THE THANTHI TRUST,CHENNAI vs. JCIT, CHENNAI

आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT: These four appeals by the assessee are arising out of the orders passed by the Commissioner of Income Tax (Appeals)-17, Chennai in ITA No.348/11-12, 14 & 1232/13-14, order dated 09.03.2015 & ITA No.39/2015-16, order dated 14.09.2017. The assessments were framed by the JCIT(OSD)(Exemptions) II / DDIT(Exemptions)-II(i/c)/JDIT(Exemptions)/ACIT(Exemptions), for

2 ITA Nos.1532 to 1534/Chny/2015 & 2720/Chny/2017 the assessment years 2009-10, 2010-11, 2011-12 & 2012-13 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide orders dated 21.12.2011, 05.03.2013, 14.02.2014 & 18.03.2015 respectively.

3 ITA Nos.1532 to 1534/Chny/2015 & 2720/Chny/2017 appreciated the findings of the Jurisdictional High Court that the entire property were held under trust and or under legal obligation was the business itself and the entire income from the business had to be utilized for the various charitable objects set out in the schedule to the decree of the High Court and therefore could not be denied of the benefit of Exemption under the Tax Act by devoting the entire surplus income to education. (5) The Commissioner of Income tax Appeals 17 is not correct in applying the proviso and the expenditure limit to the appellant's case while the appellant fulfilled the main provisions and the application of income to warrant the income eligible for exemption as per the Act. (6) It is humbly submitted that the appellant holds property under trust is the business itself and the business is carried on only and exclusively, for carrying out the charitable objects set out in the schedule in C.S.NO.90 of 1961 as approved by the High Court Order and as such the order of the Commissioner of Income Tax (Exemptions) is erroneous and void and without jurisdiction and liable to be set aside. (7) It is humbly prayed and submitted that the surplus income was utilized for educational purpose and running of schools and colleges and all activities are within the jurisdiction of the same authority and administrated by the same person and therefore the order is illegal and without jurisdiction and void therefore liable to be set aside.

4 ITA Nos.1532 to 1534/Chny/2015 & 2720/Chny/2017 1. The newspaper known as Dina Thathi or Daily Thanthi at present being published as a daily newspaper in Tamil language together with the goodwill thereof, the head office of the said newspaper being presently situated at No.60, Kutcherry Road, Mylapore, Madras, as a going concern, with all its assets and liabilities. 2. All the printing machinery, printing types, furniture and accessories of the newspaper known as Dina Thanthi or Daily Thanthi above named. The purposes for which the trust was created are a)To establish the Dina Thanthi or Daily Thanthi as an organ of educated public opinion for the tamil reading public. b)To disseminate news and to ventilate opinion upon all matters of public interest through the said newspaper; and c)To maintain the said newspaper and its press in an efficient condition devoting the surplus income of the said newspaper and its press after defraying all expenses, in improving and enlarging the said newspaper and its services and placing the same on a footing of permanency.

3.1 M/s. Thanthi Trust was granted registration u/s 12A(a) of the I.T. Act vide order of the CIT, Central-II, Madras in C.No.1802/1/89-90/Cent-II dated 30.06.1989. Subsequently after serving a show cause notice dated 25.10.2011 on the assessee trust and after adhering to and fulfilling the principles of natural justice, the DIT(E), Chennai, passed an order dated 08.12.2011 u/s 12AA(3) of the Act cancelling the registration granted to the assessee trust u/s 12A(a) of the Act. Subsequent to cancellation of registration by DIT(Exemption), the assessee carried the matter before Hon’ble Madras High Court against the order of Tribunal in ITA No.356/Mds/2010, order dated 08.05.2018 and the Hon’ble High Court noted the facts in para 2 as under:-

5 ITA Nos.1532 to 1534/Chny/2015 & 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

6 ITA Nos.1532 to 1534/Chny/2015 & 2720/Chny/2017 not make the Trust eligible for exemption; the activities are important in considering whether the Trust is eligible for exemption.

