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Income Tax Appellate Tribunal, BANGALORE BENCHES “C”, BANGALORE
Before: Shri George George K, JM & Ms.Padmavathy S, AM
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES “C”, BANGALORE
Before Shri George George K, JM & Ms.Padmavathy S, AM ITA No.2528/Bang/2017 : Asst.Year 2012-2013 M/s.Kuchalambal Charities The Income Tax Officer No.122, 10th Main Road (Exemption) Ward-1 v. 1st Block, Jayanagar Bengaluru. Bangalore – 560 011. PAN : AAATK1235B. (Appellant) (Respondent) Appellant by : Sri.S.Parthasarathi, Advocate Respondent by : Sri.Sankar Ganesh D, JCIT-DR Date of Pronouncement : 28.03.2022 Date of Hearing : 23.03.2022 O R D E R Per George George K, JM : This appeal at the instance of the assessee is directed against CIT(A)’s order dated 04.10.2017. The relevant assessment year is 2012-2013.
The grounds raised read as follows:-
“1. On the facts and in the circumstances of the case, the learned CIT (Appeals) erred in upholding the order of the AO declining to give the benefit of Section 11 of the Act to the Appellant. 2. The learned CIT (Appeals) ought to have appreciated that the objects of the Trust would clearly show that the trust was mainly for charitable purposes for providing facilities and amenities for the education of the poor, medical facilities etc. 3. The learned CIT (Appeals) ought to have appreciated that even the Kalyana Mantapa constructed was for the benefit of conducting religious and social functions besides performing marriages and also to provide -amenities like water, utensils, furniture, electricity etc which would show that the substantial objects of the Appellant-trust were charitable in nature to which the provisions of Section 2(15) of the Act would apply.
2 ITA No.2528/Bang/2017 M/s.Kuchalambal Charities.
The learned CIT (Appeals) ought to have appreciated that the proviso to Section 2(15) of the Act has no application to the Appellant-trust and the trust has been recognized for charitable purposes and accordingly registration under Section 12A was also granted. 5. The learned CIT (Appeals) ought to ,have appreciated in the circumstances that denial of exemption under Section 11 of the Act was opposed to law and uncalled for and accordingly he ought to have refrained from sustaining the order of the AO in this regard. 6. The learned CIT (Appeals) ought to have accepted the explanation offered by the Appellant and also ought to have appreciated that the benefit of Section 11 of the Act has been given to the Appellant for the past several years under similar circumstances and accordingly there being no difference in the facts of the case, he ought to have held that the Appellant-trust would continue to enjoy the benefit of Section 11 of the Act. 7... The learned CIT (Appeals) erred In enhancing the income determined by the AO. 8. The learned CIT (Appeals) ought to have accepted the explanation offered by the Appellant and refrained from enhancing the income as determined by the AO and on the other hand he ought to have. directed the AO to allow the exemption under Section 11 of the Act. 9. The learned CIT (Appeals) ought to have appreciated that the case law relied on were distinguishable and on the other hand the case law cited by the Appellant would fully support the case of the Appellant. 10. Without prejudice, the learned CIT (Appeals) erred in holding that the income generated out of Kalyana Mantapa was required to be assessed under the head "income from house property" in respect of the rental income and the other income generated was liable to be assessed under the head "income from other sources" without appreciating that the trust being a charitable trust, the surplus is required to be determined under commercial principles to which the provisions of Section 22 or Section 56 of the Act have no application. 11. The learned CIT (Appeals) ought to have followed the jurisdictional High Court judgment in this regard and refrained from directing the AO to determine the income under the head "income from house property" and "income from other sources".
3 ITA No.2528/Bang/2017 M/s.Kuchalambal Charities. 12. Without prejudice, the impugned addition as sustained by the learned CIT (Appeals) and also the income enhanced by the learned CIT (Appeals) are arbitrary, excessive and ought to be substantially reduced. 13. For these and such other grounds that may be at the time of hearing, the Appellant prays that the appeal may be allowed.” 3. The brief facts of the case are as follows: The assessee for the relevant assessment year 2012- 2013 filed return of income on 25.08.2012 declaring `NIL’ income after claiming exemption u/s 11 of the I.T.Act. The assessment was selected for scrutiny and notice u/s 143(2) of the I.T.Act was issued on 07.08.2013. During the course of assessment proceedings, it was noticed by the A.O. that the assessee was giving on rent Kalyana Mandapa for fees. The A.O. was of the view that the activities of the assessee falls under the last limb, namely, “any other object of general public utility” under proviso to section 2(15) of the I.T.Act. Since the assessee was charging fees for letting out the kalyana mandapa and it was done on a commercial basis, the assessee was asked to show cause why exemption u/s 11 of the Act should not be denied. The assessee vide its letters dated 09.03.2015 and 20-03.2015 filed objections. It was stated that the income has been applied in India for charitable purposes and to the extent of non-application, the same was accumulated. The A.O., however, rejected the contentions of the assessee. The A.O. held that subsequent to the amendment and insertion of proviso with effect from 01.04.2019 to section 2(15) of the I.T.Act, the assessee’s primary activity falls within the advancement of “any other object of general public utility” u/s 2(15) of the Act and since
4 ITA No.2528/Bang/2017 M/s.Kuchalambal Charities. the receipts from such activities exceed the prescribed limit, the A.O. concluded that the assessee is not entitled to exemption u/s 11 of the Act. The Assessing Officer, in holding so, relied on the judgment of the Hon’ble jurisdictional High Court in the case of Subharam Trust v. The Director of Income Tax (Exemption) in ITA No.380 of 2009 (judgment dated 30th May, 2011).
