The Director Of Income Tax,(Exemptions),Chennai v. M/S.vallal M D Seshadri Trust,B4, Ceebros Rangam Apartments,Old

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 13.12.2011Coram The Honourable Mr.Justice P.JYOTHIMANIandThe Honourable Mr.Justice P.P.S.JANARTHANA RAJA Tax Case Appeal Nos.554 & 555 of 2011and M.P.No.1 of 2011 The Director of Income Tax,(Exemptions),Chennai. .. Appellant in both the appeals vs. M/s.Vallal M D Seshadri Trust,B4, Ceebros Rangam Apartments,Old No.11/New No.32,Cenotaph Road,Teynampet,Chennai-600 018 .. Respondent in both the appeals The above tax case appeals are preferred under Section 260-A ofthe Income Tax Act, 1961, against the common order dated 16.6.2011passed by the Income Tax Appellate Tribunal 'C' Bench, Chennai,inI.T.A.Nos.508 and 509/Mds/2011. Respectively against the proceedingsof the Director of Income Tax Exemptions, Chennai dated 26.11.2010and made in DIT (E) No.2(101)10-11. For Appellant:Mr.T.Ravikumar JUDGMENT (Judgment of the Court was made by P.JYOTHIMANI.J.)The Revenue has preferred these tax case appeals as against theorder dated 16.6.2011 passed by the Income Tax Appellate Tribunal 'C'Bench, Chennai, in I.T.A.Nos.508 and 509/Mds/2011, suggesting thefollowing substantial questions of law:"(a) Whether on the facts and circumstances of thecase, the Tribunal was right in directing to grantregistration under Section 12AA on violation of Sec.2(15) ofthe I.T.Act? https://hcservices.ecourts.gov.in/hcservices/ (b) Whether on the facts and circumstances of the case,the Tribunal was right in directing to grant approval underSection 80G in violation of Rule 11AA of the IT Act?" 2. A reference to the order of the Director of Income Tax(Exemptions) shows that the application filed by the assessee forregistration, under Section 12AA of the Income Tax Act, has beenrejected at the threshold itself holding that one of the objectclauses, namely, clause No.16 speaks about publishing newspapers inregional, national and English languages by establishing necessaryfacilities for the same and that the original contents of the trustdeed came to be amended in respect of object clause 11(b), videamendment deed dated 2.11.2010 and the same is not permissible.Based on these two reasons, the assessing officer has rejected theapplication filed under Section 12AA of the Act and consequently,rejected the application filed under Section 80G of the Act, forapproval. 3. The Tribunal has found that the trust deed can be amended andthe finding by the Director of Income Tax(Exemption) is not based onsound reasons. That apart, the Tribunal, in the impugned order hasfound that publishing of newspapers and periodicals does not ipsofacto become commercial activity. It is on that basis, the appealsfiled by the assessee came to be allowed by the Tribunal. Beingaggrieved by the said order the Department has filed the presentappeals on the above substantial questions of law. 4. Section 12AA of the Act contemplates the power of theCommissioner to call for information for the purpose of satisfyinghimself about the genuineness of the activities of the trust orinstitution, which is as follows: "Sec.12AA. The Commissioner, on receipt of anapplication for registration of a trust or institution madeunder clause (a) or clause (aa) of sub-Section (1) ofsection 12A, shall- (a) call for such documents or information from thetrust or institution as he thinks necessary in order tosatisfy himself about the genuineness of activities of thetrust or institution and may also make such inquiries as hedeem necessary in this behalf; and(b) after satisfying himself about the objets of thetrust or institution and the genuineness of its activities,he- (i) shall pass an order in writing registering thetrust or institution; (ii) shall, if he is not so satisfied, pass an orderin writing refusing to register the trust or institution,and a copy of such order shall be sent to the applicant.Provided that no order under sub-clause (ii) shall be (a) call for such documents or information from thetrust or institution as he thinks necessary in order tosatisfy himself about the genuineness of activities of thetrust or institution and may also make such inquiries as hedeem necessary in this behalf; and(b) after satisfying himself about the objets of thetrust or institution and the genuineness of its activities,he- (i) shall pass an order in writing registering thetrust or institution; (ii) shall, if he is not so satisfied, pass an orderin writing refusing to register the trust or institution,and a copy of such order shall be sent to the applicant.Provided that no order under sub-clause (ii) shall be passed unless the applicant has been given a reasonableopportunity of being heard." 