AVM CHARITIES,CHENNAI vs. ITO EXEMPTIONS WARD 1, CHENNAI

आदेश / O R D E R

PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER

These are appeals filed by the assessee directed against a consolidated order dated 29.12.2017 of ld. Commissioner of Income

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Tax (Appeals)-17, Chennai. Though the consolidated order of the ld.

Commissioner of Income Tax (Appeals)-17 covers assessment years

1987-88, 1991-92, 1997-98, 1998-99, 2006-07 and 2008-09 to 2014-

15, appeals filed by assessee are only for assessment years 1997-98,

1998-99, 2006-07 and 2008-09 to 2014-2015.

Grounds taken for all the years are common and these are 2.

reproduced hereunder:-

‘’1. For that the order of the Learned Commissioner of Income Tax (Appeals) is contrary to law, facts, and circumstances of the case and principles of natural justice. 2. For that the Learned Commissioner of Income Tax (Appeals) erred confirming, the disallowance of deduction claimed u/s 11 of the Act. 3. For that the Learned Commissioner of Income Tax (Appeals) erred confirming the treatment of income from kalyanamandapam as business income, despite the decision rendered in earlier Assessment Years treating such income as income from property and consequently erred in sustaining the denial of the exemption u/s.11 of the Act, without assigning proper reason and justification. 4. For that the Learned Commissioner of Income Tax (Appeals) erred in presuming that the incidental activities as business activity in page 15 of the impugned order, which is unjust and bad in law. 5. For that the Learned Commissioner of Income Tax (Appeals) failed to appreciate that the misconstruction of the provisions of section 11 (4) and section 11 (4A) of the Act would lead to denying the exemption u/s 11 of the Act

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Facts apropos are that assessee a society registered under 3.

Societies Registration Act, 1860 and having registration u/s.12A of the

Income Tax Act, 1961 (in short ‘’the Act’’), had claimed exemption

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Section 11 of the Act, in the returns filed for the impugned

assessment years. Assessee was having income from two

Kalyanamandapams namely Rajeswari Thirumana Kalyanamandapam

(in short ‘’RTK’’) located in Dr. Radhakrishnan Salai, Chennai and

Mena Kalyanamandapam (in short ‘’ Mena’’) located at Kumaran

Colony Main Road, Vadapalani, Chennai. Assessee was also running a

health centre at AVM Charties Health Centre at Vadapalani. Apart from

these assessee had given a property of five acres with building located

at Valasaravakkam, Chennai to a trust called AVM Rajeswari

Educational Trust, from which the latter ran a school called Avichi.

One other building at P.S. Sivaswamy Road, Chennai, owned by the

assessee was given to one AVM Medical ENT Research Foundation for

running a diabetic centre. Assessee also had a library at

Virugambakkam, Chennai run by the Government. It appears both

AVM Rajeswari Educational Trust as well as AVM Medical ENT Research

Foundation were trusts having registration under Section 12A of the

Act. Assessee’s office was located in a building called Sivakami Building

at Dr. Radhakrishnan Salai, Chennai. For the impugned assessment

years as well as for assessment years 1987-88 and 1991-92, ld.

Assessing Officer had denied exemption claimed by the assessee

u/s.11 (1) of the Act considering it to be predominantly into business.

For assessment years 2008-09 to 2014-15, ld. Assessing Officer also

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applied proviso to Section 2(15) of the Act for denying such

exemption. For all these years, ld. Assessing Officer took a view that

income earned by the assessee from its Kalyanamandapam could not

be treated as income from house property but only as income from

business.

07, now before us, are second round of the proceedings since

assessee in its first round was successful before this Tribunal with

regard to its claim for exemption u/s.11 of the Act. This Tribunal had

held that income derived from the two Kalyanamandapams were to be

considered as property income and Sub Sections (4) and (4A) of

Section 11 of the Act did not apply. Against these orders, the Revenue

had moved an appeal before Jurisdictional High Court for assessment

years 1997-98 and 1998-99 and their lordships through a judgment

reported as 323 ITR 27 remitted the question regarding eligibility of

the assessee for claiming exemption u/s.11 of the Act back to the ld.

Commissioner of Income Tax (Appeals) with the following

observations.

