF OF THE POOR, EDUCATION, MEDICAL RELI EF AND THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC U TILITY; IT HAS BEEN NOTICED THAT A NUMBER OF ENTITIES OPERATING ON COMMERCIAL LINES ARE CLAIMING EXEMPTION ON THEIR INCOME EITHER UNDER SECTION 1O(23C) OR UNDER SECTION 11 OF THE ACT ON THE GROUN D THAT THEY ARE CHARITABLE INSTITUTIONS. THIS IS BASED ON THE A RGUMENT THAT THEY ARE ENGAGED IN THE ADVANCEMENT OF AN OBJECT OF GEN ERAL PUBLIC UTILITY AS IS INCLUDED IN THE FOURTH LIMB OF THE C URRENT DEFINITION OF CHARITABLE PURPOSE. SUCH A CLAIM, WHEN MADE IN RE SPECT OF AN ACTIVITY CARRIED OUT ON COMMERCIAL LINES, IS CONTRA RY TO THE INTENTION OF THE PROVISION. 2.14-2 THE CIT OBSERVED THAT WITH A VIEW TO LIMITIN G THE SCOPE OF THE PHRASE ADVANCEMENT OF ANY OTHER OBJECT OF GENE RAL PUBLIC UTILITY, IT IS PROPOSED TO AMEND SECTION 2(15) SO AS TO PROVIDE THAT THE ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUB LIC UTILITY SHALL NOT BE A CHARITABLE PURPOSE IF IT INVOLVES THE CARR YING ON OF (A) ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE O R BUSINESS, OR (B) ANY ACTIVITY OF RENDERING OF ANY SEIVICE IN REL ATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A FEE OR CESS OR ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OF THE INCOME FROM SUCH ACTIVITY, OR THE RETENTION OF SUCH INCOME, BY THE CONCERNED ENTITY. MA NO.222/15 :- 9 -: 3.8 ACCORDING TO CIT, THE EFFECT OF THE ABOVE AMEND MENT IS THAT IF A CASE FALLS UNDER ADVANCEMENT OF ANY OTHER OBJECT OF GEN ERAL PUBLIC UTILITY, THE SAME SHALL NOT BE A CHARITABLE PURPOSE IF IT INVOLV ES THE CARRYING ON OF ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINE SS INSPITE OF APPLICATION OF SUCH INCOME FOR CHARITABLE PURPOSE. THEREFORE, THE CLAIM OF THE PRESENT ASSESSEE THAT A PORTION OF INCOME FROM KALYANAMANDA PAM HAS BEEN APPLIED FOR CHARITABLE PURPOSES SUCH AS DONATION TO OTHER I NSTITUTIONS BELONGING TO THE SAME CHETTINAD GROUP, CANNOT BRING IT WITHIN TH E DEFINITION OF CHARITABLE PURPOSE AS ITS RECEIPTS FOR THE YEAR FAR EXCEEDED ` 10 LAKHS. 3.9. ACCORDING TO CIT, ON CONSIDERATION OF THE LEGA L FRAMEWORK WHICH CAME INTO EFFECT W.E.F. 01.04.2009, AND THE SOCIETYS AC TIVITIES, IT IS FOUND THAT THE SOCIETY IS ENGAGED IN COMMERCIAL ACTIVITIES OF RUNN ING KALYANAMANDAPAMS, AUDITORIUMS, WORKING WOMEN HOSTEL AND HOSTEL FOR GI RLS. SINCE BOTH ITS PRESENT ACTIVITIES AND MANY OF ITS OBJECTS ARE PRIM ARILY AIMED AT ADVANCEMENT OF OBJECTS OF GENERAL PUBLIC UTILITY, THE ASSESSEES CASE IS SQUARELY HIT BY THE AMENDED FIRST PROVISO TO SECTIO N 2(15) OF THE IT. ACT. SINCE ITS RECEIPTS WERE ALSO MORE THAN RS.10 LAKHS DURING THE YEAR FROM SUCH ACTIVITIES, WHICH IS THE THR LIMIT BEYOND WHICH THE ENTITYS INCOME WOULD BE TAXABLE, IT IS ALSO