IN THE MADRAS HIGH COURT
T.S. SIVAGNANAM & V. BHAVANI SUBBAROYAN, JJ.
Thanthi Trust v. DIT
T.C.A. No. 822 of 2018 (Virtual Hearing Dates 10-7-2020, 15-7-2020, 20-7-2020, 26-8-2020, 7-9-2020, 17-9-2020 & 18-9-2020)
29 October, 2020
In favour of assessee.
Appellant by: V.S. Jayakumar
Respondent by: J. Narayanaswamy Senior Standing Counsel
T.S. Sivagnanam, J.
This appeal filed by the assessee under section 260A of the Income Tax Act, 1961 ('the Act' for brevity) is directed against the Order, dated 8-5-2018, made in I.T.A. No. 356/Mds/2010 passed by the Income Tax Appellate Tribunal 'B' Bench, Chennai to decide the following substantial question of law :--
'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?'
2. The assessee is a public charitable Trust, filed an application dated 20-7-1973 for registration under section 12A(a) of the Act before the Commissioner of Income Tax, Central-II, Chennai [Commissioner (Appeals)]. The assessee Trust was constituted by a Memorandum of Association dated 1-3-1954 and subsequently by Supplementary Deed dated 28-6-1961. The Commissioner (Appeals) by Order, dated 30-6-1989, 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 Commissioner (Appeals) under section 12A(a), by Order, dated 30-6-1989. 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 not make the Trust eligible for exemption; the activities are important in considering whether the Trust is eligible for exemption. In this regard, reference was made to the decision in Kirti Chand Tarawathi Charitable Trust v. DIT(E) (1998) 232 ITR 11 (Del) : 1998 TaxPub(DT) 1271 (Del-HC).