Earning of profit from an incidental activity does not affect charitable status

Newly inserted proviso to section 2 (15) will not apply to first three limbs of section 2(15) i.e. relief of the poor, education or medical relief

Brief:

Even after amendment of the Trust Deed the main object of the trust was to promote education. Letting out was incidental and not the principle activity of the assessee trust.Thus carrying out such incidental activity and the income derived from it is used for the educational institute and not for any particular person & thus newly inserted proviso to section 2 (15) is not attracted in the assessee’s case.

Fact of the case:

The facts lie in a narrow compass. The assessee is a trust founded under a Trust Deed dated 10th April, 1959. The assessee claimed that the object for the establishment of the assessee trust was “advancement of education” which fell within charitable purpose as defined under section 2 (15) of the Act. On 29th June 1973, the assessee had made an application seeking registration under section 12A of the Act. The Commissioner of Income Tax, Mumbai City IV approved the assessee trust as a charitable trust and granted registration under section 12A (a) of the Act. Thereafter, the trust deed was amended, however the main object of the trust deed did not change. The objects were to promote, support, establish and conduct college or colleges, schools, institutions etc for advancement of education and give scholarship or other assistance to students prosecuting studies. One of the objects was also to pay some part of income to any of the institutions which are carrying out the said objects. Thus, it was submitted that the main object of the trust was always promotion of education. 4. The assessee owns a plot of land at Haji Ali, Mumbai with an approximate area of 1,00,000 sq.ft, having a building consisting of an auditorium on the ground floor and class rooms from 2nd to 7th floors. This building was let out to one Lala Lajpatrai Institute which conducts Junior College, Senior college, Law College etc and the 6th and 7th floors are let out to run a Management Institute. The letting out was in consonance with the objects of the trust which intended to promote and/or establish colleges and schools. The income which was received by the assessee from letting out the premises to Lala Lajpatrai Institute was claimed as exempted from taxation.

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