Income From Sale & Subscription Of Journals Is No Basis To Deny Exemption U/s 11 If Such Activities Are Not Main Objects Of Trust: Mumbai ITAT

The Bench of the ITAT comprising of Kavitha Rajagopal (Judicial Member) and B R Baskaran (Accountant Member) observed while relying on the decision of Supreme Court in the case of CIT vs. Sai Publication Fund [2002] 122 Taxman 437 (SC) that, “As per the proposition laid down by the Apex Court in the above said decision, the onus of proof lies on the Revenue to prove that the assessee was “carrying on business” in respect of the impugned receipt. Even in the case of the present assessee, the dominant purpose was to spread the message based on preaching's which the above decision has held to be not a business activity. It is also observed that in the said decision the term “business” and “carrying on business” has been widely interpreted. To hold the incidental or ancillary activity to be business, the Revenue is put to strict proof.” (Para 13)

As per the brief facts of the case, the assessee trust is engaged in the activity of imparting education by means of printing of books and publication related to swadhyayees of discourses on Gita, Vedas and Upanishads and also printing of books and magazines based on Dadaji's Pravachans which the AO claims to be in the nature of trade, commerce or business and the assessee claims it to be part of the charitable activity carried out by the assessee trust. The AO has rejected the assessee's contention on the ground that the assessee's entire revenue is out of the sales and subscription which are not relatable to the charitable activities as claimed for by the assessee. Hence, the AO held that the assessee Trust is not eligible for exemption u/s. 11 and the assessee's activities are not charitable in nature as per section 2(15) and proviso to section 13(8). The AO added the entire income of the assessee as taxable income in the hands of the assessee.

The CIT(A) allowed the appeal filed by the assessee by relying on the decision of the Supreme Court in the case of CIT vs. Sai Publication Fund [2002] 122 Taxman 437 (SC) where on identical facts the Apex Court has deleted the impugned addition.

The Bench noted that the moot question here is whether the income generated out of the sale and subscription of journals, magazines would be in the nature of business activity mentioned in the proviso to section 2(15).

The Bench observed that the assessee Trust was established on the object of educating to the followers of Rev. Pandurang Shastri Athavle (Popularly known as Rev Dada) where he conducted discourses containing his teachings on Bhagwad Gita, Upanishads, etc. in various parts of India and outside the country.

The Bench further observed while relying on the case of CIT vs. Sai Publication Fund [2002] 122 Taxman 437 (SC) that the publication and distribution of books which contained the preaching's of Shirdi Sai Baba was held to be incidental or ancillary to the main object of the Trust without any profit motive and the same would not be termed as 'business' where the assessee trust does not fall within the meaning of 'dealer' u/s. 2(11).

The Bench reiterated while referring the decision of Apex Court in the case of CIT vs. Sai Publication Fund [2002] 122 Taxman 437 (SC) that, “the main and dominant activity of the Trust in furtherance of its object is to spread message. Hence, such activity does not amount to "business". Publication for the purpose of spreading message is incidental to the main activity which the Trust does not carry as business. In this view, the activity of the Trust in bringing out publications and selling them at cost price to spread message of Saibaba does not make it a dealer under Section 2(11) of the Act.”

Therefore, on finding that the main object of the assessee's trust is not the business of publishing, printing and subscription of the books, ITAT dismissed the revenue's appeal.

Counsel for Appellant/Department: Rajesh P. Shah

Counsel for Respondent/Taxpayer: Sujatha P Iyangar

Case Title: Income-tax Officer verses Satvichar Darshan

Case Number: ITA No.2441/Mum/2023

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