Facts
a)
Assessee-trust,
established for educational purposes, had let out its auditorium to a
management institute on a nominal rent.
b)
Assessing Officer
(AO) found that the first proviso to section 2(15) was attracted in view of the
income earned by the assessee from letting out of the said premises.
Accordingly, exemption under section 11 was denied to assessee.
c)
The Tribunal, after
examining the facts, had come to a conclusion that the main object of the
assessee-trust was to promote educational activities. It was in the course of
this activity that the premise was let out. Hence, proviso to section 2(15) wouldn’t
be attracted in case of assessee.
d)
Aggrieved by the
order of the Tribunal. The revenue filed the instant appeal before the High
Court.
The High Court held in favour of
assessee as under-
1)
The principal
purpose for which premise was let out was for conducting an educational
activity, namely, Management Institution and there was no material to show that
building was used for a purposes other than Management Institution.
2) It is well-settled principle of law that the test to
determine as to what would be a charitable purpose within the meaning of section
2(15), is to ascertain what is the dominant object of the activity; whether it
is to carry out a charitable purpose or to earn profit? If the pre-dominant
object is to carry out a charitable purpose and not to earn profit, the purpose
would not lose its charitable character merely because the some profit arises
from the activity.
3)
Letting out of the
auditorium was not the dominant object of the trust and, admittedly, the
auditorium was incidentally let out to outsiders for educational activities.
Thus, it couldn’t be said that such letting out would fall within the first
proviso to section 2(15)- [2016] 69 taxmann.com 158 (Bombay)
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