5. On a reference to the order passed by the Director of IncomeTax (Exemptions), it is clear that nowhere he found fault with thegenuineness of the trust. In so far as it relates to the publicationis concerned, Section 2(15) of the Act is usefully extractedhereunder: "Sec.2(15) Charitable purpose includes relief of thepoor, education, medical relief, preservation ofenvironment including watersheds, forests and wildlife andpreservation of monuments or places or objects of artisticor historic interest, and the advancement of any otherobject of general public utility; Provided that the advancement of any other object ofgeneral public utility shall not be a charitable purpose,if it involves the carrying on of any activity in thenature of trade, commerce or business, or any activity ofrendering any service in relation to any trade, commerce orbusiness, for a cess or fee or any other consideration,irrespective of the nature of use or application, orretention, of the income from such activity:Provided further that the first proviso shall notapply if the aggregate value of the receipts from theactivities referred to therein is twenty five lakh rupeesor less in the previous year." 6. A plain reading of the above would show that the term'charitable' includes the word 'education' also. The word'education' came to be interpreted by the Honourable Apex Court inthe case in SOLE TRUSTEE, LOKA SHIKSHANA TRUST V. THE COMMISSIONER OFINCOME TAX, MYSORE (1995) 101 ITR 234, wherein it was held that theword 'education' should be construed with wider connotation. Therelevant portion of which is extracted hereunder: "The sense in which the word 'education' has been usedin Section 2(15) in the systematic instruction, schoolingor training given to the young is preparation for the workof life. It also connotes the whole course of scholasticinstitution which a person has received. The word"education" has not been used in that wide and extendedsense, according to which every acquisition of furtherknowledge constitutes education. According to this wideand extended sense, travelling is education, because as aresult of travelling your acquire fresh knowledge.Likewise, if you read newspapers and magazines, seepictures, visit art galleries, museums and zoos, youthereby add to your knowledge. Again, when you grow up andhave dealings with other people, some of whom are not "The sense in which the word 'education' has been usedin Section 2(15) in the systematic instruction, schoolingor training given to the young is preparation for the workof life. It also connotes the whole course of scholasticinstitution which a person has received. The word"education" has not been used in that wide and extendedsense, according to which every acquisition of furtherknowledge constitutes education. According to this wideand extended sense, travelling is education, because as aresult of travelling your acquire fresh knowledge.Likewise, if you read newspapers and magazines, seepictures, visit art galleries, museums and zoos, youthereby add to your knowledge. Again, when you grow up andhave dealings with other people, some of whom are not straight, you learn by experience and thus add to yourknowledge of the ways of the world. If you are notcareful, your wallet is liable to be stolen or you areliable to be cheated by some unscrupulous person. Thethief who removes your wallet and the swindler who cheatsyou teach you a lesson and in the process make you wiserthough poorer. If you visit a night club, you getacquainted with and add to your knowledge about some of thenot much revealed realities and mysteries of life. Allthis in a way is education in the great school of life.But that is not the sense in which the word "education" isused in clause (15) of section 2. What education connotesin that clause is the process of training and developingthe knowledge, skill, mind and character of students bynormal schooling." 7. As far as the amendment made to the trust deed is concerned,it is not the concern of the assessing authority, and only the civilCourt is empowered to decide the said issue and in any event thatcannot be the reason for denying the charitable nature of theinstitution, if it is otherwise charitable. 8. The learned counsel for the appellant would rely upon thejudgement of the Kerala High Court in IDEAL PUBLICATIONS TRUST V.COMMISSIONER OF INCOME TAX (2008) 305 ITR 143, which relates toSection 11 of the Act and the same in our opinion is not applicableto the facts of the present case, as in this case at the thresholditself the application under Section 12AA of the Act has beenrejected. 8. In the light of the above, we are of the view that there isno reason to interfere with the order passed by the Tribunal. Thereis no question of law much less substantial question law would arisefor consideration. Accordingly, the tax case appeals standdismissed. Connected miscellaneous petition is closed. No costs. Sd/Assistant Registrar To 1.The Assistant Registrar,Income Tax Appellate Tribunal, Madras Bench "C". 2.The Secretary, Central Board of Direct Taxes, New Delhi.Direct Taxes, New Delhi. 3.The Commissioner of Income Tax (Appeals) V, 121, Mahatma Gandhi Road, Chennai-600 034.(Appeals) V, 121, Mahatma Gandhi Road, Chennai-600 034. 4.The Director of Income Tax(Excemptions),Chennai 600 034(Excemptions),Chennai 600 034 Tax Case Appeals 554 & 555 of 2011 KSJ (CO)BMD 30/12/2011