Madras High Court
Commissioner Of Income-Tax vs Samyuktha Gowda Saraswatha Sabha on 24 March, 2000
Equivalent citations: [2000]245ITR242(MAD)
JUDGMENT N.V. Balasubramanian, J.
1. In all these tax cases, the common question of law that arises for consideration is :
"Whether, the Appellate Tribunal has justified in law and had valid materials to hold that the assessee-Sabha is entitled to exemption under Section 11 of the Income-tax Act, 1961, even though the Sabha has let out the Kalyana Mandapam for profit ?"
2. The respondent-Sabha, namely, Samyuktha Gowda Saraswatha Sabha, Madras, is a society registered under the Societies Registration Act (21 of 1860) on September 15, 1925. According to its memorandum of association the objects of the Sabha are the intellectual, physical, social and moral advancement of the United Gowda Saraswata Community, and doing of such other things as are incidental or conducive to the attainment of the above objects. The objects of the Sabha are for education and general public utility. Under the head "Education", the Sabha administers scholarships, funds, and grants to students studying in the schools and colleges. One of the activities of the Sabha consists in letting out its kalyana mandapam popularly known as "S. G. S. Sabha Hall" to various persons for performing marriages and similar functions at commercial rates. Along' with the use of the hall, the Sabha also lets out on hire furniture, utensils, decorative items, etc., as may be required by the persons hiring the hall.
3. The Income-tax Officer for the assessment years 1977-78, 1978-79 and 1979-80 held that the objects of the trust are partly charitable and partly non-charitable and hence the assessee was not entitled to exemption under Section 11 of the Act. Aggrieved by the above order of the Income-tax Officer, the assessee preferred an appeal before the Appellate Assistant Commissioner.
4. The Appellate Assistant Commissioner held that the Sabha would be entitled to exemption under Section 11 of the Act, as the main object of the assessee-Sabha was for advancement of an object of public utility and not for profit and held that the assessee was entitled to exemption under Section 11 of the Act. Aggrieved by the same, the Revenue preferred the appeal before the Tribunal.
5. The Tribunal confirmed the order of the Appellate Assistant Commissioner and following its order in Maharashtra Education Fund (I. T. A. No. 1957/Mds of 1978-79, dated June 4, 1979), held that the carrying on kalyana mandapam was not one of the objects of the association and such activity was an activity to better its investment yield and such funds to be used for charitable purpose, namely, advancement of education and relief to the poor and, hence, the assessee was entitled to exemption.
6. Learned counsel for the Revenue contended that the entire income of the Sabha should be taken into account for the purpose of levying income-tax and submitted that the advancement of the object of general public utility involving the carrying on of an activity for profit, and the objects of the assessee are not severable and they are partly charitable and partly non-charitable and no portion of the income can be held to be exempt from income-tax and the entire income of the Sabha is liable to be taxed under the Income-tax Act.
7. There is no dispute that the objects of the Sabha are education and general public utility. It is also not disputed that the assessee in pursuance of its objects grants scholarships, funds and provides grants to students studying in schools and colleges. The Sabha let out its hall to various persons. We hold that by mere letting out its hall, the assessee has not lost its claim to exemption. We hold that the letting out of the Sabha hall was to earn income to fulfil and apply the same to the main objects of the assessee-Sabha. We are of the view that the decision of the apex court in CIT (Addl) v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1, applies to the case as the objects of the assessee are education and other objects of general utility and the letting out of the kalyana manda-pam was not one of the objects of the assessee, but it was an activity carried on to fulfil the objects of the trust. Therefore, we hold that the Tribunal was correct in holding that the assessee-Sabha is entitled to exemption under Section 11 of the Act. The further submission of learned counsel for the Revenue was that the assessee is not entitled to exemption in view of Section 13(1)(bb) of the Act. However, we find that the income derived from the Sabha was not its business income, but its property income. Hence, the provisions of Section 13(1)(bb) of the Act are not applicable to the facts of the case. Accordingly, we answer the question of law referred to us, in all tax cases mentioned earlier in favour of the assessee and against the Revenue, However, in the circumstances, no costs.