‘’5. For the purpose of consideration, we may refer to the judgment of this court in the case of CIT v. Samyuktha Gowda Saraswatha Sabha reported in [2000] 245 ITR 242 . That was a case where this court was considering the question as to whether the letting out of property as marriage hall by a charitable trust for earning income is a

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business income or property income and whether such trust is entitled to the benefit of exemption under section 11 of the Act in respect of such income. Of course, the Division Bench held that the sabha lets out its hall to various persons and merely by letting out its hall the assessee has not lost his claim to exemption. In fact, this judgment has been followed by this court in various appeals. To quote a few, we may refer to T. C. No. 235 of 1997 dated November 12, 2001 (Director of Wealth-tax (Exemptions) v. A. V. M. Charities, Madras, T. C. No. 303 of 1997 dated September 18, 2002 (CIT v. A. V. M. Charities, Madras). 6. In this context, we may also refer to yet another judgment of this court in the case of CIT v. Halai Nemon Association reported in [2000] 243 ITR 439 . In that case, this court was considering the provision of section 22 and section 56 of the Income-tax Act with reference to the income by letting out building for marriages. Having noticed that the building was let out by the assessee to others for functions such as marriages and other functions and making available the premises for limited periods, and chairs, mikes, etc., were also made available to others for which a charge was levied and the letting out is only for a limited purpose and for a limited period and by way of licence vis-a-vis the lease granted in respect of the property on monthly or yearly basis. Having regard to the above circumstances, this court had said that the income derived from letting out of halls for marriage purposes would be a business income as defined under section 28 of the Act. Nevertheless in so far as this appeal is concerned, the law stood and applicable to the assessment year reads as under : "11.(4A) Sub-section (1) or sub-section (2) or sub- section (3) or sub-section (3A) shall not apply in relation to any income, being pro fits and gains of business, unless—

(a) the business is carried on by a trust wholly for public religious purposes and the business consists of printing and publication of books or publication of books or is of a kind notified by the Central Government in this behalf in the Official Gazette ; or

(b) the business is carried on by an institution wholly for charitable purposes and the work in connection with the business is mainly carried on by the beneficiaries of the institution and separate

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books of account are maintained by the trust or institution in respect of such business." 7. The consideration for entitlement of exemption under section 11(4A), the provision that stood prior to the insertion of the new provision of section 11(4A) to section 11 with effect from April 1, 1992, shows for the entitlement of exemption income being profits and gains of business and the business is carried on by a trust wholly for public religious purposes and the business consists of printing and publication of books or publication of books or is of a kind notified by the Central Government in this behalf in the Official Gazette or the business is carried on by an institution wholly for charitable purposes and the work in connection with the business is mainly carried on by the beneficiaries of the institution. 8. From the reading of both the orders of the Commissioner of Income-tax (Appeals) as well as the Tribunal, we are unable to find as to whether the trust in question would be entitled to exemption in terms of the above provision with regard to the profits and gains of business. 9. It is pertinent to point out that the above provision of sub- section (4A) was replaced by insertion of a new provision with effect from April 1, 1992, and that section reads as follows : "11.(4A) Sub-section (1) or sub-section (2) or sub- section (3) or sub-section (3A) shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the trust or, as the case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business." 10. For entitlement of the said new provision, the income being the profits and gains of business and the business is incidental to the attainment of the objectives of the trust or, as the case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business. The consideration for entitlement of the provision is entirely different with reference to newly inserted provision. 11. There is absolutely no discussion about the application of the provision to the trust in question by the Commissioner

