Income Tax Appellate Tribunal - Bangalore
Sangeetha Bharathi Trust, Mangalore vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
"A" BENCH : BANGALORE
BEFORE SHRI K.P.T. THANGAL, VICE PRESIDENT
AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER
ITA No.523/Bang/2009
Assessment year : Not Applicable
Sangeetha Bharathi Trust,
C/o. Avinash Medicals,
Kundapura. : APPELLANT
Vs.
The Commissioner of
Income-tax,
Mangalore. : RESPONDENT
Appellant by : Shri H.A.K. Rao
Respondent by : Shri Jason P. Boaz
ORDER
Per A. Mohan Alankamony, Accountant Member
This appeal is filed by the assessee in ITA No.523/B/09 directed against the order of the ld. CIT, Mangalore No.S-
48/80G(R)/CIT/MNG/2008.09 dated 26.2.2009 under section 80G of the Act.
2. The assessee has raised four grounds in its appeal, however, ground Nos.1, 3 & 4 are general in nature and therefore not considered for adjudication. Ground No.2 consists of two parts and they are reproduced herebelow for consideration:
ITA No.523/B/09Page 2 of 7
(a) The learned Commissioner of Income Tax has erred in concluding the Sangeetha Shale cannot be treated as conducting Education.
(b) The learned Commissioner of Income Tax has erred in concluding the collection of money by trust, sponsorships, fees from students etc. amount to activities in the nature of trade and business as such the appellant is not carrying on any charitable activity.
3. The assessee trust's application for renewal of recognition u/s. 80G of the Act dated 22.8.2008 was rejected by the ld. CIT on the ground that the activity of the trust falls outside the purview of "charitable purpose" as defined under 2(15) of the Act. Ld. CIT also observed from the trust's income and expenditure statement that the trust had received income from tuition fees, advertisements and sponsorships for the period ending 31.3.2006, 31.3.2007 and 31.3.2008 and therefore came to a conclusion that the trust activities falls in the nature of trade, commerce and business.
4. The assessee trust vide its letter dated 20.2.2009 rebutted to the view of the ld. CIT by contending :
(1) The trust has set up a music school namely "Sangeetha School"
which could be construed to be an institution for education. (2) Tuition fee was collected from the students to impart education on music which is permissible as per the Act. (3) The entire tuition fee collected from the students were wholly utilized for the purpose of running and maintaining the "Sangeetha School".ITA No.523/B/09
Page 3 of 7
(4) The trust should be construed to be meant for the purpose of education because its activities consisted only of (a) providing training in music (b) teaching classical dances (c) to bring awareness in this field amongst the potential students (d) this knowledge in music was taught to interested pupils without discrimination of caste, creed, religion etc. (5) The trust had only received sponsorship from sponsors for conducting programmes of the trust. Only a meager fee was received from the students of the music school and it was barely enough to run the school. Section 2(15) of the Act does not prohibit collection of such revenue from the trust considered to be for educational purpose.
5. However, the ld. CIT, Mangalore did not agree with the arguments of the assessee and held:
(i) The trust activities of promoting and teaching music cannot be considered to be for educational purpose as construed in section 2(15) of the Act.
(ii) The activities of the trust falls under the category of "advancement of any other object of general public utility" as envisaged in fourth limb of section 2(15) of the Act.
(iii) Receipt of money from sponsors for conducting programmes, collection of advertisement fees etc. are purely an activity in the nature of trade, commerce and business and therefore the trust ITA No.523/B/09 Page 4 of 7 will not fall within the purview of "charitable purpose" by virtue of the amended proviso to section 2(15) of the Act w.e.f. 1.4.2009.
6. Ld. CIT with the above reasoning reached to a conclusion that renewal of recognition u/s. 80G cannot be granted to the trust and accordingly rejected the application filed by the appellant trust.