Aggrieved by the denial of exemption u/s 11 of the Act, the assessee preferred an appeal to the first appellate authority. The CIT(A) after extracting clause 5 and 6 of the Trust deed dated 17.03.1962, held that there is no mention in the trust deed how income generated from running of kalyana mandapa will be utilized for charitable purposes. The CIT(A) by following the judgment of the Hon’ble Apex Court in the case of Gangabai Charities v. CIT reported in (1992) 197 ITR 416 (SC) confirmed the denial of exemption u/s 11 of the I.T.Act. Further, the CIT(A) enhanced the income by directing the A.O. to assess the rental income under the head `income from house property’ and other receipts under the head ‘income from other sources’.
Aggrieved by the order of the CIT(A), the assessee has filed this appeal before the Tribunal. The learned AR has filed two sets of paper book comprising of 151 pages, inter alia¸ enclosing therein copy of details submitted to the CIT(A) vide letter dated 30.08.2017, copy of financial statements of the trust, copy of form 10B for A.Y. 2012-2013, copy of Trust Deed dated 17.03.1962, copy of 12A registration certificate letter, copy of the details of statement of accumulation of
5 ITA No.2528/Bang/2017 M/s.Kuchalambal Charities. funds and application along with the other details, etc. The learned AR, apart from reiterating the submissions made before the lower authorities, submitted that surplus from letting out the kalyana mandapa has been utilized for charitable purpose mentioned in the object of the Trust, namely, education for the poor irrespective of cast, religion or community, providing accommodation for hostel facilities, boarding and loading to the poor students, etc. It was, therefore, submitted that the assessee is entitled to exemption u/s 11 of the I.T.Act.
The learned Departmental Representative, on the other hand, submitted that the primary object of the assessee is only letting out the kalyana mandapa. It was stated that activities of the assessee falls under last limb of proviso to section 2(15) of the Act, namely, “any other object of general public utility”. It was contended that the assessee was letting out the kalyana mandapa in a commercial manner by charging exorbitant rent. Therefore, the assessee is not entitled to exemption u/s 11 of the I.T.Act. The learned DR after referring to section 13(8) and section 11(4) of the Income Tax Act, contended that the assessee was not maintaining any separate books of accounts for the business of running of kalyana mandapa, and therefore, even if the business is incidental to the attainment of the object of the Trust, the benefit u/s 11 of the Act cannot be granted.
We have heard rival submissions and perused the material on record. The assessee has two kalyana mandapas. One at Jayanagar, Bangalore and other at Chepauk,
6 ITA No.2528/Bang/2017 M/s.Kuchalambal Charities. Chennai. The rent for taking on hire for two days the kalyana mandapa at Jayanagar, Bangalore is Rs.1,20,000 and Rs.8,00,000 for two days at Chepauk, Chennai (the figures as submitted by the assessee for the year 2017). We have perused the Trust deed dated 17.03.1962. The main object of the assessee is to run kalyana mandapa though there are other charitable objects enumerated in other clauses. There is nothing on record to show that the amounts have been spent for the other charitable objects. It was submitted by the learned AR that surplus is utilized for charitable purposes for imparting education, etc. However, the financial statements submitted do not speak so. For the relevant assessment year, the surplus available for application is Rs.96,32,723 (refer page 106 of the paper book). The assessee claims that out of the surplus of Rs.96,32,723, the assessee had expended during the relevant assessment year a sum of Rs.71,90,309 as revenue expenditure for charitable purpose and further sum of Rs.5,36,957 as capital expenditure for charitable purposes. The said claim is not supported by any evidence. The assessee, admittedly, is not running any educational institution, nor the assessee has produced any proof for incurring any expenditure for the charitable purposes.
7.1 In the instant case, the assessee is primarily carrying on the activity of letting out of kalyana mandapa, which is nothing but objects of general public utility and the letting out is being done on a commercial basis by charging exorbitant amount. The amended proviso to section 2(15) of the I.T.Act has application to the facts of the instant case.
7 ITA No.2528/Bang/2017 M/s.Kuchalambal Charities. Section 13(8) of the Act, inserted with effect from 01.04.2009 states that “Nothing contained in section 11 or section 12 shall operate so as to exclude any income from the total income of the previous year of the person in receipt thereof if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in the said previous year.”
7.2 Moreover, the assessee has not been maintaining books of account separately for the business of letting out of kalyana mandapa. Therefore, even assuming the business is incidental to the attainment of the objects of the trust in absence of separate books of account, the benefit of section 11 of the I.T.Act cannot be granted.
7.3 As regards ground 10 and 11, no arguments were raised by the learned AR during the course of hearing. Therefore, the CIT(A)’s directions to the A.O. to assess the rental income under the head `income from house property” and other receipts as “income from other sources” is confirmed. It is ordered accordingly.
In the result, the appeal filed by the assessee is dismissed. Order pronounced on this 28th day of March, 2022. Sd/- Sd/- (Padmavathy S) (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore; Dated : 28th March, 2022. Devadas G*
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Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT(A)-14, Bangalore. 4. The Pr.CIT- (Exemption), Bangalore. 5. The DR, ITAT, Bengaluru. 6. Guard File. Asst.Registrar/ITAT, Bangalore