Income Tax Appellate Tribunal - Pune
Income Tax Officer vs Brahman Karyalaya on 5 August, 1999
Equivalent citations: (2000)66TTJ(PUNE)782
ORDER
B. L. Chhibber, AM The main grievance projected in this appeal by the revenue is that the learned Commissioner (Appeals) is not justified in holding that the assessee-trust was not carrying on any business activities and therefore, the income earned by the assessee is exempt under section 11 of the Act and thereby directing the assessing officer to accept the returned income of Rs. Nil
2. The assessee-trust was established in 1925 as a charitable trust with the main object of giving medical and educational aid to the poor and needy sections of the society. It owns a building which is very old and this building is given on hire on various occasions at nominal rent. The building being very old needs regular maintenance and repairs and major portion of the income is from rent which is used for this purpose, thereby leaving a meagre surplus every year. Inspite of such meagre surplus, the trust carries on its charitable activities by offering the building free of charge on various occasions such as blood donation camps, medical check-ups, gathering and meetings for study purposes, etc. The objects of the trust are certainly charitable and this fact is not doubted by the assessing officer. The assessee is registered under Societies Registration Act and Bombay Public Trust Act. In all the years in the past even though number of assessments (that too made under section 143(3)) were made, in none of them any doubt ever arose about the fact that the assessee was a charitable trust or that it was entitled to exemption under section 11.
During the year under appeal, the assessing officer held that the trust was carrying on regular business of letting on hire the building and utensils and hence he concluded that the provisions of section 11 do not apply and he computed the income at Rs.1,10,810 after allowing expenditure at Rs. 64,057.
3. The assessee appealed to the Commissioner (Appeals). It was submitted before the Commissioner (Appeals) that the entire approach of the assessing officer in doubting the charitable nature of the assessee-trust was erroneous and also biased. It was also contended that the assessing officer had not doubted that the objectives of the trust are not of charitable nature. It was also pointed out that the Act contained sufficient checks and controls and it was not for the assessing officer to question whether and how the trust spent the income. Section 13 ensured that no unfair advantage was taken by any interested party and it was not the case of the assessing officer that section 13 is applicable. Section 11 required that the trust should spend at least 75 per cent of the income for charitable purposes and the remaining income can be accumulated for such purpose for which notice in Form No. 10 should be given in view of section 11(2). It was contended that there was no legal requirement of spending the income of the trust. It was further pointed out that the assessing officer had no reason to refer to assessment years 1984-85 to 1989-90 which were beyond the jurisdiction because in those years, exemption under section 11 was already allowed after proper scrutiny. It was also submitted before the Commissioner (Appeals) that by letting out its Karyalaya the assessee-trust was not carrying on any business activity because the assessee does not carry on business of arranging marriage functions, providing catering service, providing musical amusement, refreshment, etc. It merely lets out its premises, utensils and furniture and earns rental income. Reliance was also placed on the following judgment :
(1) Mahakoshal Shaed Smarak Trust v. CIT (1983) 140 ITR 795 (MP); (2) CIT v. Ganeshram Laxminarayan Goel (1984) 147 ITR 469 (MP) and (3) Raghunath Das Parihar Dharmashala v. CIT (1986) 158 ITR 432 (Raj).
After considering the submissions made before him, the Commissioner (Appeals) held that it is seen from the assessment order that the assessing officer had not doubted that object of the trust was not that of charitable nature. In his opinion, since the assessee was carrying on business of renting Mangal Karyalaya, utensils, it would not be entitled for exemption under section 11 as the trust had not applied the income for charitable purpose or for the objects of the trust. He did not approve this approach of the assessing officer and held that the assessee was not carrying on any business activities and, therefore, the income earned by the assessee is exempt under section 11 of the Act and further directed the assessing officer to accept the returned income of Rs. Nil. In support of his finding, the Commissioner (Appeals) relied upon the three cases quoted before him (supra) as also the judgment of the Supreme Court in the case of Dharmaposhanam Co. v. CIT (1978) 114 ITR 463 (SC) and the judgment of the Kerala High Court in the case of Dharmodayam Co. v. CTT (1962) 45 ITR 478 (Ker) and the judgment of the Supreme Court in the case of CIT v. Dharmodayam Co. (1977) 109 ITR 527 (SC). Aggrieved by the order of the Commissioner (Appeals) the Revenue is in appeal before us.
4. Shri C.M. Bhake, the learned Departmental Representative submitted that the activities of letting out Mangal Karyalaya and deriving income therefrom was regular business activities and the excess of income over the expenditure is assessable as 'profit and gains of business or profession' and accordingly, the Commissioner (Appeals) erred in holding that no business activities were carried on by the assessee. Shri K.A. Sathe, the learned counsel for the assessee strongly supported the order of the learned Commissioner (Appeals).
5. We have considered the rival submissions and perused the facts on record. Ever since it was established in the year 1925, the trust has been letting its Mangal Karyalaya and utensils for providing functions besides doing other charitable acts like providing medical and educational aid to the poor and needy classes of the society. In judging the charitable nature, one has to keep in mind the context of time when the trust was established. In old days when the assessee-trust was established there were no adequate places available for performing marriages and thread ceremonies. A Karyalaya was, therefore, a need of the society. The assessee-trust decided to provide this facility but not as a commercial venture. The assessee-trust is only providing on rent its premises and furniture, utensils on hire for marriage and other functions. This is only a passive letting and no commercial aspects are involved, more so, when the assessee does not undertake any contract for marriage functions catering, etc. The party taking the premises has either to provide its own service or obtain help from others. The rent charged by the assessee is extremely cheap as compared to what is being charged elsewhere. It has been submitted before us that the assessee charges rent at Rs. 550 to Rs. 850 whereas, others charge between Rs. 3,500 and Rs. 5,000. If the poor family finds the rent as unaffordable, even token rent of Rs. 100 or Rs. 200 is, at times, charged. In the case of Addl. CIT v. Surat Art Silk Cloth Manufacturers Association (1979) : (1980) 121 ITR 1 (SC), the Hon'ble Supreme Court has held that if a primary or dominant purpose of a trust or institution was charitable another object which by itself may not be charitable but was merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or institution from being a valid charity. In this judgment, the judgment of the Supreme Court in the case of CIT v. Dharmodayam Co. (supra), CIT v. Cochin Chamber of Commerce & Industry (1973) 87 ITR 83 (Ker) and Andhra Pradesh State Road Transport Corporation v. CIT (1975) 100 ITR 392 (AP) have been approved. The Hon'ble Bench of the Supreme Court consisting of five Judges presided over by P. N. Bhagvati, J. (as he then was) overruled its earlier judgment in the case of Indian Chamber of Commerce v. CIT (1975) 101 ITR 796 (SC). The Hon'ble Bench also disapproved the observations of Khanna and Gupta, JJ in Sole Trustee, Loka Shikshana Trust v. CIT (1975) 101 ITR 234 (SC) and further approved the observations of Beg, J. in Sole Trustee, Loka Shikshana Trust v. CIT (supra). In the case before us, the dominant and primary objects of the assessee-trust are charitable in nature i.e., providing medical, financial and educational aid to the poor and needy sections of the society and letting out its Mangal Karyalaya is only ancillary and incidental to the primary or dominant purpose of charity. Accordingly, we do not find any infirmity in the findings of the Commissioner (Appeals) and confirm the same.
6. In the result, the appeal is dismissed.