- (1.) The assessee is on appeal as against the common order passed by the Income Tax Appellate Tribunal relating to the assessment years 2008-09 and 2009-10. There were six appeals before the Income Tax Appellate Tribunal, out of which five were by the Revenue and one by the assessee.
(2.) Following are the questions of law raised by the assessee in Tax Case (Appeal)No.35 of 2014. 1. Whether the Tribunal was right in not adjudicating the specific issue raised by the Revenue questioning the decision of the Commissioner of Income Tax (Appeals) that the income from letting out the property should be treated as business income or income from property for the purpose of invoking Section 11 of the Income Tax Act, 1961? 2. Whether the Tribunal was right in holding that the matter should be remanded to the files of the Assessing Officer to examine the nature of activity and its income derived as incidental to the objects of the assessee or as a separate business for the purpose of Section 11 and more specifically for Section 11(4A)? 3. Whether the income earned from letting out of the property is taxed as business income for the purpose of invoking Section 11 of the Income Tax Act, 1961? 2. The assessee herein is a Charitable Institution granted registration under Section 12AA of the Income Tax Act, 1961. The Society was formed to provide education, medical relief to the poor and objects of general public utility. It is stated that it is running lodging accommodations at two places and has a large Auditorium for conducting functions at Vepery and one such small Auditorium is at Esplanade and a large ground at Royapettah, which has a commercial value to be let out for public functions, exhibitions,etc. The Society maintains swimming pool, recreation centres and gymnasium. Two schools and a home were formed and maintained for the deprived children. Relief activities in times of flood and other natural calamities are also being carried out by the Society. The Auditorium and the hall are let out to members and non-members. Rooms are also let out to members and non-members, which included providing of food. The Assessing Officer held that the assessee was carrying on business activities. As regards the letting out of the Auditorium at Vepery, the Hall at Esplanade, the ground at Royapettah, letting of rooms at Royapettah and Vepery the Society was charging rent and as well as for providing food and beverages to the persons, who were occupying such rooms. When the assessee was questioned about the nature of receipts, the assessee took the contention that the income from these activities was not business income but income from the property. The assessee placed reliance on the decision of this Court [CIT vs. Shri Rao Baghadur ADK Dharmaraja Educational Charity Trust, 2008 300 ITR 365] as well as Punjab and Haryana High Court,2002 121 Taxman 717 apart from [Additional CIT vs. Surat Art Silk Cloth Manufacturers Association, 1980 121 ITR 1] on the aspect of utilization of the income for charitable purpose and hence exempted from Section 11 of the Income Tax Act, 1961. The contention of the assessee was however rejected holding the view that letting out of the hall and the open space and hiring out rooms amounted to business and hence the income there from were assessable as business income. Referring to Section 11(4A) of the Income Tax Act,1961 the Assessing Officer viewed that any business activity conducted by the assessee would result in losing of the benefit under Section 11(1), (2), (3) and (3A) of the Act unless separate books of accounts were maintained. Going by the requirement of Section 11(4A) of the Income Tax Act, 1961, the Assessing Officer viewed that the assessee would be ineligible for exemption under Sections 11 and 12 of the Income Tax Act,1961.
(3.) Aggrieved by this assessment, the assessee went on appeal before the Commissioner of Income Tax (Appeals), who agreed with the assessee that the receipts from letting off of the rooms and the Auditorium constitute income from a house property. Referring to the objects of the Trust and Section 11(4A) of the Act, the Commissioner of Income Tax (Appeals) held that there was no violation of the provisions of the Act to deny the exemption under Section 11 of the Act. Considering the objects of the Society, viz., maintaining centres, hostels, boarding houses, tourist homes etc owning of the property and receiving rental incomes by letting out the same constituted income of the assessee from the house property. The Commissioner of Income Tax (Appeals) further viewed that letting out of the property to the members and non-members could not be treated as a business activity. The guests are permitted to avail the facilities of the organisation and therefore, the so-called members, who availed the services of the Society through the introduction of members as the guests of the members, who are treated as temporary members and the same could not constitute business activity. Thus, aggrieved by the order of the Commissioner of Income Tax (Appeals), directing the Assessing Officer to grant the benefit under Section 11 of the Income Tax Act, 1961, the Revenue went on appeal before the Income Tax Appellate Tribunal.;