The Chennai Bench of Income Tax Appellate Tribunal (ITAT) held that providing uniforms, books or transport services to the students by the assessee trust are not its main objects and these been commercial in nature and disallowed the exemption under Section 11 of the Income Tax Act,1961.
The assessee trust M/s. Sri Palaniappa Charitable, is a charitable trust registered under Section 12AA of the Income Tax Act claimed exemption under Section 11 of the Income Tax Act. The main objects of the assessee trust are to run and establish educational institution.
The AO during the course of assessment proceedings noticed that the assessee has declared gross receipts on account of main object of the trust at Rs.48,11,650/- and a sum of Rs.16,03,040/- as receipts from incidental objects. The AO disallowed the claim of exemption under Section 11 of the Income Tax Act on the receipts from incidental objects.
Aggrieved by the order, the assessee filed appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], the first appellate authority confirmed the action of the AO relying on the decision of Supreme Court in the case of New Noble Educational Society vs. CIT.
The Authorised Representative of assessee S. Sridhar, stated that the CIT(A) erred in not accepting the gross receipts of the trust for the impugned year was Rs.64,59,206 consisting of term fees, book fees, bus fees, uniform fees and interest, term fees works out to 75 percent, while other receipts for activities incidental to the main object of the trust, being education works out to 25 percent.
D. Hema Bhupal appeared as Departmental Representative
A Single Judge bench comprising of Mahavir Singh, Vice President relied on the decision of CIT(A) and followed Supreme court’s judgement in the case of New Noble Educational Society vs. CIT, where it was stated that, “providing uniforms, books or transport services to the students by the assessee trust are not its main objects and these been commercial in nature.”
Hence, the Tribunal confirmed the action of AO in disallowing the exemption on trust property under Section 11 of Income Tax Act.
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