3.2 The Hon’ble High Court framed the following question:- Whether the Tribunal was right in law in holding that the appellant trust is not eligible for exemption under Section 12A of the Income Tax Act, 1961 without considering the merits of the case in a proper manner?

and the Hon’ble High Court granted registration and the relevant final finding by Hon’ble High Court in paras 87 to 90 held as under:- 87.Before we conclude, it would be relevant to take note of the CBDT instruction No.1132, dated 05.01.1978 with regard to the availability of exemption in hands of charitable Trusts of amounts paid as donation to other charitable Trusts. The CBDT has instructed as follows:- “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. The above position may kindly be brought to the notice of all officers working your charge.””

88.Circular No.1 of 2011 dated 06.04.2011 issued by the CBDT deals with various aspects and clause 7 of the circular deals with -cancellation of registration obtained under Section 12A of the Act-, which reads as follows:- “7.Cancellation of registration obtained under Section 12A 7.1. Section 12AA provides the procedure relating to registration of a trust or institution engaged in charitable activities. Section 12AA(3) previously provided that if the activities of the trust or institution are found to be non-genuine or its activities are not in accordance with the objects for which such trust or institution was established, the registration granted under Section 12AA can be cancelled by the Commissioner after providing the trust or institution an opportunity of being heard.

7 ITA Nos.1532 to 1534/Chny/2015 & 2720/Chny/2017

7.2. The power of cancellation of registration is inherent and flows from the authority of granting registration. However, judicial rulings in some cases have held that the Commissioner does not have the power to cancel the registration which was obtained earlier by any trust or institution under provisions of Section 12A as it is not specifically mentioned in Section 12AA.

7.3. Therefore, Section 12AA has been amended to provide that the Commissioner can also cancel the registration obtained under Section 12A as it stood before amendment by Finance (No.2) Act, 1996. 7.4. Applicability -– This amendment has been made applicable with effect from 1st June, 2010 and shall accordingly apply for assessment year 2011- 12 and subsequent assessment years.”

8 ITA Nos.1532 to 1534/Chny/2015 & 2720/Chny/2017 11 of the Act. To say the least, the Tribunal-s justification would amount to judicial indiscipline for not following the decision of the Hon’ble Supreme Court and this Court in the assessee-s own case. The DIT(E) failed to adhere to the instructions issued by the CBDT which is binding on the DIT(E). As observed earlier, the recent pandemic has taught very many lessons and one of which is that, mode and method of education cannot be in any manner restricted, but should be given the widest meaning that is possible.

9 ITA Nos.1532 to 1534/Chny/2015 & 2720/Chny/2017 business without a cess or fee or any other consideration. The CIT(A) by identically worded orders denied the claim of exemption u/s.11 & 12 or section 10(23C) of the Act by observing in para 4.7, 4.8 & 4.9 as under:- 4.7 The appellant has been giving away every year crores of Rupees to Aditanar Educational Institutions as donation and calling the same as application of income within the meaning of sec. 11(1) of the I.T. Act, 1961. According to the appellant 'donation' is equivalent to application. But donation and 'application' are two different words having different meanings. The meaning intended to be attributed to the word 'application’ by the statute in legal perlance is "the action of putting something into operation". Whereas ‘donation' is something which ‘someone gives to other organization or charity.’ Under section 11, the Income-tax Act intends to give tax exemption to the income of the trust for charitable or religious purposes to the extent of its application to such purposes in India. According to the I.T. Act the 'income' should be 'applied' and not given away to others. By 'application' the income is put into utility operation of the charitable purposes in India. By putting the income into utility operation the trust shall be able to control, monitor and supervise the pursuance of charitable activities for which purpose the trust exists. Whereas in the case of 'donation' the trust who gives such donation shall not have any control, or supervision over the manner and discipline in which the income donated is used in the accomplishment of the desired charitable purposes. Hence the donation given by the appellant to Aditanar Educational Institution cannot be treated as 'application of income' within the meaning of sec.11 of the Act and hence the exemption claimed cannot be granted on this ground also. At the most the appellant is entitled for deduction u/s 80G of the Act in respect of donation given to the Aditanar Educational Institution provided the recipient is granted approval u/s 80G(5) of the Act.