HIT BY THE SECOND PROVISO. SIMI LARLY, THE APPLICATION OF THE SURPLUS OR PROFIT FROM SUCH COMMERCIAL ACTIVITIES F OR CHARITABLE PURPOSES WOULD NOT ASSIST THE ASSESSEE IN GETTING EXEMPTION U/S 11(4) OR 11 (4A), AS THE SECOND PROVISO TO SECTION 2(15) CLEARLY MENTION S THAT IRRESPECTIVE OF THE USE OR APPLICATION OF SUCH PROFITS, SUCH INCOME GO OUT OF CHARITABLE PURPOSE. THEREFORE, THE ASSESSING OFFICER SHOULD HA VE APPLIED THESE TWO MA NO.222/15 :- 10 - : NEWLY- INTRODUCED PROVISOS TO THE FACTS OF THE PRES ENT CASE AND BROUGHT THE ENTIRE EXCESS INCOME TO TAX, APPLYING SUCH PROVISIO NS. INSTEAD, HE COMPLETED THE ASSESSMENT WITHOUT RESORTING TO ANY DISCUSSION OR EVEN RAISING THE ISSUE OF APPLICATION OF NEWLY INTRODUCED SECTION 2(15) IN ASSESSEES CASE. HE ALSO LOST SIGHT OF THE LATER PORTION OF THE SECOND PROVI SO WHICH PROVIDED THAT ONCE THE PROVISO TO SECTION 2(15) GETS TRIGGERED IN A PA RTICULAR CASE, THEN IRRESPECTIVE OF THE USE OR APPLICATION OR RETE NTION OF SUCH INCOME FOR ANY CHARITABLE PURPOSE, SUCH INCOME WOULD HAVE TO B E BROUGHT TO TAX. 4. ACCORDINGLY, CIT(E) DIRECTED THE AO TO REDO T HE ASSESSMENT AFTER CONSIDERING THE POINTS RAISED BY HIM IN THE A BOVE IMPUGNED ORDER OF CIT(E). AGAINST THIS ASSESSEE IS IN APPEAL BEFO RE US. 5. ACCORDING TO LD.A.R SIMPLY BECAUSE CIT(E) FELT THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE BY ITSELF, WOULD NOT BE ENOUGH TO VEST THE CIT(E) WITH THE POW ER OF SUO MOTO REVISION BECAUSE THE FIRST RECOMMEND OF THE SECTION , NAMELY, THE ORDER IS ERRONEOUS, IS LACKING. FURTHER, THE IMPUGNED ORDER U/S.263 OF THE ACT IS NOT MAINTAINABLE FOR THE SIMPLE REASON THAT THE SHOW-CAUSE NOTICE WAS ISSUED FOR ALLEGED FAILURE BY AO. FURTH ER ON EXAMINING THE IMPUGNED ORDER, IT GOES TO SHOW THAT THE ASSESSMENT WAS PROPOSED TO BE REVISED FOR FURTHER ENQUIRY INTO THE MATTER. AC CORDING TO LD.A.R, IF THERE IS NO ENQUIRY BY THE AO, ASSUMPTION OF JURISD ICTION U/S.263 OF THE ACT BY THE CIT IS JUSTIFIED. IF THERE IS INADEQUAT E ENQUIRY BY THE AO MA NO.222/15 :- 11 - : THAT IT CANNOT BE LEAD TO REVISION BY THE CIT. THUS HE SUBMITTED THAT ORDER OF S.263 IS BAD IN LAW. HE SUBMITTED THAT ONL Y IN THE CASE OF LACK OF ENQUIRY I..E JURISDICTION U/S.263 CAN BE ASSUMED BY THE CIT. ACCORDING TO HIM, THERE IS DECISION OF JURISDICTION AL HIGH COURT IN ASSESSEE'S OWN CASE REPORTED IN 330 ITR 24 WHEREIN HELD THAT SEC.11(4A) DOES NOT EXCLUDE S.11(4); EXEMPTION U/S. 11(4A) WOULD BE AVAILABLE ONLY WHEN THE BUSINESS IS INCIDENTAL TO T HE ATTAINMENT OF OBJECT OF THE TRUST; MATTER IS REMANDED TO THE AO T O FIND OUT THE ACTUAL ENTITLEMENT OF EXEMPTION BY CONSIDERING THE MATERIA LS PLACED BEFORE HIM, WHO SHALL DECIDE AS TO WHETHER SUCH BAS INCOME IS USED FOR THE ATTAINMENT OF THE OBJECT