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of Income-tax (Appeals) as well as the Tribunal. In our opinion, the entire issue should be reconsidered by the Commissioner of Income-tax (Appeals) as to whether the trust in question is entitled to the exemption in respect of the assessment year by applying the relevant provisions. In that case, if the Commissioner of Income-tax (Appeals) comes to the conclusion that the income is a property income, then he has to find out the actual quantum of tax component with reference to the actual profit and the amounts spent towards the object of the trust. In the absence of any of the discussion, we are of the view that we have to only remand the matter after setting aside both the orders of the Commissioner of Income-tax (Appeals) and the Tribunal for fresh consideration. 12. Accordingly, the orders of the Commissioner of Income- tax (Appeals) and the Tribunal are set aside and the matter is remanded to the Commissioner of Income-tax (Appeals) for fresh consideration. We may make it clear that the Commissioner of Income-tax (Appeals) should consider the matter afresh by considering both the judgments of this court reported in CIT v. Halai Nemon Association [2000] 243 ITR 439 (Mad) and CIT v. Samyuktha Gowda Saraswatha Sabha reported in [2000] 245 ITR 242 (Mad) with reference to the provision. We may also point out that all the provisions relating to exemption prior to 1989 and thereafter prior to 1992 and after April 1, 1992, have been considered by the Supreme Court in the case of Asst. CIT v. Thanthi Trust reported in [2001] 247 ITR 785 and that judgment also be taken note of by the Commissioner of Income-tax (Appeals). We also make it clear that both the Revenue as well as the assessee are entitled to place whatever judgments which they intend to rely before the Commissioner of Income-tax (Appeals) for his consideration’’.

For assessment year 2006-07, this Tribunal itself had set aside the

question regarding eligibility of the assessee for claiming exemption

u/s.11 of the Act back to the ld. Commissioner of Income Tax

(Appeals) for re-consideration, following the above referred judgment

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of Hon’ble Jurisdictional High Court. Appeals for assessment years

2008-09 to 2014-15, are first round.

the exemption claimed by the assessee u/s.11(1) of the Act, was that

its income consisted of rent received on running of two

kalyanamandapam which was run as a business. As per the ld.

Assessing Officer these properties were not settled by the settlor as

trust property and hence could not be considered as properties held

under trust. Further, as per the ld. Assessing Officer, objects of the

assessee did not authorize running of kalyanamandapam in a

commercial manner. According to the ld. Assessing Officer the activity

of running kalyanamandapams were not incidental to any of its main

objects but was independent in nature. Ld. Assessing Officer took a

view that assessee, by running these kalyanamandapams, was into a

business and this was its predominant activity. According to the ld.

Assessing Officer, income of the assessee lost the exemption under

Section 11(1) of the Act by application of Sub Section (4A) of Section

11 of the Act. In contra, as well as agreeing with the ld. Assessing

Officer, on a number of aspects, ld. Commissioner of Income Tax

(Appeals), in his consolidated order for assessment years 1987-88,

1991-92, 1997-98, 1998-99, 2006-07 and 2008-09 to 2014-2015,

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after considering the judgment of Hon’ble Jurisdictional High Court in

assessee’s case referred (supra), came to the following conclusions:-

(i) As per the objects clause of the assessee society it’s main

object was medical relief.

(ii) The land for Kalyanamandapams were acquired by the

assessee subsequent to its formation in 1959, and building

constructed thereon. Such Kalyanamandapams acquired by

the assessee after its formation, could not be considered as

property held under trust.

(iii) Rentals received from Kalyanamandapams were in the

nature of business income, since there was no landlord to

tenant relationship between the customers who were

making one time payment for its use. Hence, the income of

the assessee was rightly considered by the ld. Assessing

Officer as emanating from business activity.

(iv) By virtue of judgment of Hon’ble Apex Court in the case of

ACIT vs. Thanthi Trust, 247 ITR 785, assessee might be

entitled to claim the benefit of Section 11(1) of the Act on

its business income for assessment years 1997-98, 1998-

99, 2006-07 and 2008-2009, subject to it fulfilling other

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requirements for claiming such benefit.

(v) From assessment years 2009-10 to 2014-15, assessee was

hit by first proviso to Section 2(15) of the Act, which was

introduced by Finance Act, 2008. Assessee being an

institution involved in activities of general public utility, it

could not be considered as charity.

(vi) Details of application of the income earned towards any

charitable purpose were not furnished, though assessee

claimed expenditure on health centre, medial relief and

Avichi School. Further, the object clause of the assessee did

not enable it to pursue educational activities. Thus even for

assessment years 1997-98, 1998-99, 2006-07 and 2008-09,

assessee became ineligible for claiming the benefit under

Section 11(1) of the Act.

(vii) Details with regard to amount spent on charitable activities

were not produced.

