DEVAKOTTAI NAGARATHAR VIZHA VALAGAM TRUST,DEVAKOTTAI vs. CIT, EXEMPTIONS,, CHENNAI

The brief facts of the case are that the assessee is a Trust established on 20.05.2024 with the object of the trust are religious, Relief to the poor, Education, Medical relief and advancement of any other objects of General Public Utility. The assessee filed its application dated 31.01.2025 in Form 10AB under Rule 17A of the IT Rules, 1962 seeking registration under section 12A(1)(ac)(iii) of the Act. On perusal of the submission made by the assessee, the ld.CIT(E) observed that the assessee has taken a ‘Kalyana mandapam’ (Nagarathar Vizha Valagam Kalyana Mandapam, 56, T. Oorani North Street, Devakottai – 630302) on rent from a temple, made renovations to it, and lets out to poor and needy people at lower than market rate. Further, the ld.CIT(E) also noted that the assessee has declared the details of its financials, in brief, as under: Ledger Head Expenses(Rs.) Income (Rs.) Magamai Income 4,46,150 EB Charges Received 1,77,150 Generator Rent Received 52,328 Electricity Charges 1,13,945 Maintenance Expenses 2,59,026 Rent 1,80,000 5,52,971 6,75,628

Further, the ld.CIT(E) stated that to consider the activities within the limb of ‘poor’ as per ‘Charitable purpose’ the activity must be for the poor and there must be relief to the poor. Since, the renting of Kalyana Mantapa at a lower rate by taking the premises on rental basis cannot be treated as relief to the poor and charitable in nature. In view of the above, the ld.CIT(E) summarised that the assessee has received Magamai Income(rent) which is not voluntary in nature and is in the line of trade, commerce and business and failed to establish

Aggrieved by the order of the ld.CIT(E) in rejecting the application filed u/s.12A(1)(ac)(iii) of the Act in Form 10AB seeking registration u/s.12AB of the Act, the assessee is in appeal before us. The ld.AR for the assessee submitted that the assessee is a charitable trust established on 20.05.2024 with the object of the trust are religious, Relief to the poor, Education, Medical relief and advancement of any other objects of General Public Utility. Initially, the Trust for providing relief to the poor by establishing Kalyana Mantap and giving the same to conduct marriages and other rituals to the poor on a concessional rate, taken a premises of the temple on rental basis by agreed to pay rent of Rs.1,80,000/- per annum and made renovations to use it as Kalyana mantap. The trust started providing the facility of Kalyana mantap to the needy and poor, as against the market rate of Rs.25,000/- to Rs.30,000/- for a day and even for half-a-day charged by other kalyana mandapams in the area, charging Rs.10,000/- for a day and Rs.5,000/- for part of a day. (9 Nos. of sample receipts in respect of the same is forming part of the Paper book page Nos.35 to 43).

This kalyana mandapam rental income has been declared by the trust under the head ‘magamai income’. As to what is ‘magamai income’, the same has been explained by the trust in its reply dated 04.09.2025 to the show cause notice (SCN) issued by the ld.CIT(E), Chennai, as detailed below: (both SCN and reply forming part of the Paper book page Nos.28 to 34):

The ld.AR also submitted before the ld.CIT(E) the revenue earned and spent through filing the financials as under:

The surplus from its activity of running the kalyana mandapam is used to meet out the incidental / administrative expenses of the assessee, as may be seen from the financials reproduced (page no.7) in the impugned order of the ld.CIT(E). In any case, the fact remains that the poor / needy sections of society are benefitted by getting the kalyana mandapam at a nominal rent (considerably lower than the market rate prevailing in that area) to celebrate their functions. In this regard, it is reiterated that as against market rate of Rs.25,000/- to Rs.30,000/- per day, the assessee is charging only Rs.10,000/- per day and in some cases where half-a-day function is involved, only Rs.5,000/-, for the function.

In such circumstances, the question as to whether the above activity of letting out the kalyana mandapam at lower than market rate is a business, may be seen to be addressed by the Hon’ble Supreme Court in the case of ACIT v. Ahmedabad Urban Development Authority (143 taxmann.com 278) as extracted below:

In view of the above, the ld.AR prayed for directing the ld.CIT(E) to grant the registration u/s.12AB of the Act.

Per contra, the ld.DR supported the order of the ld.CIT(E) and submitted that the assessee’s activity is in the nature of commercial activity as the assessee has taken the premises on rental basis and again provided the same on rental basis to the public. Hence, the ld.DR prayed for confirming the order of the authorities.

We have heard the rival submissions, perused the material available on record and carefully considered the order passed by the ld.CIT(E). The short issue arising for consideration is whether the activity of the assessee-trust in taking a Kalyana Mandapam on rent from a temple, maintaining the same and providing the facility to poor and needy sections of society at a substantially concessional rate, can be regarded as a charitable activity so as to qualify for registration u/s.12AB of the Act.

The undisputed factual position emerging from the records is that while similar marriage halls in the locality charge between Rs.25,000/- and Rs.30,000/- per day, the assessee-trust has been charging only Rs.10,000/- per day and, in appropriate cases, Rs.5,000/- for half-day usage. The receipts produced before us substantiate the claim that the facility is being provided at rates substantially lower than the prevailing market rates. The ld.CIT(E) rejected the application primarily on the ground that the assessee was receiving rent under the nomenclature “Magamai Income” and that the activity was in the nature of trade, commerce or business. We are unable to subscribe to the said view. Merely because some consideration is collected from the beneficiaries, it does not automatically lead to the conclusion that the activity is commercial in nature. The true test is whether the dominant purpose is profit-making or charitable service.

The explanation offered by the assessee that “Magamai Income” represents the nominal amount collected from users of the Kalyana Mandapam has not been found to be incorrect. The financial statements also indicate that the collections are largely utilized towards payment of rent, electricity charges, maintenance expenses and other incidental expenditure connected with the operation of the hall. The records do not reveal any profit-oriented motive or systematic commercial exploitation of the property.

Applying the ratio of the aforesaid decision to the facts of the present case, we find that the assessee is providing a socially beneficial facility at rates far below the market value. In the present economic scenario, where the cost of conducting marriages and family functions has increased substantially, making available a Kalyana Mandapam at a concessional rate to poor and economically weaker sections undoubtedly provides financial relief and reduces their economic burden. Such an activity, in our considered opinion, squarely falls within the expression “relief of the poor” as contemplated u/s.2(15) of the Act.

The objection of the ld.CIT(E) that the property is not owned by the trust is also devoid of merit. Ownership of the property is not a precondition for claiming charitable status. What is relevant is the nature of the activity carried on and whether such activity advances the charitable objects of the trust. The fact that the assessee has taken the premises on rent from a temple and is administering the same for carrying out its charitable objects does not detract from the charitable character of the activity.

Further, the trust was established only on 20.05.2024 and is at a nascent stage. Its objects specifically include providing assistance for marriage, education, medical needs and other welfare measures to deserving and needy persons. At the stage of grant of registration u/s.12AB of the Act, the scope of

Considering the totality of the facts and circumstances of the case, we hold that the activity of providing the Kalyana Mandapam at substantially concessional rates to poor and needy persons cannot be characterized as a trade, commerce or business activity. On the contrary, the same constitutes a charitable activity in the nature of “relief of the poor”. Therefore, the reasons assigned by the ld.CIT(E) for rejecting the application are unsustainable. Accordingly, we set aside the impugned order passed by the ld.CIT(E) and direct the ld.CIT(E) to grant registration to the assessee-trust u/s.12AB of the Act in accordance with law.

In the result, the appeal of the assessee is allowed.