AND THEREAFTER PROCEED IN ACCORDANCE WITH LAW. FURTHER, LD.A.R SUBMITTED THAT THE MAIN OBJECT OF THE ASSESSEE IS IN PROMOTING THE CHARITABLE OBJECT OF THE TRUST AND ATTEMPT TO RE-WRITE THE OBJECT OF THE ASSESSEE IS OUT OF THE JURISDICTI ON OF THE CIT(E). THE AMENDED PROVISO BELOW THE SEC.2(15) OF THE ACT IS A PPLICABLE TO THE LIMB OF THE DEFINITION OF CHARITABLE PURPOSE, NAMEL Y ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY AND THE SAID PROVISO IS NOT APPLICABLE TO OTHER LIMB INCLUDING THE EDUCATION OB JECT. THEREFORE, THE FOUNDATION FOR INVOKING THE JURISDICTION IN STATING THE AMENDED PROVISION IS NOT PROPER. HE SUBMITTED THAT FOR SOME ASSESSMENT YEAR 2010-11, THE APPEAL WAS PENDING WITH CIT(A), THE RE VISION U/S.263 IS BAD IN LAW. ACCORDING TO HIM, THE INCOME GENERATED FROM THE ACTIVITIES MA NO.222/15 :- 12 - : LISTED BY THE CIT(E) WAS USED FOR THE PURPOSE OF CH ARITABLE ACTIVITIES. HENCE, THE ASSESSEE TRUST IS ENTITLED FOR EXEMPTION U/S.11 OF THE ACT. 6. ON THE OTHER HAND, THE LD.D.R SUBMITTED THAT AFTER THE AMNENDMENT OF THE SECTION2(15), ANY ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS, OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS FOR A CESS OR FEE O R ANY OTHER CONSIDERATION, IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION SHALL NOT BE TREATED AS OBJECT OF GENERAL PUBLIC UTILITY. LD. D.R STRONGLY RELIED ON THE ORDER OF CIT(E) AND ALSO THE JUDGMENT OF JURISDICTI ONAL HIGH COURT IN ASSESSEE'S OWN CASE CITED SUPRA. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. WE HAVE GONE THROUGH THE ASSESSMENT ORDER PASSED U/ S.143(3) OF THE ACT DATED 28.02.2013. IN THIS ASSESSMENT ORDER, AO ADMI TTEDLY NOT DISCUSSED ANYTHING ABOUT THE PROVISO BELOW TO SEC.2(15) OF TH E ACT AND IT IS ADMITTED FACT THAT ASSESSEE IS EARNING HUGE INCOME FROM THE WORKING WOMENS HOSTEL, RANI MEYYAMMAI HOSTEL AND ALSO RUNNING KALA YANAMANDAPAM AND AUDITORIUM. AFTER INSERTION OF FIRST AND SECOND PRO VISO TO SEC.2(15) OF THE ACT WITH EFFECT FROM 01.04.2009, THE AO HAS TO LOOK INTO WHETHER THE ABOVE ACTIVITIES CARRIED BY THE ASSESSEE IS IN COMMERCIAL NATURE OR NOT. THERE IS NO WHISPER IN THE ORDER OF THE AO ON THIS ISUSE AND HA D THE AO EXAMINED APPLICABILITY OF AMENDED PROVISIONS OF THE SECTION 2(15) OF THE ACT, HE WOULD HAVE DENIED THE EXEMPTION U/S.11 OF THE ACT AS THE ASSESSEES OBJECT WAS OF GENERAL PUBLIC UTILITY AND THE ACTIVITIES OF THE ASSESSEE WERE IN THE NATURE OF TRADE, COMMERCE OR BUSINESS. THE ABOVE ACTIVITI ES OF ASSESSEE CANNOT BE MA NO.222/15 :- 13 - : CONSIDERED AS CHARITABLE ACTIVITIES AND IT IS ALSO NOT AN ACTIVITY CARRIED ON WITH AN INTENTION OF ADVANCEMENT OF ANY OTHER OBJECT OF GENERAL PUBLIC UTILITY. THEN, ASSESSEE IS HIT BY PROVISO GIVEN U/S.2(15) OF THE