Effectively, ld. Commissioner of Income Tax (Appeals), held that

assessee was not eligible for exemption claimed by it u/s.11(1) of the

Act for any of the impugned assessment years.

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assailing the orders of the lower authorities submitted that main object

of the assessee society, as contained in its Memorandum of

Association indicated carrying out any activity, calculated to promote

any object which was wholly charitable in nature, apart from doing

medical relief. According to him, the charitable activity allowed by the

main object did not exclude education. As per the ld. Authorised

Representative, assessee had no grievance in so far as, income from

the Kalyanamandapams being treated as business receipts by the

lower authorities. However, according to him, the Kalyanamandapams

were nothing but property held under trust and income and earnings

therefrom were used purely for charity. According to him, it was in

correct to say that property settled at the time of formation of trust or

society, alone could be considered as property under trust. As per the

ld. Authorised Representative, property held under trust, would include

land and buildings acquired by a trust from its income, subsequent to

its formation as well. Contention of the ld. Authorised Representative,

was that the main activities of the assessee were providing medical

relief and education help. According to the ld. Authorised

Representative, running of schools and giving contributions to

organizations pursuing activities of medical relief and education, which

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were all having registration u/s.12A of the Act, was nothing but

activities predominately in the field of health care and education.

Contention of the ld. Authorised Representative was that assessee was

subjected to the audit mandated under the Act for trusts claiming

exemption under Section 11(1) of the Act, every year, and had filed

its returns showing application of funds. These returns and accounts,

which were produced before the ld. Assessing Officer, as per the ld.

Authorised Representative, proved application of funds for medical

relief, education and health. As per the ld. Authorised Representative,

assessee had received very nominal rented for the health centre,

diabetic and ENT centre, School and library. According to him, five

acres of property with a building of 40,000 sq.ft, located at a prime

area was given out by the assessee for running Avichi School, for

an annual rent of �1,00,000/-. As per the ld. Authorised

Representative, this by itself was a clear demonstration of charity

done in the field of education. According to him, if let out at market

rates, this property would have fetched the assessee crores of

rupees. Similarly, according to him, health centre as well as diabetic

and ENT centre were rented out for nominal rent for use in the

medical field. All these as per the ld. Authorised Representative

established that the predominant of the object of the assessee was

nothing but education and medical relief. Thus, according to him,

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lower authorities fell in error in holding that assessee as not eligible

for exemption claimed by it u/s.11(1) of the Act and hit by proviso to

Section 2(15) of the Act.

96% of the income of the assessee was from renting out the

properties. According to him, rental income received by the assessee from RTK and Mena for previous year ending 31st March, 2014 came

to �6,70,01,000/-. As per the ld. Departmental Representative,

assessee was clearly running a business in the guise of charity.

According to him, object clause of the assessee did not have any

education in it. As per the ld. Departmental Representative, donations

given by the assessee to other trusts having 80G registration could at

best be considered as equivalent to contribution given by an individual

on which 50% deduction was available, that too to the extent

allowable under Section 80G of the Act. Relying on a survey

conducted by the Department in the premises of the assessee on

16.07.2018, ld. Departmental Representative submitted that results of

such survey clearly indicated that assessee had leased out its property

at Dr. Radhakrishnan Salai, Mylapore to a firm called M/s. Cine Film

Distributors for a sum of �4,80,000/- which was less than its market

rate. As per the ld. Departmental Representative the said film

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distributors had sublet this property for a sum of �1,14,00,000/- and

one of partners of this film distribution firm, namely Shri. M.

Saravanan was a trustee of the assessee trust. According to him,

apart from all the reasons mentioned ld. Commissioner of Income Tax

(Appeals) for denying the assessee the benefit of Section 11(1) of the

Act, there was thus a violation of the nature mentioned in Section

13(1) ( c) of the Act.

the survey was done by the Department on 16.07.2018 and could at

the best be used for any proceedings subsequent to the said date.

According to him, the said survey report cannot have any bearing on

these appellate proceedings. Further, according to the ld. Authorised

Representative, if same rate of rentals as projected by the ld.

