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2720/Chny/2017

2. The assessee is a public charitable Trust, filed an application dated 20.07.1973 for registration under Section 12A(a) of the Act before the Commissioner of Income Tax, Central-II, Chennai [CIT(A)]. The assessee Trust was constituted by a Memorandum of Association dated 01.03.1954 and subsequently by Supplementary Deed dated 28.06.1961. The CIT(A) by order dated 30.06.1989, granted registration to the assessee Trust under the said provision. Proceedings were initiated by the Director of Income Tax (Exemptions) ('DIT(E)') under Section 12A(a)(iii) of the Act, after noting that the assessee Trust was granted registration by the CIT(A) under Section 12A(a), by order dated 30.06.1989. The DIT(E) examined the records and noted the objects and activities of the assessee Trust. It was stated in the records that the assessee does not run any school or colleges, though such purposes have been formulated as the main objects of the Trust, the Trust engages itself in the business of publishing the Tamil news business commitments 'Dina Thanthi' and also job works for printing are undertaken as business commitments. The surplus of the income from the business after defraying all the expenses is utilized for donation to another Trust, 'Aditanar Educational Trust' only. The DIT(E) after analysis of the gross receipts of the Trust and the surplus of income from business and the donation to the 'Aditanar Educational Trust' for four assessment years, i.e., from 2006-07 to 2009-10, held that the only charitable activity done by the assessee is the donation to the other Trust year after year. The DIT(E) noted that the other Trust is running educational institution, it apparently may be covered by the object namely helping to run school or college or other educational institution for teaching arts and science as provided in the second object of the assessee Trust. The DIT(E) held that the assessee has not carried any other objects as provided in the Deed of Trust or Supplementary Deed. After referring to the definition of -charitable purpose- as defined in Section 2(15) of the Act, it was held that the activity of the assessee Trust may not be covered as relief to the poor, medical relief, preservation of environment and preservation of monuments or places or objects of artistic or historic interest and the advancement of any other object of general public utility. It was held that the activity of the assessee has to be examined as to whether it can be said that the assessee Trust is existing for the purpose of education or advancement or any other general public utility. The DIT(E) framed the question for consideration, whether the assessee Trust is engaged in educational activity or whether it is only doing business. It was held that the object of the Trust alone does 2720/Chny/2017 not make the Trust eligible for exemption; the activities are important in considering whether the Trust is eligible for exemption.

"The issue has been considered by the Board and it has been decided that as the law stands at present, the payment of a sum by one charitable trust to another for utilisation by the donee trust towards its charitable objects is proper application of income for charitable purpose in the hands of the donee trust; and the donor trust will not lose exemption under Section 11 of the Income-tax Act, 1961, merely because the donee trust did not spend the donation during the year of receipt itself.

It could also be observed during the proceedings that Shri Aditanar was the chairman-cum-trustee of Aditanar Educational Trust and simultaneously the Director-cum-trustee of the appellant trust. Thus a commonality in trusteeship is apparently seen which helps to infer that 2720/Chny/2017 the common trustee would possibly be the prohibited beneficiary u/s 13(1)(c)(i) read with sec. 13(3)(e) of the Act.

4.8 The appellant claims that it is running the business of publishing the newspaper "Dina Thanthi" and job work of printing as incidental to the attainment of the charitable objectives. This appears to be very strange. The business of the appellant was started in 1942 and the Thanthi Trust came into existence in March 1954 with the sole purpose of running the newspaper publishing and printing business. The original trust deed dated 01.03.1954 which enshrines the principal and dominating objects of the appellant does not indicate therein any kind of charitable purpose. Hence the appellant was prevented from instituting any claim for exemption u/s 11 and 12 of the Act. The situation continued till a supplementary deed of trust was introduced in 28.06.1961 which accommodated. Without prejudicing the original, principal and dominating purposes of the deed of trust dated 01.03.1854 - six objects of charitable purposes to abate the purportedly staged court case by S.T. Adityan and others against the founder of the appellant trust Shri S.B. Adityan. So it is apparent from the aforesaid facts that the six charitable objects though not ever accomplished, came into existence only as incidental to the main business of the appellant and not vice-versa as stated by the appellant. It is an undisputable and undeniable fact that the appellant cannot at any cost afford to jeopardize its main and primary business of publishing newspaper "Dina Thanthi" and printing job work. Hence with the intention of securing perpetual and profitable existence to its primary business of publishing newspaper and printing the appellant caused the incidence of the six so called charitable objects which are only kept in nominal existence on paper as a ritual for covering itself with the veil of charitable character. Hence the argument of the appellant that it is running the business of publishing the newspaper 'Dina Thanthi' and job work of printing as incidental to the attainment of charitable objectives cannot be accepted for the reasons discussed above.