ACT. THEREFORE, THE CASE OF THE ASSESSEE IS HIT BY THE PROVISO TO SEC.2 (15) OF THE ACT AND ASSESSEE IS NOT ENTITLED FOR EXEMPTION U/S.11 OF TH E ACT. THE CLAIM OF ASSESSEE IS THAT THE INCOME DERIVED FROM SUCH COMME RCIAL ACTIVITIES IS USED FOR THE PURPOSE OF EDUCATION. THUS, THE ASSESSEES CLAIM U/S.11 OF THE ACT CAN BE ALLOWED AND THEREFORE, CIT(E) CANNOT INVOKE THE PROVISIONS OF THE SECTION 263 OF THE ACT. 8. FURTHER, IN SIMILAR CIRCUMSTANCES, THE CO-ORDIN ATE BENCH OF THE TRIBUNAL IN THE CASE OF MURASOLI TRUST VS. ACIT IN ITA NOS.210 & 211/MDS/2014 DATED 6TH NOVEMBER,2015 (2016) 48 ITR (TRIB.) 472(CHENNAI) HAS HELD AS UNDER : 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD AND VARIOUS CASE LAW CITED BY THE PARTIES. S EC. 11 OF THE ACT STIPULATES THAT THE INCOME FROM PROPERTY HELD F OR CHARITABLE OR RELIGIOUS PURPOSE SHALL NOT BE INCLUDED IN THE TOTA L INCOME OF THE PREVIOUS YEAR OF THE PERSON IN RECEIPT OF THE INCOM E TO BE GIVEN EFFECT IN THE MANNER AS SPECIFIED THEREIN. THE TERM 'CHARITABLE PURPOSE' HAS NOT BEEN DEFINED UNDER THE STATUTE; BU T FOR THE INCLUSIVE NATURE OF THE TERM AS SPECIFIED UNDER S. 2(15) OF THE ACT, WHICH AS EXISTED BEFORE THE AMENDMENT IS AS FOLLOWS : 'SEC. 2(15) : 'CHARITABLE PURPOSE' INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND THE ADVANCEMENT OF AN Y OTHER OBJECT OF GENERAL PUBLIC UTILITY.' MA NO.222/15 :- 14 - : 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 NAT URE OF TRADE, COMMERCE OR BUSINESS OR ANY ACTIVITY OF RENDERING A NY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSIN ESS FOR A CESS OR FEE OR ANY OTHER CONSIDERATION IRRESPECTIVE OF THE NATURE OF USE OR APPLICATION OR RETENTION OF THE IN COME 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. 6.1 THE LD. AR SUBMITTED THAT, THE IDEA AND UNDER STANDING OF THE DEPARTMENT WITH REGARD TO THE SCOPE OF AMEND MENT 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 1S T APRIL, 1984, MA NO.222/15 :- 15 - : WHEN THE WORDS 'NOT INVOLVING THE CARRYING ON OF AN Y ACTIVITY FOR PROFIT' WERE DELETED. THUS THE CONTENTION IS THAT A FTER 1ST APRIL, 1984, THERE IS NO ALLERGY TO PROFIT AND IF THE PROF IT FEEDS CHARITY, IT STANDS CLEARED FOR EXEMPTION UNDER SEC. 11 OF THE A CT. 6.2. 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 A S FOLLOWS [298 ITR (ST.) 33, 65] : 'CHARITABLE PURPOSE INCLUDES RELIEF OF THE POOR, EDUCATION, MEDICAL RELIEF AND ANY OTHER OBJECT OF GENERAL PUBL IC UTILITY. THESE ACTIVITIES ARE TAX EXEMPT, AS THEY SHOULD BE. HOWEVER, SOME ENTITIES CARRYING ON REGULAR TRADE, COMMERCE O R BUSINESS OR PROVIDING SERVICES IN RELATION TO ANY T RADE, COMMERCE OR BUSINESS AND EARNING INCOMES HAVE SOUGH T TO CLAIM THAT THEIR PURPOSES WOULD ALSO FALL UNDER 'CH ARITABLE 