Departmental Representative to have been received by the assessee

for RTK was applied to the Avachi School premises, it should have

received rentals of more than �30,00,00,000/-. According to him,

RTK was situated in 20 grounds equivalent to 1.10 acre of land,

whereas Avichi School was situated in five acres of land with a

40,000 sq.ft. building, which was given on a nominal rent of

�1,00,000/-, for running a charitable school. According to him,

assessee had forgone the rent which otherwise it could have earned,

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as its commitment to education. Thus, as per the ld. Authorised

Representative, proportion of rental income received by the assessee

viz-a-viz its gross receipts could not be taken as a measure for

deciding the charitable nature of the assessee.

We have considered the rival contentions and perused the 9.

orders of the authorities below. Assessee has not disputed the

findings of the ld. Commissioner of Income Tax (Appeals) that rentals

received from its Kalyanamandapam had to be considered under the

head income from business. In fact Hon’ble Jurisdictional High Court

while remitting the question back to the ld. Commissioner of Income

Tax (Appeals) for assessment years 1997-98, 98-99 etc, had indicated

that income of the assessee from the Kalyanamandapam was more in

the nature of business income, by virtue of the judgment of their

Lordships in the case of CIT vs.Halai Nemon Association, (2000) 243

ITR 439. This view was taken by their Lordships overruling the opinion

of this Tribunal in the earlier round, wherein Co-ordinate Bench held

the income from Kalyanamandapam as income from house property.

For taking this view, in the earlier round, this Tribunal had relied on a

judgment of Jurisdictional High Court in the case of CIT vs.

Samyuktha Gowda Saraswatha Sabha, (2000) 245 ITR 242, which was

also duly considered by their Lordships when the question was

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remitted back to the ld. Commissioner of Income Tax (Appeals).

Obviously, assessee cannot now raise a plea against the finding of

the ld. Commissioner of Income Tax (Appeals) that income of the

assessee from renting out Kalyanamandapams were business income,

and it has wisely done so. However, it is peeved on the view taken by

the ld. Commissioner of Income Tax (Appeals) that such business

income could not be considered as income earned from a property

held under the Trust, thereby disentitling the assessee from taking

advantage of Sub section (4) of Section 11 of the Act. Section 11(4)

and 11(4A) of the Act, as it was stood in the period covered by the

appeals before us and which are apposite are reproduced hereunder:-

Section 11(4) of the Act:- ‘’For the purposes of this section "property held under trust" includes a business undertaking so held, and where a claim is made that the income of any such undertaking shall not be included in the total income of the persons in receipt thereof, the Assessing Officer shall have power to determine the income of such undertaking in accordance with the provisions of this Act relating to assessment ; and where any income so determined is in excess of the income as shown in the accounts of the undertaking, such excess shall be deemed to be applied to purposes other than charitable or religious purposes.

Section 11(4A) of the Act:- Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the

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attainment of the objectives of the trust or, as the case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business’’.

Ld.CIT(Appeals) was of the opinion that Kalyanamandapam having

being built by the assessee subsequent to its formation in the year

1959, could not be considered as property under trust. Ld.

Authorised Representative, during the course of his arguments has

stated that the land in which Kalyanamandapam were built was part

of the original settlement and the building were built therein by the

assessee from its income. Be that as it may, there is no dispute that

the land and building was owned by the assessee society, whether it

was part of original settlement or not. In our opinion, once income of

a trust is used by it to acquire a property, the property so acquired

will be property held under trust. Income from such property will be

income from property under the trust. Thus, in our opinion, rental

income received by the assessee from Kalyanamandapam though it

was in the nature of income from business, such income was nothing

but income from property held under trust.

Now the question is whether assessee can be denied the 10.

exemption claimed by it u/s.11(1) of the Act by virtue of Sub Section

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(4A) thereof. For answering this question we have to see whether

renting out the Kalyanamandapams could be considered as incidental

to the attainment of the objects of the assessee. Objects of the

assessee as it appear in its Memorandum of Association is

reproduced hereunder:-

a) to provide for, carry out, and - do all such acts and things as will or are likely or calculated to, promote the objects and purposes of a wholly and society charitable nature.

b) To provide medial relief in its most comprehensive sense and other relief whatsoever, but of a wholly charitable nature to the public irrespective of nationality caste, creed, colour, sect or any other distinction whatsoever.