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

10 ITA Nos.1532 to 1534/Chny/2015 & 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.

4.9 As the appellant trust is not eligible to claim exemption u/s 11 and 12 or 10(23C) of the Act, obviously its case needs to be considered for deduction of donations u/s 80G of the Act in computing the total income.

11 ITA Nos.1532 to 1534/Chny/2015 & 2720/Chny/2017 In this case the entire donation was given to M/s. Aditanar Educational Institution which does not enjoy the privilege u/s 80G of the I.T. Act. Hence the donation can also not be deducted to arrive at the total income.

Aggrieved, assessee came in appeal before the Tribunal in all the years.

12 ITA Nos.1532 to 1534/Chny/2015 & 2720/Chny/2017 the field of education and the relevant paras 44 to 46, he referred reads as under:- 44.In the case of Thanthi Trust vs. CBDT & Ors. [(1995) 213 ITR 0639], the assessee filed a bunch of writ petitions to quash Circular No.372, dated 08.12.1983 issued by the CBDT and the orders of the Department denying exemption under Section 11 of the Act to the assessee Trust for the assessment years 1984-85 to 1991-92 and, to direct the Department to consider the assessee’s claim for exemption under Section 11, independent of Circular No.372, dated 08.12.1983. It was held that inasmuch as the business carried on by the assessee is itself held under ‘Trust for public charitable purposes’ and the business is carried on only for the purposes of carrying on the charitable objects as found by the Hon’ble Division Bench in 137 ITR 735 (Madras), the provisions of sub’Section (4A) of Section 11 cannot have any application. The appeal filed by the Revenue against the decision in 137 ITR 735 (Madras), in the case of CIT vs. Thanthi Trust [(1999) 239 ITR 0502] was considered by the Hon’ble Supreme Court wherein, it was held that the Aditanar College was run, not by the assessee Trust, but by another registered charitable society and in such circumstances, the High Court was right in its conclusion which it had arrived at holding that no part of the Revenue’s case, at any point of time that the credit entries made in the assessee’s books of account were not genuine or true or that they were mere make-believe or bogus. Further, it was observed that it was also not brought to the notice of the Hon’ble Supreme Court that the ITO doubted the said entries and called upon the assessee to produce the accounts of the College and that the assessee failed to produce the same. With these observations, the appeal filed by the Revenue was dismissed. Thus, in the light of the above decisions in the assessee’s own case, it will be too late in the day for the Revenue to now contend that the activities of the assessee are not charitable purposes. The attempt of the Revenue is to rake up a settled issue with an attempt to reopen the entire matter under the guise of introduction of the provision of Section 2(15), which defines ‘charitable purpose’. Such attempt is wholly unsustainable and impermissible under law. The Revenue is estopped both on law as well as on facts from raising any contention as mentioned by the DIT(E) in its order dated 08.12.2011. The said order is an outcome of wrong understanding of the legal provisions, the effect of the judgment in C.S.No.90 of 1961 and the series of litigations between the Department and the assessee Trust all of which were in favour of the assessee. Thus, on the

13 ITA Nos.1532 to 1534/Chny/2015 & 2720/Chny/2017 facts of the case, the principle of estoppel will hit the Revenue and they are not entitled to state that the assessee Trust is not carrying on a charitable activity and thus, it is not in the field of education, etc.