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 W ILL NOT IN ANY WAY BE AFFECTED' (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 ALSO STATED THAT THE CONCEPT OF CHARITY IN INDIA IS WIDER, SIMULTANEOUSL Y ADDING THAT, BY VIRTUE OF THE AMENDMENT, THE POSITION THAT EXISTED PRIOR TO 1ST FEB., 1984 HAS BEEN BROUGHT BACK AND THAT IS ALL. THIS HOWEVER MA NO.222/15 :- 16 - : WILL NOT TILT THE BALANCE IN ANY MANNER IN THE CASE OF THE ASSESSEE SO AS TO TAKE THE ACTIVITIES OUTSIDE THE CHARITABLE PURPOSE, PARTICULARLY IN VIEW OF THE FACT THAT IN PUBLISHING OF NEWSPAPER WILL NOT CONSTITUTE ANY TRADE OR BUSINESS. ACCORDING TO THE LD. AR, TO PERFORM CHARITY, INCOME IS INEVITABLE AND CONTENDED THAT THE ACTIVITIES BEING PURSUED BY THE ASSESSEE MAY CONSTI TUTE A TRADE OR BUSINESS, IF IT IS NOT APPLIED FOR THE PURPOSES OF CHARITY. CONTRARY TO THIS, THE LD. DR SUBMITTED THAT THOUGH THE OBJEC T OF THE ASSESSEE IS TO CARRY ON CHARITABLE ACTIVITIES, BUT IT DOES NOT CARRY THOSE CHARITABLE ACTIVITIES, AND IT WAS ONLY CARRYI NG ON PUBLISHING OF NEWSPAPER IN A COMMERCIAL MANNER, WHICH CANNOT B E CONSTRUED AS CHARITABLE ACTIVITY. IN OTHER WORDS, IT WAS CON TENDED BY THE LD. DR THAT THE ASSESSEE CARRIED ON ACTIVITIES IN A BUS INESS ORIENTED MANNER, IT WILL DEFINITELY COME WITHIN THE FOURTH L IMB OF THE AMENDED SEC.2(15) OF THE ACT, WHERE THE PROHIBITION OF ACTIVITY IN THE NATURE OF TRADE, COMMERCE OR BUSINESS FOR ANY A CTIVITY OF RENDERING SERVICE OR ANY OTHER CONSIDERATION, IRRES PECTIVE OF THE NATURE OF THE USE OR APPLICATION OR RETENTION OF TH E INCOME OF SUCH ACTIVITY IS SPECIFIED AND HENCE, NOT ENTITLED TO AN Y EXEMPTION. 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, MA NO.222/15 :- 17 - : 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 1ST 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) BROUGHT INTO EFFECT FROM 1ST APRIL, 2009. YET ANOTHER IMPORTANT ASPECT TO B E NOTED IN THIS CONTEXT IS THAT, AFTER THE AMENDMENT BY INCORPORATI NG PROVISO TO S. 2(15), THE 4TH LIMB AS TO THE ADVANCEMENT OF 'ANY O THER OBJECT OF GENERAL PUBLIC UTILITY' WILL NO LONGER REMAIN AS CH ARITABLE 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 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 SER VICE IN RELATION TO THE TRADE, COMMERCE OR BUSINESS, IT HAS TO BE EX AMINED WHETHER THE WORDS 'ANY TRADE, COMMERCE OR BUSINESS' AS THEY APPEAR IN THE SECOND LIMB OF CL. (B) ARE IN CONNECT ION WITH THE MA NO.222/15 :- 18 - : SERVICE REFERRED TO THE TRADE, COMMERCE OR BUSINESS PURSUED BY THE INSTITUTIONS TO WHICH THE SERVICE IS GIVEN BY T HE ASSESSEE. IF THE SAID WORDS ARE ACTUALLY IN RESPECT OF THE TRADE , COMMERCE OR BUSINESS OF THE ASSESSEE ITSELF, THE SAID CLAUSE [S ECOND LIMB OF THE STIPULATION UNDER CL. (B)] IS RATHER OTIOSE. SINCE THE ACTIVITY OF THE ASSESSEE INVOLVING ANY TRADE, COMMERCE OR BUSINESS, IS ALREADY EXCLUDED FROM THE CHARITABLE PURPOSE BY VIRTUE OF T HE FIRST LIMB [CL. (A)] ITSELF, THERE IS NO NECESSITY TO STIPULATE FUR THER, BY WAY OF CL. (B), ADDING THE WORDS 'OR ANY ACTIVITY OF RENDERING ANY SERVICE IN RELATION TO ANY TRADE, COMMERCE OR BUSINESS ....... ...........'