c) without prejudice to the above comprehensive objects expressed in general terms and, without limiting, in any way, the scope or extent thereof, to establish, promote, provide for and maintain maternity homes nursing homes, hospitals, general and for the treatment of children’s diseases, provide facilities for surgical operations. out-patient. Dispensariessupply of medicines and after-treatment care and to take care of and provide for orphans, the aged, the infirm and the destitute

d) for any of the purposes of the Society i. to acquire, by accepting as gift, purchase, lease, exchange or otherwise, lands, buildings and structures of any tenure or description, to sell, mortgage, exchange, lease, let out, hire or otherwise deal with

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such property; and to build constructions on lands and extend, improve and repair buildings and structures and otherwise deal with the property; and to receive rent and other income from property

ii. to make donations to such persons or bodies and in such cases, and either of cash or other. Assets as the Society may think directly or indirectly conclusive to any of its objects. iii. To do all such acts as may be necessary for the benefit of the Society or in Its Interest to derive benefits from Its assets consistently always with the charitable nature of the Society's objects.

iv to open current. demand deposit, fixed deposit and other accounts with any Scheduled Bank and operate same;

v. to receive gifts, donations, contributions, subscriptions, whether In cash or in kind.

vi. To do, subject always to the provisions of the Societies Registration Act, 1860 and to the Rules and Regulations of this Society, all such other or further acts and things as shall or may be conducive or incidental to the attainment of charitable objects for which this society is formed’’.

By virtue of clause (d) above, assessee can purchase, build and let out

properties for its other purposes. The purpose mentioned in clause (a)

clearly indicate promotion of any object which was wholly and solely

charitable in nature. No doubt ld. Commissioner of Income Tax

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(Appeals) had mentioned this to be a very wide expressions,

disentitling it from claiming exemption u/s.11 of the Act. It is true

that clause (a) is of a wide amplitude. However what we need to

remember is that the assessee was having registration u/s.12A of the

Act since 11.04.1975, and such registration still continued. If the

main object of the assessee was too wide, as mentioned by ld.

Commissioner of Income Tax (Appeals), it would not have been given

such registration. Having given such registration, which was alive since

1975, Revenue cannot now turn back and say that the main object

was very wide and assessee could not be given benefit of Section

11(1) of the Act. Activity of renting out Kalyanamandapam in our

opinion could be construed as only incidental to the attainment of its

main object. Assessee therefore could take advantage of Sub Section

(4) of Section 11 of the Act. There is no dispute that assessee had

maintained separate books for its Kalyanamandapam. The audited

accounts filed along with its return clearly show separate income and

expenditure for each of the activities, including Kalyanamandapam.

Sub Section 4A would not apply to the assessee once its business is

considered as incidental to the attainment of its main objects.

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activity of the assessee was charity and if so what was the nature of

charity. It is not disputed that apart from the two

Kalyanamandapams, assessee was having properties from which a

school, a health centre and a library were run. It might be true that

the school was run by another trust. However, rental received by the

assessee for running the school called Avichi school was nominal. We

find great strength in the argument of the ld. Authorised

Representative, that property from which the School was run, if given

out on market rates, would fetch tens of crores in income, and

forgoing such income for educational purpose, was nothing but charity

in the nature of education. Especially so, since the school was run by

a trust which was undisputedly having registration u/s.12A of the Act.

Apart from this assessee had earned little revenue from its diabetic

centre. It had also given out a premises to the Government for a

library. All the activities of the assessee were either in the field of

education or in field of medical care. Net revenue earned by the

assessee and its expenditure in the field of medical aid, health care

and donations as compiled from its income and expenditure account

and Balance sheet reads as under:-

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Assessm Net Rajeswari Charitable ent year Revenue Kalyanamandapam Expenditure A/c- Donations and Medical Aid 1997-98 8,46,748 4,90,315 3,21,091 80,373 3,11,531