14 ITA Nos.1532 to 1534/Chny/2015 & 2720/Chny/2017 5.1 The ld.counsel for the assessee further referred to paras 58 to 63, which reads as under:’ 58. The above referred decisions will be squarely applicable to the case of the assessee. In fact, the DIT(E) accepts this position with regard to the finality of the judgment and decree in C.S.No.90 of 1961. In paragraph 7(b) of its order dated 08.12.2011, the DIT(E) accepts the objects as per the Supplementary Deed as ratified in C.S.No.90 of 1961. If such be the admitted factual position, then the Revenue cannot dispute the fact that the amounts, which were earned by the assessee Trust, have to be necessarily spent for a charitable purpose as per the mandate under the Supplementary Deed as confirmed in C.S.No.90 of 1961 and therefore, it is a case of diversion of income by overriding title. Therefore, it goes without saying that the Department should be consistent in their approach and change of officers cannot change the legal position which stood concluded in the assessee’s case. The argument that the Revenue can take a re-look because of the amendment to Section 2(15) by amended proviso is an argument which has to be outrightly rejected especially, when the Department has accepted the finality of the judgment in C.S.No.90 of 1961. (To be noted, the Department has no other option, or else they may be liable for contempt of Court.)

15 ITA Nos.1532 to 1534/Chny/2015 & 2720/Chny/2017 held that strictly speaking res judicata does not apply to income tax proceedings, each assessment year being a unit, what is decided in one year may not apply in the following year where a fundamental aspect permeating through different assessment years has been found as a fact one way or other and parties have allowed the position to be sustained, it would not be appropriate to allow the position to be changed in a subsequent year.

16 ITA Nos.1532 to 1534/Chny/2015 & 2720/Chny/2017 Trust and therefore, curtain has to be drawn and finality should prevail. While on this issue, we would have been well justified in imposing exemplary cost on the Revenue for their unsustainable interpretation.

5.2 The ld.counsel for the assessee then finally stated that even Hon’ble High Court of Madras has considered the amendment to proviso to section 2(15) of the Act viz-a-viz the facts of the present case and held in paras 71 & 72 that the assessee’s activities are not to be held as non-genuine because of the amendment. The Hon’ble High court discussed in paras 71 & 72 as under:- 71. In the case on hand, there is no allegation that the assessee Trust has not carried on its activities in accordance with the objects of the Trust as set out in the Deed of Trust and the Supplementary Deed. The Revenue has accepted the said fact and also acceded to the finality of the judgment and decree in C.S.No.90 of 1961. The DIT(E) seeks to bring the assessee-s case in the first limb of sub-Section (3) by stating that the activities of the Trust are not genuine.

17 ITA Nos.1532 to 1534/Chny/2015 & 2720/Chny/2017 to be done under sub-Section (3) of Section 12AA. The satisfaction should be on the activities of the Trust and finding should be rendered as to how such activities are not genuine. The activities of the assessee Trust have not been disputed, nor there is any allegation of non genuine activities. Therefore, by referring to the amendment to the proviso to Section 2(15) and referring to the meaning of the word ‘education’ as spelt out in certain decisions, cannot be construed to be a satisfaction, which is contemplated under sub-Section (3) of Section 12AA.

Finally, the Hon’ble High Court has considered this issue and held that the DIT(E) committed gross error in restricting the meaning of the word ‘education’ and did not appreciate the effect of the decision in Loka Shikshana Trust (supra), which was considered in several other subsequent decisions and allowed the claim of assessee. The relevant paras 87, 88 & 89 have already been reproduced in para 3.2 above.

18 ITA Nos.1532 to 1534/Chny/2015 & 2720/Chny/2017 held that this issue cannot be reopened by the Revenue and Revenue is not entitled to state that the assessee’s trust is not carrying on charitable activity and thus, it is not in the field of education, etc. Once, Hon’ble High Court had held that the assessee is in the field of education, assessee is fully entitled for claim of deduction u/s.11 of the Act. We order accordingly. Therefore, in all the four years, appeals of the assessee are allowed.

Order pronounced in the open court on 8th July, 2022 at Chennai.

Sd/- Sd/- (महावीर �सह ) (मनोज कुमार अ�वाल) (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा�य� /VICE PRESIDENT लेखा सद�य /ACCOUNTANT MEMBER चे�ई/Chennai, �दनांक/Dated, the 8th July, 2022 RSR आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु� (अपील)/CIT(A) 4. आयकर आयु� /CIT 5. िवभागीय �ितिनिध/DR 6. गाड� फाईल/GF.