Tribune Trust Chandigarh vs. Commissioner of Income Tax- Whether the Objective of Trust is Charitable to Qualify for Income Tax Exemption

The date of pronouncement of this case was December 23, 2016 and it was published on December 29, 2016. The high court had to consider whether the Objective of the trust is charitable in nature in spite of the amendment in 2008 and if the reliance placed by the Tribunal on the judgment of Sole Trustee Loka case at all good in law.

Guiding Principle- If the Objective of Trust is Charitable in Nature

In this appeal the revenue has raised a certain valid grounds. On the facts and circumstances of the case in law, the Ld. CIT (A) has erred in allowing appeal of the assessee without appreciating the facts of the case.   On the other hand, in the facts and in the circumstances of the case and, in law the Ld. CIT (A) has erred in reversing the action of the Assessing Officer who relying upon Circular No. 11 of 2008 dated 19.12.2008 and provisions of Section 2(15) treated the assessed as the business entity and thereby assessed the income of the assessee at Rs. 26, 81,557/- against returned loss of Rs. 38, 74, 62,223/-.

Other Facts about Case- Tribune Trust vs CIT

Whether Assesee having Business Income Qualifies for Exemption of Income as Charitable Income

After hearing the appeal of both the parties, it was found that the assessee filed a return declaring loss of Rs 38, 74, 62, 223/- after claiming exemption of the Income Tax Act, 1961 amounting to Rs 1, 97, 95, 36, 211/-. The assessing officer noticed that assessee has been notified by the CBDT as eligible for the exemption concerned. But it was seen that the notification regarding the exemption was not applicable because assessee has business income and the main business of assessee was printing and publication of newspaper.

The Chief Justice’ Verdict- Interpretation of Section 2(15) of Income Tax Act

The Chief Justice said that this is an appeal against the order of the income tax Appellate Tribunal dated 26.11.2014 setting aside the order of the Commissioner of Income Tax and restoring that of the assessing officer. Certain questions arose out of this appeal.

• Whether in fact and circumstances of the case the purpose/objects of the appellant are charitable in nature despite the 2008 Amendment particularly when there is no change in the functions/nature of operation of the Trust?
• Whether the reliance placed by the Ld Tribunal on the judgment in the case of Sole Trustee Loka Shikshana Trust v/s CIT (1975) 101 ITR 234 is good in law?

These questions of law are of considerable importance that could not be ignored in any way. The answer to these questions would have affected the working of trusts in general and the effect, therefore, goes beyond the trusts and the assesses concerned in a given case. This appeal essentially involves the interpretation of the section 2(15) of the Act and in particular, the proviso thereto.

Earning Profit is not Motive

In the High Court, stress was given by the Chief Justice and Addison J. on the fact that the Tribune newspaper charges its readers and advertisers at ordinary commercial rates for the advantages which it affords. As against this, the evidence does not disclose that any profit was made by the newspaper or by the press before 1918. It is at least certain that neither was founded for private profit whether to the testator or to any other person.

Related Read- Can exemption as Charitable Organization be denied just because organization is making Profits?