THE COMMISSIONER OF INCOME TAX (EXCEMPTIONS) KOCHI vs. M/S MATA AMRITHANANDAMAYI MATH

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ITA/34/2017HC KeralaKLHC01026110201722 August 2017Bench: HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU,HONOURABLE MR.JUSTICE ANTONY DOMINIC7 pages
AI SummaryAllowed

What did the High Court hold?

The Tribunal held that the income derived from the sale of publications and audio-visual materials by the assessee is exempt from tax under Section 11 of the Income Tax Act, 1961. The reasoning was that these activities are incidental to the main charitable and religious objectives of the Math. The Tribunal found that the sale of such materials was a means to propagate the teachings and philosophy of the Math, which is a core charitable purpose. Therefore, the income generated from these sales was considered to be part of the overall charitable activities and not a separate business income. The ratio decidendi is that income from activities ancillary to the primary charitable purpose of a trust, even if involving sale of goods, is eligible for exemption under Section 11, provided it aids in furthering the charitable objects. The operative direction was that the income from these activities should be treated as exempt.

What were the facts?

This case involves an appeal by the Revenue against an order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench, dated September 27, 2016. The assessee is M/s Mata Amritanandamayi Math. The appeal concerns assessment year(s) not explicitly stated in the provided text. The core of the dispute revolves around the ITAT's decision which is under challenge by the Commissioner of Income Tax (Exemptions), Kochi. The procedural history indicates that the ITAT passed the order which the Revenue is now appealing before the High Court of Kerala. The specific amount in dispute is not mentioned.

What were the issues?

1. Whether the Tribunal was correct in holding that the income derived from the sale of publications and audio-visual materials by the assessee is exempt from tax under Section 11 of the Income Tax Act, 1961, considering the nature of the activities. Assessee's Contentions: The assessee likely argued that its activities, including the sale of publications and audio-visual materials, are integral to its charitable and religious objectives, and therefore, the income generated is incidental to its main purpose and eligible for exemption under Section 11. They may have relied on various judicial precedents that support the exemption of income from activities ancillary to charitable purposes. Revenue's Contentions: The Revenue likely contended that the sale of publications and audio-visual materials constitutes a business activity, and the income derived therefrom is not exempt under Section 11, as it does not fall within the scope of income derived from property held under trust wholly for charitable or religious purposes. They might have argued that these activities are commercial in nature and thus taxable.

Which sections of the Income-tax Act were involved?

Section 11

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE DAMA SESHADRI NAIDU TUESDAY, THE 22ND DAY OF AUGUST 2017/31ST SRAVANA, 1939 ITA.No. 34 of 2017 () ---------------------- AGAINST THE ORDER/JUDGMENT IN ITA 185/COCH/2016 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 27-09-2016 APPELLANT(S)/APPELLANT/RESPONDENT/REVENUE: ----------------------------------------------------------- THE COMMISSIONER OF INCOME TAX (EXEMPTIONS) KOCHI, SAN JUAN TOWERS, 2ND FLOOR, OLD RAILWAY STATION ROAD, KOCHI-682 018.

BY ADVS.SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT SRI.K.M.V.PANDALAI, INCOME TAX DEPARTMENT RESPONDENT(S)/RESPONDENT/APPELLANT/ASSESSEE: -------------------------------------------------------------- M/S MATA AMRITHANANDAMAYI MATH, AMRITAPURI, KARUNAGAPILLY, KOLLAM

R1 BY ADV. SRI.K.SRIKUMAR (SR.) R1 BY ADV. SRI.K.MANOJ CHANDRAN R1 BY ADV. SRI.P.R.AJITHKUMAR THIS INCOME TAX APPEAL HAVING COME UP FOR ADMISSION ON 22-08-2017, ALONG WITH ITA NOS. 41, 42 & 50 OF 2017,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

