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

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 1.9.2008 CORAM THE HONOURABLE MR. JUSTICE K. RAVIRAJA PANDIANANDTHE HONOURABLE MR. JUSTICE P.P.S. JANARTHANA RAJA TAX CASE (APPEAL) NOS.1358 TO 1361 OF 2008AND M.P.NOS.1 (3 COUNTS) OF 2008 IN T.C.(A)NOS.1359 TO 1361 OF 2008 The Commissioner of Income TaxChennai.... Appellant in all the TCs. Vs. M/s. Sri Narayana Gurtuviah Chetty'sEstate & Charities49, Varadhamuthiappan StreetChennai – 600 001.... Respondent in all the TCs. 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.1397/Mds/1999,1480/Mds/2000, 1481/Mds/2000 and 1482/Mds/2000 for the assessmentyear 1996-97, 1997-98, 1998-99 and 1999-2000 respectively againstthe assessment order of the Commissioner of Income Tax (appealsIX) Chennai in ITA.No.9/99-00 dated 24.6.1999 against theassessment order of the Commissioner of Income Tax appeals(IX)Chennai in ITA.Nos.43, 35 and 36/00-01 dated 12.6.2000 arisingout of order of Dy Director of Income Tax (Excemptions) IIChennaidated26.2.1999,29.2.2000respectivelyinPAN/GIR.No.2621-S for the assessment years 1995-96, 1996-97,1997-98 and 1999-2000 respectively. For Appellant : Mr. J. Naresh Kumar Standing Counsel for IT DepartmentJ U D G M E N T (Judgment of the Court was delivered by K. Raviraja Pandian, J.) The Revenue on appeals against the orders of the Tribunaldated 16.12.2005 in ITA.Nos.1394/Mds/1999, 1480/Mds/2000, https://hcservices.ecourts.gov.in/hcservices/ 1481/Mds/2000 and 1482/Mds/2000. The relevant assessment yearsare 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 TaxAct. The Assessing Officer denied exemption on the ground thatthe assessee is running a Kalyana Mandapam which is not anactivity either as per the objects of the Trust or incidentalthereto. The Kalyanamandapam was rented out on substantial rentwhich sustains the commercial nature of the activity. On appeal,the Commissioner of Income Tax (Appeals) reversed the order ofthe Assessing Officer placing reliance on the judgment of thejurisdiction High Court reported in 245 ITR 242. The Revenuechallenged the order before the Income Tax Appellate Tribunal.The Tribunal after considering the various clauses contained inthe Will and also following the earlier order in respect of thevery same assessee dated 27.12.2004 in I.T.A.No.103/Mds/98confirmed the order of the Commissioner of Income Tax (Appeals).The correctness of the same is now canvassed before this Court bythe Revenue by formulating the following questions of law: " Whether, in the facts and circumstances of the case,the renting out of Kalayanamandapam is a commercialactivity or not for the purpose of claiming exemptionunder Section 11 of the Income Tax Act ?" 3. The learned counsel appearing for the Revenue has arguedpointing out the clause contained in the Will. 4. We heard the learned Standing Counsel appearing for theRevenue and perused the materials available on record. 5. For the earlier assessment year, which is the subjectmatter of I.T.A.No.103/Mds/98, the Tribunal has held asfollows:- " Whether, in the facts and circumstances of the case,the renting out of Kalayanamandapam is a commercialactivity or not for the purpose of claiming exemptionunder Section 11 of the Income Tax Act ?" 3. The learned counsel appearing for the Revenue has arguedpointing out the clause contained in the Will. 4. We heard the learned Standing Counsel appearing for theRevenue and perused the materials available on record. 5. For the earlier assessment year, which is the subjectmatter of I.T.A.No.103/Mds/98, the Tribunal has held asfollows:- " The assessee referred to clause 92 of the Will leftbehind by Shri Narayana Guruviah Chetty. It wassubmitted that the deceased desired that gifts andcharities should be continued permanently and powershave been given to the trustees in the manner theythought proper in carrying out the Will of thedeceased. The CIT(A) noted that clause 9 of the saidWill permitted carrying out improvements to land andproperty. It allowed lending of money on interest anddeveloping of the estate. He considered the provisionsof clause 8, 92, 20 to 63 and other clauses of theWill. One of the objects pertained to theKalyanamandapam and giving the same on rent with thesole objectthat rentalincomefrom theKalyanamandapam 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 wasmade indicating that the assessee was carrying oncharitable work. On behalf of the assessee, reliancewas 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 caseof CIT vs. Samyuktha Gowda Saraswatha Sabha (supra)where the income from the Kalyana mandapam was used onlyfor purposes of charity and it was held that it wasentitled to exemption. Following the said decision ofthe jurisdictional High Court, we uphold the order ofthe CIT(A) and dismiss the appeal by the Revenue." 6. Having regard to the above said judgment, the Tribunalalso took notice of the observations of the Supreme Court inThanthi Trust case referred supra (247 ITR 785), wherein it hasbeen held as under:-" A business whose income is utilised by the trust orthe institution for the purposes of achieving theobjectives of the trust or the institution is, surely,a business which is incidental to the attainment of theobjectives of the trust. In any event, if there be anyambiguity in the language employed, the provision mustbe construed in a manner that benefits the assessee.The trust, therefore, is entitled to the benefit ofsection 11 for the assessment year 1992-93." Hence, the Tribunal confirmed the order of the Commissioner ofIncome Tax (Appeals). As the order of the Tribunal is based onconsideration of the relevant clause in the Will and also theinterpretation of such clauses by this Court as well as theSupreme Court and decided in favour of the assessee, we find nomerit in these appeals for interference. Accordingly, the taxcaseappealsaredismissed.Consequently,connectedmiscellaneous petitions are also dismissed. No costs. /true copy/ Sub Asst.Registrar To 1. The Commissioner of Income Tax (Appeals IX)Chennai. 2. The Asst Registrar,Income Tax Appellate Tribunal,III floor, Rajaji Bhavan,Besant Nagar, Chennai 90. 3. The Secretary, Central Board of Revenue, New Delhi.4. The Deputy Director of Income Tax (Exemption II)Chennai+ 1 cc to Mr. N. Muralikumaran, CGSC for SR No.49441T.C.(A)Nos.1358 to 1361of 2008GG(CO)SR/22.9.2008