BHARTIYA VICHAR DARSHAN,NAVI MUMBAI vs. ITO (E) 1(1), MUMBAI

Date of Hearing: 15.11.2016 Date of Pronouncement: 28.12.2016 ORDER

PER N.K. PRADHAN, AM

2.1 In a nutshell, the grievance of the assessee is that the Assessing Officer (AO) has not allowed deduction u/s 24 of the Act on rental income of Rs. 84,00,000/- earned by the assessee-trust. It is found that in the income and expenditure statement for the year ended 31st March, 2010, the assessee-trust has credited rental income of Rs. 84,00,000/-. The contention of the learned counsel of the assessee is that standard deduction u/s 24 at 30% should be allowed on the rental income. The AO has denied exemption u/s 11 to the assessee on the ground that it is carrying on activities in the nature of trade, commerce, business and therefore such activities are not covered within the definition of ‘’charitable purpose’’ as per the proviso to section 2(15) of the Act. In appeal, the learned CIT(A) has mentioned that since section 11 is not applicable and exemption claimed by the appellant is denied, therefore, the income of the assessee during the year is liable to be computed in ‘commercial manner’ without classification under various heads as per decisions in the cases of CIT vs. Rao Bahadur Calavala Cunnan Chetty Charities (Mad) 135 ITR 485, DIT vs. Girdharilal Shewnarain Tantia Trust (1993) 199 ITR 215 (Cal) and CIT vs. Programme for Community Organization (1997) 228 ITR.

2.2 We have heard the rival submissions and perused the relevant material on record. The purpose of bringing the amendment in section 2(15) relating to trust registered under advancement of any other object of general public utility was that number of entities operating on commercial lines were claiming exemption on their income u/s 11 of the Act on the ground that they are charitable institutions. This was based on the argument that they are engaged in the “advancement of an object of general public utility” as is included in the last limb of the current definition of “charitable purpose”. Such a claim, when made in respect of an activity carried out on commercial lines, was contrary to the intention of the provision. Hence, income of such trusts was made taxable w.e.f. assessment year 2009-10.

2.3 The assessee in the instant case has not contested the denial of exemption u/s 11 of the Act. The Ld. CIT(A) has also noted that the assessee is not maintaining separate books of accounts as per section 11(4A) of the Act.

2.4 It is a settled position of law that income from the properties held under trust have to be arrived at the normal commercial manner without classification under the various heads set out in section 14 of the Act. The computation under the different categories or heads arises only for the purposes of ascertaining the total income for the purposes of the charge. Those provisions cannot be introduced to find out what the income derived from the property held under trust to be excluded from the total income.

4. The 2nd ground filed by the assessee in this appeal is that the learned CIT(A) erred in not allowing the exemption u/s 11(1A)(b), on trust property sold amounting to Rs. 75,00,000/- whereas as per facts and circumstances it should be allowed.

4.1 During the course of hearing, the learned counsel of the assessee submitted that the assessee would not like to press the 2nd ground of appeal. He submitted the same in writing. Therefore, the 2nd ground of appeal is dismissed as not pressed.

Order pronounced in the open court on 28/12/2016