Commissioner of Income Tax vs Janakiammal Ayyanadar Charitable Trust

Chitra Venkataraman, J.—The Revenue is on appeal as against the order of the Tribunal relating to the assessment years 1990-91 and

1991-92. It is seen from the narration of facts herein that the assessee Trust herein was created on 30.04.1957 mainly for educational and

charitable purposes. The founders gifted the land and the business run in the name of ""The National Papercaps Factory"" with a stipulation that the

said business shall be run by the trustees and the income therefrom shall be utilised for charitable objects.

During the relevant previous year, the trustees were stated to have carried on the business and claimed exemption u/s 11 of the income tax Act,

in respect of the income earned therefrom. The claim for exemption u/s 11 made by the assessee was negatived by the Assessing Officer on the

ground that the same was hit by Section 11(4A), that there was no evidence to hold that the business of manufacture and sale of paper caps

carried on by the assessee Trust was in the course of actual carrying on of the primary objects. In so holding, the Assessing Officer relied on the

decision in Commissioner of Income Tax Vs. Virudhunagar Hindu Nadars Abiviruthi Panchukadai Mahamai, . Aggrieved by the same, the

assessee went on appeal before the Commissioner of Income Tax (Appeals). Following the decision of the Apex Court in THIAGARAJAR

CHARITIES Vs. ADDITIONAL COMMISSIONER OF INCOME TAX and Another, and the order in the assessee''s own case in respect of

the assessment year 1994-95, the assessee''s appeal was allowed. Aggrieved by this, the Revenue went on appeal before the Income Tax

Appellate Tribunal. Following the decision in Commissioner of Income Tax Vs. Samyuktha Gowda Saraswatha Sabha, and Thanthi Trust Vs.

Central Board of Direct Taxes and others, , the Tribunal rejected the Revenue''s appeal. Aggrieved by the same, the Revenue has preferred this

appeal raising the following substantial questions of law:

Whether in the facts and circumstances of the case, the Tribunal was right in holding that the assessee trust is eligible for the exemption of the

income arising out of the business carried on by National Paper Caps and rental income, u/s 11?

Whether in the facts and circumstances of the case, the income received by the assessee charitable trust is hit by the provision of Section

11(4A) and

Whether the ratio of the Supreme Court''s judgment in the case of Assistant Commissioner of Income Tax Vs. Thanthi Trust, is not squarely

applicable to the facts and circumstances of the case?.

Even though the Tribunal had not given any finding as regards the primary purpose, yet, a reading of the order of the Income Tax Officer shows

that the Officer had considered the clauses in the trust deed to arrive at the finding that the primary object of the Trust are charitable in nature and

that the property given was impressed with the character of trust property. Having held so, the Officer, nevertheless, pointed out that there was no

evidence to hold that the business of manufacture and sale of papercaps, carried on by the trust in the name of The National Papercaps Factory,

was in the course of the actual carrying on of the primary objects; hence, the Trust was not entitled to claim exemption u/s 11 of the income tax

Act. The Officer rejected the assessee''s reliance on the decision reported in Thiagarajar Charities (supra). With the finding of fact arrived at by the

Officer that the primary purpose of the Trust was charitable in nature, in the face of Section 2(15) and Section 11(4A) read with Section 13(1)(bb)

of the income tax Act, we have no hesitation in confirming the order of the Tribunal.

We have already considered the issues raised herein in a similar order in CIT v. P. Iya Nadar Charitable Trust[Tax Case (Appeal) Nos. 259 to

261 of 2004, 987 to 991 of 2005, 1547 to 1549 of 2005 and 675 of 2008 by order dated 18.09.2012] and rejected the Revenue''s Tax Cases

by applying the law declared by the Apex Court in the decision reported in Additional Commissioner of Income Tax, Gujarat Vs. Surat Art Silk

Cloth Manufacturers Association, and Thiagarajar Charities (supra) and we have distinguished the said case from the decision reported in Assistant

Commissioner of Income Tax Vs. Thanthi Trust, ). Even though the Tribunal had not considered the issue as a final fact finding authority, with no

disputes raised by the Revenue on the facts and on the facts admitted by the Assessing Officer, we have no hesitation in rejecting the Tax Cases

preferred by the Revenue and confirming the order of the Tribunal.

In the result, these Tax Cases (Appeals) stand dismissed. No costs.