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The Commissioner of Income Tax Chennai v/s M/s. Sri Narayana Gurtuviah Chetty's Estate & Charities

    TAX CASE (APPEAL) NOS.1358 TO 1361 OF 2008 AND M.P.NOS.1 (3 COUNTS) OF 2008 IN T.C. (A) NOS. 1359 TO 1361 OF 2008
    Decided On, 01 September 2008
    At, High Court of Judicature at Madras
    For the Petitioner : J. Naresh Kumar, Standing Counsel for IT Department. For the Respondent: ----

Judgment Text
(Prayer: Appeals filed under section 260-A of the Income Tax Act, 1961 against the orders of the Income Tax Appellate Tribunal 'B' Bench, Chennai dated 16.12.2005 in ITA Nos.1394/Mds/1999, 1480/Mds/2000, 1481/Mds/2000 and 1482/Mds/2000 for the assessment year 1996-97, 1997-98, 1998-99 and 1999-2000 respectively.)

K. Raviraja Pandian, J.

The Revenue on appeals against the orders of the Tribunal dated 16.12.2005 in ITA.Nos.1394/Mds/1999, 1480/Mds/2000, 1481/Mds/2000 and 1482/Mds/2000. The relevant assessment years are 1996-97, 1997-98, 1998-99 and 1999-2000.

2. The assessee-Trust filed return of income admitting `nil' income and claimed exemption under Section 11 of the Income Tax Act. The Assessing Officer denied exemption on the ground that the assessee is running a Kalyana Mandapam which is not an activity either as per the objects of the Trust or incidental thereto. The Kalyanamandapam was rented out on substantial rent which sustains the commercial nature of the activity. On appeal, the Commissioner of Income Tax (Appeals) reversed the order of the Assessing Officer placing reliance on the judgment of the jurisdiction High Court reported in 245 ITR 242. The Revenue challenged the order before the Income Tax Appellate Tribunal. The Tribunal after considering the various clauses contained in the Will and also following the earlier order in respect of the very same assessee dated 27.12.2004 in I.T.A.No.103/Mds/98 confirmed the order of the Commissioner of Income Tax (Appeals). The correctness of the same is now canvassed before this Court by the Revenue by formulating the following questions of law:

" Whether, in the facts and circumstances of the case, the renting out of Kalayanamandapam is a commercial activity or not for the purpose of claiming exemption under Section 11 of the Income Tax Act ?"

3. The learned counsel appearing for the Revenue has argued pointing out the clause contained in the Will.

4. We heard the learned Standing Counsel appearing for the Revenue and perused the materials available on record.

5. For the earlier assessment year, which is the subject matter of I.T.A.No.103/Mds/98, the Tribunal has held as follows:-

" The assessee referred to clause 92 of the Will left behind by Shri Narayana Guruviah Chetty. It was submitted that the deceased desired that gifts and charities should be continued permanently and powers have been given to the trustees in the manner they thought proper in carrying out the Will of the deceased. The CIT(A) noted that clause 9 of the said Will permitted carrying out improvements to land and property. It allowed lending of money on interest and developing of the estate. He considered the provisions of clause 8, 92, 20 to 63 and other clauses of the Will. One of the objects pertained to the Kalyanamandapam and giving the same on rent with the sole object that rental income from the Kalyanamandapam should be applied to charitable purpose only. The CIT(A) noted that in about 5 years, charity to the extent of a little over Rs.16 lakhs was made indicating that the assessee was carrying on charitable work. On behalf of the assessee, reliance was placed on the following decisions:-

a) Thiagarajar Charities vs. Addl. CIT (1997) 225 ITR 1010 (S.C.)

b) CIT vs. Samyuktha Gowda Saraswatha Sabha (2000) 245 ITR 242 (Madras).

c) Asst. CIT vs. Thanthi Trust (2001) 247 ITR 785 (S.C.)

Identical issue was considered by this Court in the case of CIT vs. Samyuktha Gowda Saraswatha Sabha (supra) where the income from the Kalyana mandapam was used only for purposes of charity and it was held that it was entitled to exemption. Following the said decision of the jurisdictional High Court, we uphold the order of the CIT(A) and dismiss the appeal by the Revenue."

6. Having regard to the above said judgment, the Tribunal also took notice of the observations of the Supreme Court in Thanthi Trust case referred supra (247 ITR 785), wherein it has been held as under:-

" A business whose income is utilized by the trust or the institution for the purposes of achieving the objectives of the trust or the institution is, surely, a business which is incidental to the attainment of the objectives of the trust. In any event, if there be any ambiguity in the language employed, the provision must be construed in a manner that benefits the assessee. The trust, therefore, is entitled to the benefit of section 11 for the assess

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ment year 1992-93." Hence, the Tribunal confirmed the order of the Commissioner of Income Tax (Appeals). As the order of the Tribunal is based on consideration of the relevant clause in the Will and also the interpretation of such clauses by this Court as well as the Supreme Court and decided in favour of the assessee, we find no merit in these appeals for interference. Accordingly, the tax case appeals are dismissed. Consequently, connected miscellaneous petitions are also dismissed. No costs.