MAC CHARITIES,CHENNAI vs. DCIT, EXEMPTIONS, CIRCLE, CHENNAI

The order of the Commissioner of Incometax (Appeals) is contrary to law, facts and circumstances of the case.

The Ld. AR advanced arguments to submit that the rental receipts were very less in comparison to total receipts and lower authorities erred in invoking second proviso to Sec.2(15). The Ld. AR also submitted that the activities being carried out by the assessee were for charitable purposes only. It was also pointed out that similar disallowance made by Ld. AO was allowed by Ld. CIT(A) in earlier year and the revenue did not contest the same any further. The Ld. Sr. DR, on the other hand, submitted that the activities were commercial in nature and the same were hit by proviso to Sec.2 (15). Having heard rival submissions and after due consideration of orders of lower authorities, our adjudication would be as under.

The assessee being registered trust u/s 12A enjoys exemption u/s 11 & 12 as applicable to a charitable trust. The assessee is registered 3 - since November, 2000. During this year, the assessee’s total receipts were Rs.1827.92 Lacs. During assessment proceedings, it was noted by Ld. AO that the main objective of the trust was to run education institution, render financial assistance to students, help poor and destitute persons, rendering useful services in the field of community health etc. The assessee was running a Kalyanam Mandapam by the name M/s Abirami Chidambaram community hall at Kottupuram. The assessee submitted that community hall was conceived and constructed to help the poor and middle-class people by enabling them to hire out a community hall for conducting family functions at moderate rental and also encourage fine arts by using the hall for music concerts and dance performances. The proviso to Sec.2(15) would not apply since the assessee was providing a platform for the poor and middle class people to conduct family functions at a cost reasonably within their reach. However, Ld. AO noted that the assessee earned rental receipts of Rs.72.93 Lacs and was hit by the proviso to Sec.2(15). Accordingly, the income from this activity could not be attributed to act of charity. Certain other additions / adjustments were made in the assessment order. However, the same are not the subject matter of dispute before us. The stand of Ld. AO, upon confirmation by Ld. CIT(A), is in further challenge before us.

Upon due consideration of material facts, it could be gathered that the assessee is a registered charitable trust since the year 2000. It is enjoying exemption as applicable to a charitable trust. With a view to help poor and middle-class people, which is one of its main objects, the assessee runs Kalyanam Mandapam by the name M/s Abirami Chidambaram community hall at Kottupuram. This community hall is 4 - stated to have been conceived and constructed to help the poor people by enabling them to hire out a community hall for conducting family functions at moderate rental and also encourage fine arts by using the hall for music concerts and dance performances. It could also be seen that as against total receipts of Rs.1827.92 Lacs, the rental receipts are merely Rs.72.93 Lacs which is merely 4% of total receipts. The majority of rent received by the assessee include rental from marriage functions and rent earned from other events like cultural, spiritual and educational seminars etc. It is nowhere the findings that the assessee has not adhered to the conditions as applicable to a charitable trust or any of the objects of the assessee are profit-motive. Under these circumstances, it could not be concluded that the assessee carried out separate commercial activities and it was hit by the proviso to Sec. 2(15). The decision of this Tribunal in the case of Mylapore Fine Arts Club V/s DDIT (ITA No.1706/Mds/2010; dated 12.09.2011) supports the case of the assessee wherein it was held that in the modern society, perseverance and advancement of traditional and classical forms of music and arts could not be achieved without the support of the public. Participation of the public is essential. Therefore, any contributions made to such organizations by members of public have to be treated as contribution for a public cause. The assessee trust is receiving contributions in the above spirit and accordingly, it was held by coordinate bench that the assessee was eligible for approval u/s 80-G. We find that similar analogy is applicable in the present case. Moreover, this activity is regularly being carried out by the assessee over several years to achieve the objects of the trust. Therefore, the impugned activities could not be considered to have been hit by proviso to 5 - Sec.2(15). We order so. The Ld. AO is directed to re-compute assessee’s income in terms of our above order.

The appeal stands allowed in terms of our above order.