Case Note & Summary
The case involves an appeal by the revenue under Section 260A of the Income Tax Act, 1961 against an order of the Income Tax Appellate Tribunal (ITAT) dated 25th May 2013. The respondent-assessee, M/s Lala Lajpatrai Memorial Trust, is a charitable trust established on 10th April 1959 with the object of advancement of education. The trust was granted registration under Section 12A(a) of the Act on 29th June 1973. The trust owns a plot of land at Haji Ali, Mumbai, with a building comprising an auditorium and classrooms. The building was let out to Lala Lajpatrai Institute, which conducts junior college, senior college, law college, and a management institute. The Director of Income Tax (Exemptions) [DIT(E)] withdrew the registration under Section 12A, alleging that the trust was carrying on business and not applying its income for charitable purposes, thereby attracting Section 11(4A) of the Act. The assessee appealed to the ITAT, which allowed the appeal and restored the registration. The revenue then appealed to the High Court. The High Court framed the question of law: whether the ITAT was justified in allowing the appeal brushing aside Section 11(4A). The court held that the trust was not carrying on any business; it merely let out its property to educational institutions in furtherance of its charitable objects. The rental income was applied for charitable purposes. Section 11(4A) applies only when a trust carries on a business, which was not the case here. The court dismissed the revenue's appeal, upholding the ITAT order.
Headnote
A) Income Tax - Charitable Trust - Registration under Section 12A - Withdrawal - The assessee trust, established for advancement of education, let out its building to educational institutions. The DIT(E) withdrew registration under Section 12A on the ground that the trust was carrying on business and not applying income for charitable purposes. The Tribunal allowed the assessee's appeal. On appeal by revenue, the High Court held that letting out property for educational purposes is not a business activity and the trust's income was applied for charitable objects. The provisions of Section 11(4A) were not attracted. (Paras 1-6) B) Income Tax - Section 11(4A) - Business Income - Applicability - Section 11(4A) applies only when a trust carries on a business and claims exemption under Section 11. In the present case, the trust was not carrying on any business; it merely let out its property to educational institutions. Hence, Section 11(4A) had no application. (Paras 3-6)
Issue of Consideration
Whether the Income Tax Appellate Tribunal was justified in allowing the appeal of the assessee brushing aside the provisions of Section 11(4A) of the Income Tax Act, 1961?
Final Decision
Appeal dismissed. ITAT order dated 25th May 2013 allowing assessee's appeal is upheld. No substantial question of law arises.
Law Points
- Section 11(4A) of Income Tax Act
- 1961 applies only when business is carried on by trust
- letting out property for educational purposes does not constitute business
- registration under Section 12A cannot be withdrawn if trust continues to apply income for charitable purposes.