. AS IT STANDS SO, GIVING A PURPOSIVE INTERPRETATION TO THE STATUTE, IT MAY HAVE TO BE READ AND UNDERSTOOD THAT THE SECOND LIMB OF EXCLUSION UNDER CL. (B) IN RELATION TO THE SERVICE RENDERED BY THE ASSESSEE, THE TERMS 'ANY TRADE, COMMERCE OR BUSINES S' REFERS TO THE TRADE, COMMERCE OR BUSINESS PURSUED BY THE RECI PIENT TO WHOM THE SERVICE IS RENDERED (AS THERE MAY BE A SIT UATION INVOLVING IN PUBLISHING OF NEWSPAPER. 8.1 BEING SO, IN OUR OPINION THE ACTIVITIES OF THE ASSESSEE TRUST IS NOT PROPERLY APPRECIATED BY THE AO. AS SUCH, THE CI T(E) HAS RIGHTLY INVOKED THE PROVISIONS OF THE SECTION 263 OF THE AC T. MA NO.222/15 :- 19 - : 8.2 THE OTHER PLEA OF THE LD.A.R IS THAT IN EARLI ER YEAR I.E.,2009- 10, THE ABOVE ISSUE WAS DECIDED BY THE CIT(A) IN FA VOUR OF THE ASSESSEE AND FOR ASSESSMENT YEAR 2010-11, IT IS PEN DING BEFORE CIT(A). AS SUCH, CIT(E) CANNOT INVOKE THE JURISDICT ION U/S.263 OF THE ACT FOR THE ASSESSMENT YEAR 2010-11. IN ITA NO.1044 /MDS./2014 VIDE ORDER DATED 15.05.2015 FOR ASSESSMENT YEAR 2009-10, THE TRIBUNAL OBSERVED THAT SINCE THE ISSUE IS RELATING TO INCOME FROM KALAYANA MANDAPAM, AUDITORIUM, WORKING WOMENS HOSTEL IS SUB JECT MATTER OF THE APPEAL BEFORE THE CIT(A) AND THE SAID ISSUE IN ASSESSMENT ORDER MERGED WITH THE ORDER OF CIT(A) AS A WHOLE, HENCE T HERE WAS NO MORE AMENABLE TO REVISIONAL JURISDICTION OF CIT. 9. IN THE PRESENT CASE, THE ISSUE RELATING TO APP LICABILITY OF PROVISO TO SEC.2(15) OF THE ACT, THEREBY ITS ENTITL EMENT OF EXEMPTION U/S.11 IS NOT AT ALL BEFORE THE CIT(A) FOR THE ASSE SSMENT YEAR UNDER CONSIDERATION I.E. 2010-11. AS RIGHTLY OBSERVED BY THE CIT(E) IN PARA- 37, THE PROVISO TO SEC.263(1) WHICH PROVIDES THAT T HE POWERS OF THE COMMISSIONER U/S.263 SHALL EXTEND AND SHALL ALWAYS TO HAVE EXTENDED TO SUCH MATTERS WHO HAD NOT BEEN CONSIDERED AND DEC IDED IN APPEAL. BEING SO, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(E) AND THE SAME IS CONFIRMED ON BOTH LEGAL AS WELL AS ON MERIT S. MA NO.222/15 :- 20 - : 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED ON 20 TH JULY, 2016, AT CHENNAI. SD/ - SD/ - ! ' # . $ %& ' ( DUVVURU RL REDDY ) ) % / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER () / CHENNAI *+ / DATED: 20 TH JULY, 2016 K S SUNDARAM +,-- ./-0/ / COPY TO: - 1 . / APPELLANT 3. - 1-!' / CIT(A) 5. /23- 4 / DR 2. / RESPONDENT 4. - 1 / CIT 6. 3&-5 / GF