Section 11 of Income-tax Act, 1961 – Charitable or religious trust – Exemption of Income from property held under – Assessment years 1996-97 and 2001-02 – Assessee was registered under section 12A as a charitable society – While making its assessment, Assessing Officer disallowed its claim for exemption under section 11 on ground that its activity of letting out building to other society to run educational institution did not constitute charitable purpose – On assessee’s appeal, Commissioner (Appeals), considering fact that rental income earned by assessee was again being utilized for education by maintaining and constructing new building for same purpose, held that charitable purpose was not lost and, therefore, assessee was entitled to exemption under section 11 – Tribunal upheld order of Commissioner (Appeals) – Whether on facts, Tribunal had rightly held that income of assessee-society was exempt under section 11 – Held, yes
Commissioner of Income-tax, Haldwani, Nainital vs Jyoti Prabha Society
While framing assessment of the assessee-society, the Assessing Officer took the view that though the assessee was registered as a charitable society under section 12A, its activity of letting out the building to other society to run educational institution did not constitute the charitable purpose. Therefore, he denied exemption under section 11 to the assessee and levied tax on its income. On appeal, the Commissioner (Appeals), considering the fact that the assessee-society and the society to whom the building was let out both were charitable societies and had the similar object of imparting education, took the view that the charitable purpose was not lost by merely letting out the building to another charitable society. The Tribunal upheld the order of the Commissioner (Appeals).
On revenue’s appeal:
The objects of the assessee-society made it abundantly clear that the society existed for charitable purposes. The activities of the assessee-society included letting out of the properties to the educational institutions. Had the rental income earned by the assessee, not utilized for the educational purposes, it could have been said that the letting out of the property on the part of the assessee-society had lost the charitable purpose. But in the instant case, there was concurrent findings of fact on the part of the Commissioner (Appeals) and the Tribunal that the rental income earned by the assessee-society was being utilized again for the purposes of imparting education by maintaining the buildings and constructing new building for the same purpose. As such, the charitable purposes was not lost and it could not be said that the assessee was not entitled to the exemption claimed by it under section 11. [Para 5]
The Commissioner (Appeals) and the Tribunal had rightly held that the income of the assessee was exempted under section 11.