Commissioner of Income Tax vs Sri Narayana Gurtuviah Chetty's Estate and Charities

K. Raviraja Pandian, J.—The Revenue on appeals-against the orders of the Tribunal dt. 16th Dec, 2005, in ITA Nos. 1394/Mad/1999,

1480/Mad/2000, 1481/Mad/2000 and 1482/Mad/2000. The relevant assessment years are 1996-97, 1997-98, 1998-99 and 1999-2000.

The assessee trust filed return of income admitting ''nil'' income and claimed exemption u/s 11 of the IT Act. The AO 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 CIT(A) reversed the

order of the AO placing reliance on the judgment of the jurisdictional High Court in Commissioner of Income Tax Vs. Samyuktha Gowda

Saraswatha Sabha, . The Revenue challenged the order before the 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 dt. 27th Dec., 2004, in ITA No. 103/Mad/1998 confirmed the order of

the CIT(A). The correctness of the same is now canvassed before this Court by the Revenue by formulating the following question 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 u/s 11 of the IT Act?

The learned Counsel appearing for the Revenue has argued pointing out the Clause contained in the will.

We heard the learned standing counsel appearing for the Revenue and perused the materials available on record.

For the earlier assessment year, which is the subject-matter of ITA No. 103/Mad/1998, 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 Clauses 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 v. Addl. CIT and Anr. : [1997]225ITR1010(SC) ;

(b) Commissioner of Income Tax Vs. Samyuktha Gowda Saraswatha Sabha, ;

(c) Assistant Commissioner of Income Tax Vs. Thanthi Trust, .

Identical issue was considered by this Court in the case of CIT v. Samyuktha Gowda Saraswatha Sabha (supra) where the income from the

Kalyanamandapam 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.

Having regard to the abovesaid judgment, the Tribunal also took notice of the observations of the Supreme Court in Assistant Commissioner of

Income Tax Vs. Thanthi Trust, , wherein it has been held as under:

A business whose income is utilised 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 asst. yr.

1992-93.

Hence, the Tribunal confirmed the order of the CIT(A). 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.