|CORAM:||Bhavnesh Saini (JM), T. R. Sood (AM)|
|SECTION(S):||10(23C) (iv), 2(15)|
|CATCH WORDS:||Charitable purpose, not involving the carrying of any activity of profit|
|DATE:||November 26, 2014 (Date of pronouncement)|
|DATE:||November 29, 2014 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 2(15) Proviso/ 10(23C) (iv): Meaning of expression "not involving the carrying of any activity of profit" explained in detail|
(i) The assessee trust is doing only one activity of printing and publishing of newspaper. This activity was held to be of charitable in nature by the Privy Council in the Trustees of The Tribune Press Lahore 7 ITR 415. In this decision it was observed that though the assessee cannot be termed as an educational institute but it was held to be a trust providing service in the nature of general public utility.
(ii) Now the question arises to what an extent this fetter of “not involving the carrying of any activity for profit” would operate. In this regard Ld. Counsel vehemently relied on the decision of Hon’ble Delhi High Court in the case of The Institute of Chartered Accountants of India Vs. The Director General of Income Tax (Exemptions) 347 ITR 99 (Delhi) wherein the new provision to section 2(15) which put a rider on other objects of general public utility have been analyzed and it has been held that unless and until such activity leads to generation of profit, the exemption cannot be denied. The decision in the case of The Institute of Chartered Accountants of India Vs. The Director General of Income Tax (Exemptions) was rendered by Hon’ble Delhi High Court wherein institute was mainly engaged in the regulatory functions of controlling the profession of Chartered Accountants and holding of coaching classes of the students was only an ancillary activity.
(iii) From the above i t becomes absolutely clear that after insertion of expression “not involving the carrying of any activity for profit” the decision of Privy Council in the case of Trustees of The Tribune (supra) cannot be followed.
(iv) The words ‘not involving the carrying of any activity of profit’ were omitted by Finance Act, 1983 from 1.4.1984, this amendment was in fact consequential to the amendment made in section 11 of the Income Tax Act by section 6(b) of Finance Act, which made the profits and gains of business in the case of charitable or religions trust and institution taxable under that section, if they were carrying on any business. A more elaborated proviso has been again added u/s 2(15) which has been extracted above and which makes it clear that if a Trust is engaged in the advancement of any other object of general public utility, it cannot be called for charitable purpose, if it involves carrying on any activity in the nature of trade, commerce or business.
(v) The decision by the Privy Council was rendered in 1939 and lot of water has flown in the Ganges thereafter, may be at that time publication of newspaper could be construed as advancement of general public utility. However, in the present days a great competition is there in media and thousands of newspapers are being published and each one of them is competing with the others to increase circulation. In fact, the main purposes of these newspapers and magazines is to sell advertisements and to earn profits and for that they are subsidizing the cost of newspapers. For example a paper X may be costing after publication at Rs. 10/- but it is sold at Rs. 2/- just to increase the circulation and such subsidized cost is recovered through revenue collected from advertisements which is generally much more than the sale price of the particular daily newspaper or magazine or weekly or monthly magazine. Such newspaper in today’s world had to face further competition from television where again hundreds of news channels have been launched, both this media are facing further competition from the internet and social media. So every organization is trying to sell its media reports by various means adopting various techniques i .e. in case of internet all the search engines including Google or Yahoo and social medial like face book are free of cost and whole of revenue is collected through advertisements.
(vi) In the above background in the case of assessee it was found from the income and expenditure account that assessee has collected only a sum of Rs. 17.49 crores from sale of newspaper and in addition to Rs. 3.07 crores from subscription of such dailies and Rs. 2.39 crores from sale of clippings. Against this revenue of approx 21 cores, the assessee has earned advertisement revenue of Rs. 124.87 crores. This itself shows that assessee is earning profits though figures for original corpus at the time of established of trust are not available before us because it is a very old Trust but as on 31.3.2009, the balance in corpus account is Rs. 120.71 cores and we are very sure that at the time of establishment of trust, the value of corpus must have been only in lakhs of rupees, therefore, it makes it absolutely clear that as observed by the Hon’ble Supreme Court in the case of Sole Trustee, Loka Shikshana Trust Vs CIT (supra) the assessee has definitely earned profits. This fact further get fortified from the fact that assessee has received interest of more than Rs. 11.38 cores on its fixed assets. This fact again shows that assessee is earning profits. One more question arises whether the exemption is to be granted automatically once the assessee trust has been notified by the CBDT for the purpose of section 10(23C) (iv). The answer is that even if the approval has been granted, income can still be assessed if it is found that proviso to first provision of clause 15 of section (2) is applicable.