1998-99 18,09,985 3,42,045 3,36,118 1,27,689 89,802

2006-07 60,54,507 4,71,500 2,69,468 74,000 1,63,009

2008-09 1,10,03,311 4,06,548 2,81,730 2,24,270 5,17,000

2009-10 1,13,75,508 8,51,108 2,61,353 5,04,676 5,85,000

2010-11 73,00,106 10,86,304 1,26,421 4,93,000 13,16,500

2011-12 2,88,61,952 45,73,439 --- 1,27,000 2,31,33,490

2012-13 1,80,01,123 61,87,543 --- 1,34,000 35,32,000

2013-14 73,40,730 58,83,146 --- 3,35,000 27,72,000

2014-15 4,13,29,717 1,17,57,158 --- 3,47,483 41,87,090

Net revenue includes what the assessee received as rentals from its

Kalyanamandapams also. Submission of the assessee that donations

given were all to organization engaged in either education or medical

relief, which were having registration under Section 80G of the Act

was not rebutted by the Revenue. No doubt, ld. Departmental

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Representative has raised an argument that such donations can at

best be treated as donation given by an individual for which benefit to

the extent given under Section 80G alone could be claimed. However,

a reading of Section 11(1) of the Act clearly show that, types of

income mentioned in clauses (a) to (d) therein have to be excluded

while computing the total income of a person in receipt of such

income. Exclusion is available to any person irrespective of status. Viz

whether an individual, HUF, AOP, firm or company. Vide clause (a),

income which is applied for charitable purpose or religious purpose is

necessarily to be excluded Donations given to a trust having 12A

registration which is pursuing an object of medical relief, education or

relief to poor, is in our opinion equivalent to using the money for such

purpose. Intention remains the same. No doubt, ld. Commissioner of

Income Tax (Appeals) has observed that assessee could not produce

evidence for the charity done by it. However, it is not disputed that

assessee had maintained books of accounts and produced the

books and records before ld. Assessing Officer. Such books were

subject to audits and assessee had filed Audit reports in form 10A of

the Act. In such circumstances, we find no reason to uphold the

finding of the lower authorities that predominant activity of the

assessee was not charity.

ITA Nos.277 to 286/2018 :- 25 -:

Act, said Section is reproduced hereunder:-

2 (15) "charitable purpose" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility ;

[Provided that the advancement of any other object of general public utility shall not be a charitable purpose, if it involves the carrying on of any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, unless- (i) Such activity is undertaken in the course of actual carrying out of such advancement of any other object of general public utility; and (ii) the aggregate receipts from such activity or activities during the previous year, do not exceed twenty per cent of the total receipts, of the trust or institution undertaking such activity or activities, of the previous year] First proviso applies to an assessee engaged in advancement of

general public utility other than relief to the poor, education, medical

relief, preservation of environment and preservation of monuments.

As already mentioned by us, assessee’s charitable activities were

directly or indirectly in the nature of relief to the poor or education or

medical relief. It was not an organization which was pursuing an

activity of general public utility, different from education, medical

relief or relief to the poor. First proviso to Section 2(15) of the Act is

attracted only where an assessee carries on activities which was of

ITA Nos.277 to 286/2018 :- 26 -:

general public utility other than those mentioned specifically in the definition of charitable purpose given in Section 2(15) of the Act. In the circumstances, we are of the opinion that assessee was eligible for the exemption claimed by it u/s.11(1) of the Act for the impugned assessment years. Orders of the lower authorities are set aside and the ld. Assessing Officer is directed to give assessee the exemption claimed by it u/s.11(1) of the Act for the impugned assessment years.

In the result, the appeals of the assessee for all the 13. assessment years are allowed.

Order pronounced on Wednesday, the Second day of January 2019, at Chennai.

Sd/- Sd/- (एन.आर.एस. गणेशन)) (अ�ाहम पी. जॉज�) (N.R.S. GANESAN) (ABRAHAM P. GEORGE) लेखा सद�य/ACCOUNTANT MEMBER �या�यक सद�य/JUDICIAL MEMBER चे�नई/Chennai �दनांक/Dated:02 January, 2019 KV आदेश क� ��त�ल�प अ�े�षत/Copy to: 1. अपीलाथ�/Appellant 3. आयकर आयु�त (अपील)/CIT(A) 5. �वभागीय ��त�न�ध/DR 2. ��यथ�/Respondent 4. आयकर आयु�त/CIT 6. गाड� फाईल/GF

ITA Nos.277 to 286/2018 :- 27 -: