Https://Hcservices.ecourts.gov.in/Hcservices v. The Director Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMand THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN M/s.Thanthi Trust,46, E V K Sampath Road,Chennai 600 007. ... Appellant/Appellant-vs- The Director of Income Tax (Exemptions)121, Uttamar Gandhi Road,Nungambakkam, Chennai 600 034. ... Respondent/Respondent Prayer:- Tax Case Appeal filed under Section 260-A of the IncomeTax Act, 1961, against the order dated 08.05.2018 made inI.T.A.No.356/Mds/2012 on the file of the Income Tax AppellateTribunal 'B' Bench Chennai, Appeal against the Order dated 08/12/2011 made in DIT(E)No.1802/1/89-90-12AA)3)/2011-12, The Director of Income Tax(Exemptions), Chennai-34. This appeal filed by the assessee under Section 260A of theIncome Tax Act 1961 ('the Act' for brevity) is directed against https://hcservices.ecourts.gov.in/hcservices/ the order dated 08.05.2018, made in I.T.A.No.356/Mds/2010 passedby the Income Tax Appellate Tribunal 'B' Bench, Chennai todecide the following substantial question of law:''Whether the Tribunal was right in law inholding that the appellant trust is not eligiblefor exemption under Section 12A of the Income TaxAct, 1961 without considering the merits of thecase in a proper manner?'' 2. The assessee is a public charitable Trust, filed anapplication dated 20.07.1973 for registration under Section 12A(a) of the Act before the Commissioner of Income Tax, Central-II, Chennai [CIT(A)]. The assessee Trust was constituted by aMemorandum of Association dated 01.03.1954 and subsequently bySupplementary Deed dated 28.06.1961. The CIT(A) by order dated30.06.1989, granted registration to the assessee Trust under thesaid provision. Proceedings were initiated by the Director ofIncome Tax (Exemptions) ('DIT(E)') under Section 12A(a)(iii) ofthe Act, after noting that the assessee Trust was grantedregistration by the CIT(A) under Section 12A(a), by order dated30.06.1989. The DIT(E) examined the records and noted theobjects and activities of the assessee Trust. It was stated inthe records that the assessee does not run any school orcolleges, though such purposes have been formulated as the mainobjects of the Trust, the Trust engages itself in the businessof publishing the Tamil news business commitments 'Dina Thanthi'and also job works for printing are undertaken as businesscommitments. The surplus of the income from the business afterdefraying all the expenses is utilized for donation to anotherTrust, 'Aditanar Educational Trust' only. The DIT(E) afteranalysis of the gross receipts of the Trust and the surplus ofincome from business and the donation to the 'AditanarEducational Trust' for four assessment years, i.e., from 2006-07to 2009-10, held that the only charitable activity done by theassessee is the donation to the other Trust year after year. TheDIT(E) noted that the other Trust is running educationalinstitution, it apparently may be covered by the object namelyhelping to run school or college or other educationalinstitution for teaching arts and science as provided in thesecond object of the assessee Trust. The DIT(E) held that theassessee has not carried any other objects as provided in theDeed of Trust or Supplementary Deed. After referring to thedefinition of 'charitable purpose' as defined in Section 2(15)of the Act, it was held that the activity of the assessee Trustmay not be covered as relief to the poor, medical relief,preservation of environment and preservation of monuments orplaces or objects of artistic or historic interest and theadvancement of any other object of general public utility. Itwas held that the activity of the assessee has to be examined asto whether it can be said that the assessee Trust is existing for the purpose of education or advancement or any other generalpublic utility. The DIT(E) framed the question forconsideration, whether the assessee Trust is engaged ineducational activity or whether it is only doing business. Itwas held that the object of the Trust alone does not make theTrust eligible for exemption; the activities are important inconsidering whether the Trust is eligible for exemption. In thisregard, reference was made to the decision in Kirti ChandTarawathi Charitable Trust vs. DIT(E) [(1998) 232 ITR 11 (Del)].The DIT(E) held that the only issue to be decided is as towhether the activities of the assessee of giving only donationto educational institution can be said to be educational. Afterreferring to the decision in Sole Trustee, Loka Shikshana Trustvs. CIT [(1975) 101 ITR 234 (SC)]; CIT vs. Oxford UniversityPress [(1996) 221 ITR 77 (Bom)]; CIT vs. Sorabji NusserwanjiPaarekh [(1993) 201 ITR 939 (Gujarat)]; and ACIT vs. VictoriaTechnical Institute [(1979) 120 ITR 358 (Madras)], it was heldthat it is difficult to accept that the assessee's activity canbe said to be educational in nature. The DIT(E), therefore, cameto the conclusion that the assessee's activities can only be foradvancement of general public utility. Further, the Trust isconducting business of running the newspaper and the turnoverexceeds the threshold limit as per second proviso to Section 2(15) of the Act. It was held that undoubtedly the assessee isconducting business of publication of newspaper and grossreceipts running into hundreds of crores of rupees exceeding thethreshold limit as provided under second proviso to Section 2(15) of the Act. Therefore, the first proviso to Section 2(15)of the Act is squarely applicable to the assessee's case andtherefore the activities, prima facie, shall not be charitablein nature. Further, it was held that this position will notchange whether the business is carried independently or given ascorpus by the settlor. Thus, the DIT(E) held that it appearsthat the activity of the assessee is hit by proviso to Section 2(15) of the Act and the prima facie activities of the Trust areno longer charitable in nature. 3.The assessee was called upon to show cause as to whyaction under Section 12AA(3) should not be taken to cancel theregistration granted to them under Section 12A(a) of the Act.The assessee was also afforded an opportunity of personalhearing through their authorized representative. The assesseesubmitted their reply dated 30.11.2011 through their CharteredAccountant in the form of written submissions. 4.The assessee contended that they claimed exemption underSection 11(1) of the Act and not under Section 10(23)(c) of theAct and the conditions mentioned in the amendment to Section 2(15) of the Act covers only public utility services and not forapplication to educational purposes by a Trust holding property 3.The assessee was called upon to show cause as to whyaction under Section 12AA(3) should not be taken to cancel theregistration granted to them under Section 12A(a) of the Act.The assessee was also afforded an opportunity of personalhearing through their authorized representative. The assesseesubmitted their reply dated 30.11.2011 through their CharteredAccountant in the form of written submissions. 4.The assessee contended that they claimed exemption underSection 11(1) of the Act and not under Section 10(23)(c) of theAct and the conditions mentioned in the amendment to Section 2(15) of the Act covers only public utility services and not forapplication to educational purposes by a Trust holding property for such purposes. In this regard, the speech of the Hon'bleFinance Minister in the Parliament and Circular issued by theCentral Board of Direct Taxes (CBDT) in Circular No.11 of 2008were referred. The assessee referred to the decision in the caseof MP. Madhyam vs. Joint Commissioner of Income Tax [(2004) 89TTJ Indore 770], in which, it was held that the provision ofSection 12AA of the Act is not meant for withdrawal orcancellation of registration already granted; that benefit ofthe principle of promissory estoppel cannot be denied to theassessee enjoying the registration for the last several yearsunder the same facts and circumstances, unless there is a breachof conditions laid down for granting registration in specificterms; that in such cases, the burden lies heavily on theDepartment to establish as to how the approach of the assesseewas commercial; that where the predominant object is to carryout the charitable purpose and not to earn profit, the Societywould not lose its charitable character merely because someprofit arises from the activity; and that where the CIT(A)failed to specify as to how profit making was the predominantactivity of the society instead of carrying out charitablepurpose, there was no justification in proposing cancellation ofthe registration. Further it was stated that the Department hasnot discharged the onus cast upon it to show as to how theconditions for grant of registration have been breached by theassessee. Further, CIT(A) has failed to specify as to how profitearning is the predominant activity of the assessee-Society. Theassessee, further, stated that they are not challenging thepowers of the Department to deny registration already granted toa Trust, but they submitted that the doctrine of promissoryestoppel will come to their rescue when there is no change incircumstances not in law or in facts. Noting that in the showcause notice, the DIT(E) has stated that the registration wasgranted on the basis of the Memorandum of Trust dated 01.03.1954and by Supplementary Deed dated 28.06.1961, the assessee statedthat the Department is well aware that the assessee preferredappeals before the Appellate Assistant Commissioner (AAC) forthe assessment year 1962-63 contending that they are entitled tothe grant of exemption under Section 11 of the Act. The AACaccepted the plea of the assessee that the decree passed by thisCourt in C.S.No.90 of 1961 created a legal obligation on theTrustees to utilise the income from the Trust for the object setout in the schedule to the decree. The decree passed by thisCourt in the said suit was mandatory in nature and that theassessee had credited in the books of accounts 75% of the incomein favour of 'Aditanar College'' and therefore, the assessee wasentitled to the benefit of the exemption under Section 11 of theAct. It was further stated that aggrieved by the orders of AAC,the Revenue preferred appeals to the Tribunal contending thatthe Supplementary Deed dated 28.06.1961, which was subjectmatter of C.S.No.90 of 1961, was invalid and ineffective inasmuch as the founder who had divested himself of his interestin the newspaper business and had created an irrevocable trustin respect thereof, no power to alter the terms of the TrustDeed and that Clause 3(i) of the Original Deed dated 01.03.1954only empowered the founder to confer additional powers on thetrustees for the proper administration of the assessee Trust andhad not conferred any powers on the founder of the Trust toalter the objects of the Trust; that the judgment and decree inC.S.No.90/1961 not being a judgment in rem was not binding onthe Revenue; that the judgment was rendered in originatingsummon wherein complicated questions of law and fact could notbe gone into without going into the validity of theSupplementary Deed dated 28.06.1961; the same cannot be reliedon by the assessee and the institution of such a suit was notgenuine but collusive and fraudulent; even if the SupplementaryDeed dated 28.06.1961 was valid and effective, no propertyhaving been separately endowed for the said object; there was noscope for the application of Section 11 of the Act inasmuch asthere was assignment for charitable purposes of the income onlyand not of the property which yields the income and that therebeing no application of the income for the assessment years inquestion for the objects contemplated in Section 11 of the Act,the assessee was not entitled to claim exemption. The assesseeTrust contended before the Tribunal that in view of the judgmentand decree of this Court in C.S.No.90 of 1961, it was no longeropen to the Revenue to contend that the Supplementary Deed wasnot valid that as a result of the decree in the said Suit, theTrustees were under legal obligation to apply the income for theobjects mentioned in the schedule to the decree and they had nodiscretion to apply the entire income for the maintenance of anewspaper business, that the Press already existing should beconsidered as one constituted by the Original Deed as modifiedby the decree of this Court and even if the original objects setout in the original Trust Deed continued to be the object of theTrust, they were to be considered only as ancillary, in view ofthe modification made by this Court. The Tribunal decided thecase in favour of the assessee holding that by reason of thejudgment and decree in C.S.No.90 of 1961, the objects of theTrust are only those set out in the schedule to the said decreeand they are charitable objects and that the assessee will beentitled to exemption from tax in respect of such income derivedfrom the business as is shown to have been actually parted by itand actually spent on such charitable objects during therelevant previous years. With this finding, the Tribunaldirected that the assessments for the two years in questionshould be modified. Aggrieved by such decision of the Tribunal,the Revenue as well as the assessee Trust sought for referencesto this Court and the following questions were referred for theopinion of this Court: (1) Whether on the facts and circumstances of the case, by reason of the judgment and decree ofthe Madras High Court in C.S.No.90 of 1961, theobjects of the trust are only those that are setout in the schedule to the said decree and notthose for which the trust was originally foundedand that such objects are charitable objectswithin the meaning of section 2(15) of the IncomeTax Act 1961? (2) Whether on the facts and circumstances ofthe case, the trustees are not bound to apply theincome that is left after meeting, the lawful andnormal expenses for running the business forcarrying out the objects set out in the scheduleto the decree in C.S.No.90 of 1961? (3) Whether, on the facts and circumstancesof the case, the Tribunal was right in holdingthat the trust in respect of the entirety of thebusiness for the objects mentioned in theschedule to the decree in C.S.No.90 of 1961 onthe file of the High Court, Madras and not merelyin respect of the income from the said business? (2) Whether on the facts and circumstances ofthe case, the trustees are not bound to apply theincome that is left after meeting, the lawful andnormal expenses for running the business forcarrying out the objects set out in the scheduleto the decree in C.S.No.90 of 1961? (3) Whether, on the facts and circumstancesof the case, the Tribunal was right in holdingthat the trust in respect of the entirety of thebusiness for the objects mentioned in theschedule to the decree in C.S.No.90 of 1961 onthe file of the High Court, Madras and not merelyin respect of the income from the said business? 5.The questions which were referred for consideration wereanswered in favour of the assessee in CIT vs. Thanthi Trust[(1982) 137 ITR 0735 (Madras)]. This decision was affirmed bythe Hon'ble Supreme Court in (1999) 239 ITR 502 (SC). In thelatter part of this judgment, we shall dwell deeper into thereasons assigned by the Hon'ble Division Bench for accepting thecase of the assessee and rejecting that of the Revenue. 6.The assessee further stated that the Income Tax Act coverscharity on two different fields, one is for application andanother field covers generation of income. The application ofsurplus income is covered by Section 11(1) of the Act and thegeneration of income is covered by Section 10(22) of the Act. 7.It was further contented that the Division Bench of thisCourt in the decision reported in 123 ITR 611, held that a Trusthas an obligation annexed to the ownership by a specificproperty and not with a non existing property. It was explainedthat in the case of assessee Trust, the property held by theTrust is the business undertaking which was in existence at thetime of creation of the Trust and after the judgment inC.S.No.90 of 1961, it became a legal obligation on the Trustees,a formal deed is not necessary, if it binds the trustee and assuch the decree in C.S.No.90 of 1961 creates a legal obligationon the Trustees to spend the surplus income of the Trust onlyfor educational purpose and not to any other purpose. It wasfurther contended that the Department has attempted to importthe conditions stipulated in Section 10(23)(C) into Section 11 https://hcservices.ecourts.gov.in/hcservices/ https://hcservices.ecourts.gov.in/hcservices/ (1) which is not in accordance with law. Further, it was pointedout that sub-Sections (1), (4) and (4a) of Section 11 of the Actwere not omitted or amended and the same situation andcircumstances continues, so far as the assessee Trust isconcerned. With regard to the applicability of Section 11(4a),the assessee referred to the judgment of the Honble SupremeCourt in their case reported in ACIT vs. Thanthi Trust [(2001)247 ITR 785(SC)]. The assessee referred to the instrument ofdeclaration of Trust dated 01.03.1954 registered as documentno.136/1954 on the file of the Sub Registrar, Mylapore and theSupplementary Deed dated 28.06.1961 and submitted that thejudgment in C.S.No.90 of 1961 validates the Supplementary Deedand has held that the Trustees are bound to apply the surplusincome to the objects mentioned in the Supplementary Deed.Further, it was submitted that the Director/Trustee is theChairman of the governing body of the College from the veryinception, he is managing and running the newspaper asDirector, chosen by other trustees and he is also the Chairmanof the educational agency which is a Society which runs variousColleges in Thiruchendur and there is no other effective way tocarry out the directions, of those contained in the judgment inC.S.NO.90 of 1961 and wishes of the Founder of the ThanthiTrust. Therefore, it is submitted that it is not sustainable tocontend that (a) Trust does not run any School or College; (b)only surplus income is held under Trust; (c) the property ofrunning the business is not held for the purpose of Trust andonly the surplus income is held under Trust. It is submittedthat all these three aspects have been decided by the Courts andthey are in favour of the assessee Trust. Further, it waspointed out that the registration under Section 12(A)(a) wasgranted to the assessee on the basis of declaration of Trustdated 01.03.1954 and the Supplementary Deed dated 28.06.1961 andmechanically without due application of mind, the registrationcannot be proposed to be cancelled. Without prejudice to theabove submissions, it was stated that in any event, theDepartment cannot cancel the registration retrospectively.Further, the decisions which were referred to by the DIT(E)relate only to Section 10(22) of the Act and they are notapplicable to the assessee's case, as they claimed exemptionunder Section 11(1) of the Act and not under Section 10(23)(C)of the Act. Further, it was submitted that newly insertedproviso to Section 2(15) is applicable only to the objects ofadvancement of any other object of general public utility andthe same is not applicable to the assessee's case whose objectsare solely for the purpose of education. With the abovesubmission, the assessee prayed for dropping the proposal tocancel the registration granted to it under Section 12A(a) byinvoking the power under Section 12A(A)(3) of the Act. 8.The DIT(E) by order dated 08.12.2011, cancelled theregistration granted to the assessee Trust with effect from01.04.2009 (AY 2009-10) i.e., from the date of introduction ofthe proviso to Section 2(15) of the Act. 8.The DIT(E) by order dated 08.12.2011, cancelled theregistration granted to the assessee Trust with effect from01.04.2009 (AY 2009-10) i.e., from the date of introduction ofthe proviso to Section 2(15) of the Act. 9.The DIT(E) stated in its order that it is undisputed factthat the assessee is not running an educational institution byitself; it is only giving donation to another Trust; the word'Education' is not defined under the Income Tax Act andtherefore, have to rely on the decisions of various Courts forinterpreting the word 'Education'. After referring to thejudgment in ACIT vs. Victoria Technical Institute [(1979) 120ITR 358 (Madras)], it held that since the assessee was notrunning an educational institution, their activity will fallunder the category of advancement of any other object of generalpublic utility as used in Section 2(15) of the Act and thoseactivities would not fall within the scope of educationalactivity, as held in Victoria Technical Institute (supra).Reference was made to the decision of the Hon'ble High Court ofGujarat in Sorabji Nusserwanji Paarekh (supra). Relying uponthe decision in the case of Loka Shikshana Trust (supra), it wasstated that the word 'Education' connotes the process oftraining and developing the knowledge, mind and character ofstudents by normal schooling. Further, by once again referringto the above stated decision, it was held that it is necessaryto run educational institution to qualify under the category'Education' in Section 2(15) of the Act. It was further statedthat the material differences between Section 2(15) and Section2(22) as far as a education is concerned, is a use of the word'solely'. Further, the DIT(E) accepted that there is no disputethat the objects of the Trust as per the Supplementary Deeddated 28.06.1961 were ratified by judgment in C.S.No.90 of 1961and that the Department is accepting the objects as per theSupplementary Deed after series of litigations. However, none ofthe decision in the assessee's case had dealt with the issuethat the Institution is not running educational institution eventhen it can be said to pursue objects of education. Whileconsidering the contention raised by the assessee stating thatthe proposal to cancel the registration is hit by principles ofpromissory estoppel, the DIT(E) held that the decision in MP.Madhayam (supra) will not come to rescue the assessee, as thereis a change of law from the date of registration under Section12AA of the Act and proviso to Section 2(15) of the Act wasinserted with effect from 01.04.2009. The DIT(E) after referringto the surplus and reserve in the Balance Sheet of the assessee,observed that there is a huge surplus and reserve available inthe Balance Sheet invested in stocks, cash and bank balance andloans and advances. Thus, it was held that the assessee isengaged and pursuing objects of general public utility and noteducation and conducting business of newspaper having turnover running in to crores of rupees much more than the thresholdlimit provided in the second proviso. Therefore, the DIT(E)concluded that the objects and activities of the assessee is nolonger chargeable in nature and therefore, cannot be said topursue charitable activity and the registration can be cancelledunder Section 12AA(3) of the Act. Accordingly, the registrationwas cancelled with effect from 01.01.2009. running in to crores of rupees much more than the thresholdlimit provided in the second proviso. Therefore, the DIT(E)concluded that the objects and activities of the assessee is nolonger chargeable in nature and therefore, cannot be said topursue charitable activity and the registration can be cancelledunder Section 12AA(3) of the Act. Accordingly, the registrationwas cancelled with effect from 01.01.2009. 10.Aggrieved by such order, the assessee filed appeal beforethe Tribunal. Before the Tribunal, among other things, theassessee contended that the DIT(E) failed to appreciate that thedefinition of term 'charitable purpose' is a condition precedentfor grant of exemption and not a condition precedent forgranting registration; that it failed to appreciate that theassessee is not carrying on any business activity as theactivity of the Trust but is continuing to carry on theactivities vested with the Trust by settler; it failed to notethat the two components of the activity namely (i) of continuingto carry on the obligation entrusted upon the Trust (ii) theobligation to utilise the funds being the resultant income overexpenditure in accordance with directives of the settlor; thatthe principle of overriding, title will apply to the resultantincome of the newspaper activity and such amounts are bound tobe applied only for chargeable purpose and hence the activitiesof the Trust are genuine; that the interpretation given toSection 2(15) of the Act is incorrect; DIT(E) failed toappreciate the findings of this Court in the assessee's owncase, wherein it was held that the entire property were heldunder Trust and / or under legal obligation was the businessitself and entire income from the business have to be utilisedfor the various charitable objects set out in the schedule tothe decree of this Court and therefore they cannot be denied thebenefit of exemption under the Act. The other contents anddecisions which were referred by the assessee while submittingtheir reply dated 30.11.2011 to the show cause dated 25.10.2011,were placed before the Tribunal. The Revenue contended that asper the Trust Deed dated 01.03.1954, the object of the Trust wasto establish the newspaper as an organ of educated publicopinion for the Tamil reading public and to disseminate newsand to ventilate opinion upon all matters of public interestthrough it. It was further stated that the assessee does not runany school or college, though such purposes have been stipulatedas a main objects of the Trust. The activities of the trust inconducting a newspaper business cannot be said as impartingeducation within the scope of charitable activity. 11.The assessee had not offered any donation to othereducational trust but only to one Trust and therefore, the orderof cancellation of a registration is proper. The Tribunal heldthat for the purpose of registration of the Trust, charitable 11.The assessee had not offered any donation to othereducational trust but only to one Trust and therefore, the orderof cancellation of a registration is proper. The Tribunal heldthat for the purpose of registration of the Trust, charitable purpose is an essential ingredient otherwise, registration underSection 12A cannot be accorded to any Trust. After referring tosome of the objects of the Trust as set out in the Deed of Trustand Supplementary Deed, the Tribunal stated that the originalTrust Deed was executed for the purpose of establishment ofnewspaper and the surplus income from the business was to meetout the objects set out in the Supplementary Deed dated28.06.1961 and since the main activity of the Trust ispublishing newspaper, it would fall within the meaning of tradeand commerce. The Tribunal faulted in not offering donation toother educational Trust or Societies but only 'AdhitanarEducational Trust' and that is the single activity of theassessee Trust. Referring to the decision in Yogiraj CharityTrust vs. CIT [(1976) 103 ITR 777 (SC)], it is held that if anyof the objects of a Trust cannot be treated as charitable, theclaim of the entire Trust for exemption has to fail. Further,the Tribunal held that the assessee has not carried out anyother activity in the nature as provided in the SupplementaryDeed and the only activity besides printing of the newspaperbeing, giving donation to a particular Trust. The said activitycannot be treated as activity for the advancement of any otherobject of general public utility, in the light of Section 2(15)of the Act, as it stood amended from 01.04.2009. In ground no.1placed in the impugned order, the Tribunal has faulted theassessee in offering donation only to one Trust, therefore, cameto the conclusion that the same cannot be treated as acharitable activity, since the Trust has not carried out themain objects in the Supplementary Deed namely, establishing andrunning Schools or Colleges. The Tribunal came to the conclusionthat the litmus test of a charitable institution is that itshould primarily carrying on charitable activity which is notthe case of the assessee Trust. There is distinction betweencarrying on of charitable activity and donations for charitablepurpose and that the assessee Trust having not carried out anycharitable activity but only carrying on business activity isnot entitled for registration. With these observations andfindings, the appeal was dismissed by the Tribunal. 12.Aggrieved by such order, the assessee has preferred thisTax Case Appeal. 13.Mr.V.S.Jayakumar, learned counsel for the appellant witha view to assist this Court to take a decision in the matter andalso to assimilate all relevant facts and details regarding thepast litigation between the assessee and the Department on thesame subject matter, prepared his notes on submissions in theform of Power Point Presentation (PPT). 14.To the best of our knowledge, this is the first time, wehave come across arguments advanced by the learned counsel bysubmitting a PPT before this Court. One school of thought seeksto condemn PPT presentations and have faulted the speakers whohad used PPT as being monotonous and boring. The fault does notlie on the PPT but on the presenter, invariably the presenterreads out what is displayed in the presentation, forgetting thatthe Powerpoint Presentations give salient features and bulletpoints on which the speaker will elaborate. If the PPT is donein such a form, it is a very effective way of presenting anytopic and in our view, Mr.V.S.Jayakumar, learned counsel hasdone this excellently, which has assisted this Court and we haveno doubt in our mind, it has also assisted the learned StandingCounsel for the respondent/Revenue. For better appreciation, wewould quote the PPT as presented before us to enable the Courtto decide the appeal as hereunder:- “Basic facts •Thanthi Trust was formed on 01.03.1954 – Objects “Basic facts •Thanthi Trust was formed on 01.03.1954 – Objects •(1) to sustain the Dina Thanthi or Daily Thanthi asan organ of educated public opinion for the Tamilreading public; •(2) To disseminate news and to ventilate opinion uponall matters of public interest through the said newspaper; •(3) to maintain the said newspaper and its Press isan efficient condition devoting the surplus income ofthe said newspaper and its Press after defraying allexpenses, in improving and enlarging the saidnewspaper and its services and placing the same on afooting of permanency. •Supplementary trust deed dt 28.06.1961 •1) Establishing and running a school or college , for the teaching of journalism; •2) Establishing and running or helping to runschools, colleges or other educational institutionsfor teaching arts and science; 3) Establishing ofscholarships for students of journalism, arts andscience; •4) Establishing and or running or helping to runhospitals for students; •5) Establishing and or running or helping to runorphanages and • 6)Other educational purposes; •Decree in Civil suit No. 90/1961 dated 02.03.1962.Schedule to this decree is referred to in 137 ITR 735(Mad) which mentions the same six objects. •Court observed; “It is clear that the object of thetrust is not in any manner opposed to law and there isnothing illegal in the prayers being allowed….Therecan , therefore, be no objection to the aforesaidprayers being allowed. Ordered accordingly.” •Registration u/s 12 A was granted by CIT on 30.06.89though applied for in the year 1973 after a delay of20 days. Delay was condoned. •Assessments u/s 143(3) were made from A Y 56-57 tillA Y 96-97 dealing with Sec 11 exemption. Refer Pg 139of spiral binding. From A Y 97-98 till 08-09 therewere no disputes. •For AY 09-10 to 12-13- Exemption u/s 11 was denied byAO/CIT(A) and appeals before ITAT along with refusalof registration u/ s 12 A A were listed several times. •Only the appeal relating to refusal of registrationu/s 12 A r/w 12AA was disposed off which is theimpugned order passed by the ITAT in this TC(A) 822 if2018•Donations list for various years from inception referpg 22-23-spiral binding. Aditanar educational trust isthe only donee •Charitable activities of the assessee trust wasquestioned by the tax department from A Y 68-69 and69-70 for the first time and exemption u/s 11 wasdenied. Refer 137 ITR 735(Mad)(see below).Otheraspects like application of income etc were consideredin earlier assessment years appeals. •ITAT and HC upheld that supplementary deed was notvalid as the trustees have no power under the deed tochange the objects-but because of the Civil Courtdecree ordering the prayer to carry out six objectsmentioned therein, there was a legal obligation on thepart of the trustees to carry out the charitableactivities which are six in numbers and so the trustis eligible for exemption u/s 11. •Case law: (i) Sree Anjaneya Medical Trust v CIT 382ITR 399(Ker) S.12A is one time registration. Exemptionis annual -ACIT v Agra Dev Authority (2018) 90taxmann.com 282(All) at 203- 218 at pg 215 para 49 PB II ; 12 A- is a fait accompli per Justice Ashok Bhan-CIT v Surat City Gymkhana Trust - (2008) 300 ITR 214(SC) para B / 5 Addl typed set case law –I ; TNCA vCIT 360 ITR 633(Mad) and Gujarat Cricket Assn v CIT-419 ITR 561(Guj)- 12 A exemption is not an idle orempty formality-Addl typed set-I •Sec.2(15) w e f 01.04.2009 by F A (No.2) 2009 •2(15) Charitable purpose includes relief of poor,education, medical relief….and any other object ofGeneral Public Utility •Provided that the advancement of any other object ofgeneral public utility shall not be a charitablepurpose, if it involves the carrying on any activity ,in the nature of trade, commerce or business… … II ; 12 A- is a fait accompli per Justice Ashok Bhan-CIT v Surat City Gymkhana Trust - (2008) 300 ITR 214(SC) para B / 5 Addl typed set case law –I ; TNCA vCIT 360 ITR 633(Mad) and Gujarat Cricket Assn v CIT-419 ITR 561(Guj)- 12 A exemption is not an idle orempty formality-Addl typed set-I •Sec.2(15) w e f 01.04.2009 by F A (No.2) 2009 •2(15) Charitable purpose includes relief of poor,education, medical relief….and any other object ofGeneral Public Utility •Provided that the advancement of any other object ofgeneral public utility shall not be a charitablepurpose, if it involves the carrying on any activity ,in the nature of trade, commerce or business… … •Provided further that the first proviso shall notapply if the aggregate value of the receipts from theactivities referred to therein is 25 lakhs rupees orless in the previous year … •2(15)proviso is not attracted as the main object iseducation and hence not violated•TNCA(2014) 360 ITR 633(Mad); Gujarat Cricket 419 ITR561(Guj)PB-II, DIT(E) v Chartered Accountants StudyCircle 347 ITR 321(Mad) •Observations on “education” in Thanthi’ Trust’sreported cases. •Hon’ ble Justice G.Ramanujam and Hon’ ble JusticeSengotuvelan -137 ITR 735 (Mad) Pg 50 to 75 •(i) para 26 pg 66: In this case the founder of thetrust has clearly evinced an intention to create apublic charitable trust as seen from the preamble andcl3(k) of the original trust deed and the charitableobjects referred to in the schedule to the decree inCS no. 90 of 1961 have to be fulfilled from and out ofthe income from the business which is directed to beheld under trust or other legal obligation. Thosecharitable objects fall within the first twocategories referred to in S 2(15). Viz relief of thepoor and education. It is to carry out and fulfillthose objects the business is carried on. •Thus the primary purpose is to carry out thecharitable objects and the business is carried on as ameans in the course of the actual carryng out that primary purpose and not as an end in itself. While thepredominant object of the trust is the carrying out ofthe charitable objects referred to its two off thethree categories of charitable purpose referred to inS 2(15), the carrying on of the business which isactually the property held under trust or other legalobligation is incidental and the profit resultingtherefrom the business can be taken to be a byproduct. •(ii)Page 65 para 22 end. The principle laid down bythe SC(121 ITR1) in the said decision seems tosquarely apply to this facts of the case. In this casethe property held under trust or under legalobligation is the business itself and the entireincome from the business has to be utilised for thevarious charitable objects set out in the schedule tothe decree in CS No.90 of 1061. Thus, the objects willclearly fall under the head ‘ relief of thepoor,education, medical relief etc, and merely becausethe trust is carrying on the charitable objectsreferred to in schedule to the decree, it cannot bedeprived of S.11. •(iii) Page 65-66 para 25 : As pointed out by the SC ,if the contention of the revenue is accepted, no trustcan carry on any business even for the fulfillment ofthe charitable objects, such as, relief of poor,education and medical relief, and, therefore, such acontention cannot be accepted. If the intention of thelegislature were to prohibit a trust or institutionestablished for a charitable purpose or for theprohibition of an object of general public utilityfrom carrying on any activity for profit , it wouldhave provided in the clearest terms.. •(iii) Page 65-66 para 25 : As pointed out by the SC ,if the contention of the revenue is accepted, no trustcan carry on any business even for the fulfillment ofthe charitable objects, such as, relief of poor,education and medical relief, and, therefore, such acontention cannot be accepted. If the intention of thelegislature were to prohibit a trust or institutionestablished for a charitable purpose or for theprohibition of an object of general public utilityfrom carrying on any activity for profit , it wouldhave provided in the clearest terms.. •iv) Pg 60 para 18:The supplementary deed as well asthe decree in C S No.90 of 1961 proceed on the basisthat as the original objects had since been achieved,new objects substituted for them. The new objects arepurely charitable.•(v) Pg 61 para 19 end : Once there is a surplus,there is no discretion left in the trustees to spendthe same for any non-charitable purpose and they arebound to spend the same for any of the charitablepurposes referred to in the schedule to the decree,all of which are admittedly charitable objects. Pg 61para 19 end. •(vi) pg65 para 25: In the case on hand the propertyheld under trust is the business itself and thebusiness is carried on only and exclusively, for carrying out the charitable objects set out in theschedule to the decree in CS No.90 of 1961 •(vii) Pg 185 238 ITR 635(Mad) Hon’ble JusticeR.Jayasimhababu-@ 186: 137 ITR 735 followed ….thatthose charitable objects fall under the relief to thepoor and education referred to in S. 2(15) and thatthe primary purpose of the trust is to carry out thecharitable objects and that business is carried ononly as a means in the course of actually carrying outthe primary purpose of the trust, and not as an enditself. •viii) Pg-143 144- 91 ITR 261(Mad)- Hon’ ble JusticeG.Ramanujam and Hon’ ble Justice V Ramaswami- In theoriginal assessment for A Y 62-63 to 67-68,- In allthese Ays the ITO has specifically found that 75% ofthe income of the trust had been applied for arecognized charitable purposes,namely, education. •ix) Hon’ ble Justice N.V.Balasubramanaiam and Hon’ble Justice P Thangavel 239 ITR 510(Mad) pg 159applied 137 ITR 735; •X) 172 Hon’ ble Chief Justice K A Swami and Hon’ bleJustice K. Somasundaram J at 213 ITR 626(Mad) –para14- 146 ITR(st) 187 SLP against 137 ITR 735 admittedon Qs 4,5 and 6 and Qs 1 to 3 were dismissed.•Observations of Supreme Court in Thanthi Trust’s case • Hon’ ble Chief Justice of India Barucha, (2001)247ITR 785(SC) at para 20- 21 pg 184 of PB- para21 end 11(4A)-“The trust, therefore , is entitled to thebenefit of S.11 for the A Y 92-93 and thereafter. Itis, therefore, we should add, not in dispute, that theincome of its newspaper has been employed to achieveits objectives of education and relief to the poor andthat it has maintained separate books of account inrespect thereof. •….Pg. 180 of PB – para 6 Court observes… 137 ITR 735has become final and binding on the revenue, namely,that the primary purpose of the trust was to carry outthe charitable objects and that the business carriedon only as a means in the course of the actualcarrying on the purpose of the trust.” •) Hon’ble Justice Jeevan Reddy-(1999) 239 ITR 502(SC)CIT v Thanthi trust- application of income aspectonly-para 2-page 208PB- •“2. It appears that the Adityanar College was run, not by the assessee trust, but by another registeredcharitable society. In the circumstances, the HC wasright in the conclusion which it arrived at. •…..It may also be mentioned that it is no part of therevenue’s case at any point of time that the creditentries made in the assessee’s books of account werenot genuine or true or that they were mere makebelieve or bogus. It was never doubted. “•Meaning of education/utilization of surplus •) Hon’ble Justice Jeevan Reddy-(1999) 239 ITR 502(SC)CIT v Thanthi trust- application of income aspectonly-para 2-page 208PB- •“2. It appears that the Adityanar College was run, not by the assessee trust, but by another registeredcharitable society. In the circumstances, the HC wasright in the conclusion which it arrived at. •…..It may also be mentioned that it is no part of therevenue’s case at any point of time that the creditentries made in the assessee’s books of account werenot genuine or true or that they were mere makebelieve or bogus. It was never doubted. “•Meaning of education/utilization of surplus •“Meaning of education” is wider and not narrower-Justice Beg; Per Hon’ ble Justice Khanna meaning of“education” is narrower; Regarding Hon’ ble JusticeGupta’s view there is no indication in the judgment in(1975) 101 ITR 234(SC) Lok Shikshana Trust v ITO-Submission is the meaning of education is obiter dictaand is not a ratio decidendi …in view of disapprovalof this judgment in 121 ITR 1(SC) Surat Art SilkAssociation v ITO as noticed in 137 ITR 735(Mad)Thanthi Trust v CIT. •Investor Financial Education Academy v ITO TC(A)900/2018 dated 04.09.2020(unreported) is relied on. •ICAI Accounting Research Foundation v DIT 321 ITR 73(Del) followed•Gujarat State Co-op Union v CIT 195 ITR 279(Guj) andAhmedabad Management Assn Followed. •Alembic Chemical works Ltd v CIT- 177 ITR 377(SC)-modern developments should be judicially noticed. •Utilization of surplus- reasonable to hold 15% withthe assessee. •Investor Financial Education Academy v ITO TC(A)900/2018 dated 04.09.2020.(unreported) •IT Act envisages 15 % being retained and 85% must bespent. •Refer page for utilisation mentioned in the impugnedorder of DIT/ITAT as also the spiral binding at pages22-23 of spiral binding. •Diversion by over riding title/rule of consistency •Diversion by overriding title- ground raised beforethe ITAT not answered. •CIT v Tollygunge Club Ltd 107 ITR 776(SC) •CIT v Bijili Cotton Mills P Ltd – 116 ITR 60(SC)•Rule of consistency •Radhsoami Satsang v CIT (1992) 193 ITR 321(SC) •ACIT v Surat City Gymkhana (2008) 300 ITR 214(SC) •Same issue considered in another facet of the incometax exemption u/s 11 which is relevant here also whileconsidering rejection of registration u/s 12A. •Case law on first three limbs •121 ITR 1(SC) Surat Art Silk Association v CIT para 8page 10 of PB –I - Sec 2(15) which gives an inclusivedefinition of charitable purpose. It provides that“charitable purpose” includes relief of poor,education, medical relief and the advancement of anyother object of general public utility not involvingthe carrying on of any activity for profit. In thesame para: •It is now well settled as a result of the decision ofthis court in Dharmadeepti v CIT 114 ITR 454(SC) thatthe words “not involving the carrying on of any forprofit qualify or govern only the last head ofcharitable purpose and not the earlier three heads. •Where, therefore, the purpose of a trust orinstitution is relief of the poor, education ormed