Income earned from Leasing of Trust Building Is  Commercial Business Activity: ITAT upholds Cancellation of Registration [Read Order]

The two member bench of Pune Income Tax Appellate Tribunal ( ITAT ) canceled  the application of registration filed under Section 12A of the Income Tax Act, 1961 after observing that the income earned from leasing of trust building is a commercial business activity.

The Assessee, Golden Charitable Trust entered into a lease agreement with The Muslim Education Welfare Trust on 03.07.2019. The assessee has given on lease, a building. The lease is for 50 years. Annual Lease is Rs.10 lakhs for the first five years. Accordingly the assessee filed an application for registration.However the CIT(E) dismissed the application.

During the adjudication Kishor B Phadke, the counsel for assessee  submitted that   assessee had sought permission from Charity Commissioner for the Lease Agreement, subsequently.

Keyur Patel, Counsel for Revenue supported the order of lower authorities and argued that the assessee has not registered the  lease deed. Therefore, the assessee has violated Registration Act of 1908T, Maharashtra Public Trust Act, and Maharashtra Stamp Act. Therefore, as per section 12AA, since assessee has violated the applicable law, assessee is not eligible for Registration under section 12A of the  Income Tax Act.Further the income from the lease did not come under the object of assessee trust.

It was observed that the On perusal of the Income & Expenditure Account  assessee has not shown any rental income; though assessee has entered into lease agreement in the year 2019. Thus the Objects of the Trust fall in the last limb of the Section 2(15) which is General Public Utility(GPU).

However, it is observed that the assessee has earned income from lease. Since assessee’s objects are General Public Utility, the assessee is barred from doing any business activity. Earning lease is not incidental to the objects of the assessee. Hence, earning lease is a commercial business activity.

After reviewing the facts the ITAT bench of S.S.Godara (Judicial Member) and Dr. Dipak P. Ripote(Accountant Member)  held that the assessee is not eligible for Registration under section 12A of the  Income Tax Act.

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