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Showing contexts for: charitable trust objects in Al-Madeena Charitable Trust vs Assistant Commissioner Of Income-Tax on 1 November, 1999Matching Fragments
6. The learned CIT (Appeals) noted that the nature of the objects of the trust are charitable. However, he held that the registration of the trust by itself does not lead to the conclusion that its income is exempt from tax because the provisions of sections 11, 12, 12(a) and 13 have to be applied along with other relevant sections of the act to find out whether there is any taxable income for a particular assessment year. For the years under consideration, i.e., during the relevant accounting years for both the assessment years, it is the case of the Revenue, the learned CIT (Appeals) noted that the assessee has not been carrying on any charitable activities mentioned in the trust deed, but was only engaged in the printing and publishing of a newspaper called 'Madhyamam'. It was the case of the assessee that the trust was engaged during the relevant accounting periods only in undertaking job works of printing and publishing of Madhyamam and has also undertaken other job works of printing from other sundry parties. The assessee admitted that none of the activities of charitable nature as mentioned above, was carried on by the assessee trust as there was no income to be applied for charitable purposes. However, the learned CIT (Appeals) noticed the following items credited in the profit and loss account:
S.No. Accounting Year Period No. of days Amt. (Rs.) !.
1995-96 30-8-1995 to 31-3-1996 21.03,192.40
2.
1996-97 1-4-1996 to 31-3-1997 35,70.535.93
3. 1997-98 1-4-1997 to 29.8-1997 12,22,786.28 Total 68,96.514.61 The learned CIT (Appeals) noticed that there were expenses like printing expenses, salary and wages, travelling and conveyance, postage, telegram, telephones, rent, taxes, repairs, maintenance, bank charges, advertisement, audit fee and depreciation which were also debited to the account. The net result of the profit and loss account was a loss of Rs. 46,152 for the assessment year 1989-90 and a net profit of Rs. 74,203.77 for the assessment year 1990-91. On further consideration of the balance-sheets, the learned CIT (Appeals) also noted that the contributions received towards the corpus have been utilised by the assessee by way of investment in plant and machinery, furniture, and fittings and also for making advances to various parties. The above items were connected with the printing and publishing of the newspaper. Advances to sundry parties included a sizeable amount transferred to Madhyamam newspaper, mentioned earlier. Addition to plant and machinery for the year ended 31-3-1989 was Rs. 1,66,680.70 and for the year ended 31-3-1990 Rs. 29,990.55. Advances transferred to Madhyamam under the head 'Advance and Deposits' stood at Rs. 22,50,785.30 as on31-3-1989 and at Rs. 33,85,205.25 as on 31-3-1990. The learned CIT (Appeals) came to the conclusion that the assessee has not complied with all the conditions that are necessary to make a charitable trust eligible for exemption under section 11 of the Income-tax Act, 1961. The assessee has not carried on any of the charitable objects mentioned in the trust deed. Printing and publishing of a newspaper and doing odd work cannot be construed as charitable activity because, first of all, the assessee has collected printing charges and fees for services on regular basis. All the expenses debited to the profit and loss account were related to the business of printing jobs. There was no proof that this activity was incidental to the attainment of the objects of the trust because the object of the trust was charitable in nature, but remained only in printing paper and has not been translated into practice. The contributions received towards the corpus were also diverted for acquisition of assets connected with the printing of the newspaper Madhyamam. Therefore, the learned CIT (Appeals) held that neither the income of the trust nor the corpus donations have been utilised for charitable activities as envisaged in the trust deed. Therefore, the learned CIT (Appeals) held that the Assessing Officer was justified in reaching the conclusion by relying on sub-section (4A) of section 11. The learned CIT(Appeals) further held that, if that is so, the question to be considered is whether the voluntary contributions received in the instant case can be treated as income or not. He held that according to section 11 (1)(d), income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or the institution, are to be excluded from the total income of the trust. However, after the amendment brought into section 11(1)(d) with effect from 1 -4-1989, the law has been substantially changed. The assessment years under consideration are the assessment years 1989-90 and 1990-91 and the amended provisions are, therefore, applicable. Hence the amended provisions of section 11(1)(d), read with section 11(4A) and section 2(24)(iia) are applicable. Accordingly, the CIT (Appeals) held that the assessee cannot be treated as a charitable trust for income-tax purposes, specially in view of the following facts : The conclusion reached by the learned CIT (Appeals) vide para 8 of his appellate order is reproduced below:
Thus it is clear from the fact that except undertaking the printing work for M/s Ideal Publication Trust, the assessee has not brought on record any thing to suggest that it was engaged in any charitable activity as contemplated in the objects of the trust. Assessee's stand is that no income was generated from its business of printing work which is held in trust and that it has been always incurring loss only. This may be true, but even then in the light of the fact that the corpus was diverted to M/s Ideal Publication Trust for assisting them for the publication of the daily, Madhyamam leads to the inevitable conclusion that the assessee was, in fact, instrumental by setting up the printing press to publish the newspaper by M/s Ideal Publication Trust. Publication of a newspaper is not a charitable activity as has been held by the Hon'ble Supreme Court in Sole Trustee, Loka Shikshana Trust's case (supra). The publication of the newspaper itself may become a charitable activity if that activity was carried on to generate income for the advancement of the other charitable objectives as contemplated under section 2(15) of the Income-tax Act, 1961 such as "relief of the poor, education, medical relief and advancement of any other general public utility". The decision relied on by the learned counsel in Dharmodayam Co. s case (supra) is distinguishable on facts. In that case, their Lordships of Kerala High Court came to the conclusion that the business of conducting Kuries itself was held in trust for charitable purposes and for generating income. In the case before us, though the assessee claims the same, from the facts and circumstances, we are unable to hold so.
As far as Indian law is concerned, in view of the clear definition of 'education', the scope is narrower and limited especially in the ratio of the decision of the Hon'ble Supreme Court in Sole Trustee, Loka Shikshana Trust (supra). We have to hold that in the light of the clear observations of the Assessing Officer that some of the corpus or the income generated from the business carried on by the assessee, if at all, parted to with M/s Ideal Publication Trust, for the benefit of publication of the daily, Madhyamam, the same cannot be held as application of income for charitable purposes. Still the question remains whether the mere running of the printing press itself will constitute an object of charitable activity. Coining to the definition of 'charitable purpose' in section 2(15) the most important words arc "advancement of any other object of general public utility". In the case of East India Industries (Madras) (P.) Ltd. v. C/T [1967] 65 ITR 611, the Supreme Court held that the mere carrying on of a business of manufacture, sale and distribution of pharmaceutical, medicinal and other preparations conducive to public health alone is not sufficient to constitute a charitable activity. In the case of Addl CIT Gangabai Charities [1983] 142 ITR 718, the Hon'ble Madras High Court held that "the proper way to understand the scope of the exemption is to find out what precisely are the objects, the income devoted to which are entitled to exemption. In this task it is essential to scrutinise the objects of the trust at least from the standpoint of the well-known heads of charity, such as relief of the poor, education, medical relief, and the like. Since the crux of the statutory exemption is not the income earned being derived from the property held under trust for a charitable object, but the actual application, or the accumulation or setting apart of the income for application, for a charitable purpose, the objects in any given trust deed will have to be construed not in an abstract sense but with reference to the capability or amenability of that charitable object to be put into operation for the purpose of enabling of the earning of the income to meet the object." Therefore, it is very clear that not only the object, but the application of the income is an important factor that has to be gone into by the judicial authorities. In the instant case of the assessee, the assessee-trust has not applied any portion of the income generated from the business of printing the newspaper to any charitable purposes.