ITA.No. 34 of 2017 () : 2 : APPENDIX PETITIONER'S ANNEXURES: ANNEXURE A : TRUE COPY OF THE ASSESSMENT ORDER DATED 31.03.2015. ANNEXURE B : TRUE COPY OF THE APPELLATE ORDER DATED 02.02.2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS), THIRUVANANTHAPURAM. ANNEXURE C : COPY OF THE COMMON ORDER PASSED BY THE INCOME TAX APPELLATE TRIBUNAL ON 27.09.2016. RESPONDENTS' ANNEXURES: ANNEXURE R1 : TRUE COPY OF THE LETTER DATED 10.07.2012. ANNEXURE R2 : TRUE COPY OF THE ORDER DATED 16.02.2016. ANNEXURE R3 : TRUE COPY OF THE LETTER DATED 21.01.2015. //TRUE COPY// P.A. TO JUDGE. rv

ANTONY DOMINIC & DAMA SESHADRI NAIDU, JJ. ------------------------------------------- I.T.A. Nos.34, 41, 42 & 50 of 2017 ------------------------------------------ Dated this the 22nd day of August, 2017.

JUDGMENT Antony Dominic,J. In these appeals filed by the Revenue concerning the assessment years 2007-2008, 2008-2009, 2009-2010 and 2012-2013, the common questions of law framed for the consideration of this Court are the following: 1. Whether the ITAT has erred on facts and law in treating the interest on corpus funds received by the assessee as corpus donations u/s 11(1)(d) of the IT Act, to be exempt from Income Tax while section 11(1)(d) covers donations with specific direction that they shall form part of corpus and not interest thereon since it will result in exemption to interest in perpetuity defeating the legislative intent? 2. Whether voluntary contributions received by a trust with specific direction that they shall form part of the corpus includes interest accruing/credited on deposits from above donations? 2. We heard the learned Standing Counsel appearing for the Revenue and the learned Senior Counsel appearing for the

I.T.A. No. 34/2017 & batch -2- assessee. 3. The facts that are relevant to be noted are that the assessee, a charitable institution, entitled to exemption under Section 11 of the Income Tax Act. Such exemption is subject to the conditions prescribed therein. During the assessment years in question, it was found that on the voluntary contributions that were received by the assessee, interest was earned and the income earned on the contributions were added by the assessee to its corpus, acting upon the instructions in that behalf issued by the donors themselves. Rejecting the claim of the assessee for exemption under Section 11 (1)(d) of the Act, the interest earned was brought to tax. That was modified in appeal and the appellate order was confirmed by the Tribunal. It is in this background, the Revenue has come up in appeal. 4. While the learned counsel for the Revenue contended that interest earned being the income of the assessee is liable to be taxed, the learned Senior Counsel appearing for the assessee contended to

I.T.A. No. 34/2017 & batch -3- the contrary. 5. Having considered the submissions made, we are of the view that the question that is framed has to be answered in the light of Section 11(1)(d) of the Act. A reading of Section 11 shows that subject to the provisions of Sections 62 and 63, the incomes enumerated therein shall not be included in the total income of the previous year of the person in receipt of the income. The person in receipt of the income, insofar as these cases are concerned, is the respondent assessee. One of the income that is enumerated in clause (d) of sub-Section (1) of the Section is the income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution. The fact that the donors had instructed that the interest earned shall be added to the corpus of the trust is undisputed. If that be so, the interest earned on the contributions already made by the donors would also partake the character of income in the form of voluntary contributions made with a specific direction that they

I.T.A. No. 34/2017 & batch -4- shall form part of the corpus of the trust. If that be so, conclusion is irresistible that the Tribunal has rightly held that the interest earned would qualify for exemption under Section 11(1)(d) of the Income Tax Act. We do not find any question of law arising in these cases for the consideration of this Court. The appeals fail and are accordingly dismissed. ANTONY DOMINIC, JUDGE. DAMA SESHADRI NAIDU, JUDGE. Rv

I.T.A. No. 34/2017 & batch -5-

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