7. Ld. AR forcefully argued that the trust falls within the second limb of section 2(15) of the Act viz., "Education", because the main activity of the trust centres around promoting and teaching music. Imparting such skill and knowledge is nothing other than education. The trust has not generated any surplus on account of these activities but only collected tuition fees from the students, sponsorship and advertisement charges to conduct programmes on music and all such amount collected were wholly utilized on these activities. To buttress his arguments, ld. AR submitted a paperbook consisting of 1 to 57 pages:
(1) Statement giving the details of amount collected and expenditure incurred for the years ended 31.3.2006, 31,3.2007 and 31.3.2008.
(2) Audited statement for the years ended 31.3.2006, 31,3.2007 and 31.3.2008 along with statement of total income returned.
(3) Deed of Trust.
(4) Leaflets/Brochures published at the time of programme indicating
name of sponsors, Advertiser, calling for assistance.
(5) (a) Copy of letter dated 9.2.09 from CIT, Mangalore.
(b) Copy of letter dated 20.2.09 of appellant.
8. Ld. DR relied upon the findings of ld. CIT and pleaded that the activities of the trust are in the nature of business as it is apparent from the record that the trust had generated income by collecting advertisement ITA No.523/B/09 Page 5 of 7 charges, tuition fee, etc. and accepted sponsorship. Ld. DR further submitted that in these circumstances the trust will not be entitled for recognition u/s. 80G of the Act and therefore prayed that the renewal application should be rejected and the order of the ld. CIT be confirmed.
9. We have heard the rival submissions and minutely perused the materials available on record produced before us. It is pertinent to note that the trust had enjoyed recognition u/s. 80G of the Act in the past. All the activities of the trust remains the same as in the past. On a plain reading of the Act along with the various decided case law and the decision of the Apex Court in the case of Sole Trustee, Loka Shikshana Trust v. CIT reported in [1975] 101 ITR 234, it is apparent that the appellant trust falls in the category of "advancement of any other object of general public utility"
as envisaged in the fourth limb of section 2(15) of the Act. Further on a minute scrutiny of the activities of the trust from the records produced before us, we do not find any activity in the nature of trade, commerce, business or service in relation to any trade, commerce or business. All the activities conducted by the appellant trust are directly related to the object of the trust viz., to promote music and impart education of music. The statement of income of the trust no doubt reveals that the trust had generated revenue by way of receipt of tuition fees from the students of the music school, sponsorship and advertisement charges for the year ended 31.3.2006, 31.3.2007 and 31.3.2008. By virtue of this revenue collection, ld. CIT was of the misconception that the trust had collected revenue and indulged in the activities of trade, commerce and business thereby excluding the appellant trust from the scope of "charitable purpose" as ITA No.523/B/09 Page 6 of 7 defined in section 2(15) of the Act and the amended proviso. Ld. CIT has failed to observe that for all these three years, the statement of income shows a deficit balance implying that the entire amount is spent to meet its charitable objectives. The appellant trust had no profit motive. It goes without saying that when any such activities are to be conducted, sourcing of funds is essential. When such sourcing of fund are generated without indulging in any activity in the nature of trade, commerce or business etc., proviso to section 2(15) of the Act will not apply. Considering the facts of the case, we are of the firm opinion that -
(1) The appellant trust falls in the category of "advancement of any other object of general public utility" as provided in the fourth limb of section 2(15) of the Act.
(2) The trust has not indulged in any activity which can be construed to be in the nature of trade, commerce or business or any activity of rendering any service in relation to any trade, commerce or business.
(3) The generation of revenue by the appellant trust by way of collecting sponsorship, advertisement charges, tuition fee etc. was only for the purpose to meet out expenditure in relation to the fulfillment of the objects of the trust.
10. Because of our above findings and reasons, we hereby direct the ld. CIT to grant renewal of recognition u/s. 80G of the Act.
11. In the result, the appeal of the assessee is allowed. ITA No.523/B/09 Page 7 of 7
Pronounced in the open court on this 11th day of September 2009.
Sd/- Sd/-
( K.P.T. THANGAL ) (A. MOHAN ALANKAMONY )
Vice President Accountant Member
Bangalore,
Dated, the 11th September, 2009.
Ds/-
Copy to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR, ITAT, Bangalore.
6. Guard file (1+1)
By order
Assistant Registrar
ITAT, Bangalore.