IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 29.1.2007 CORAM THE HON'BLE MR.JUSTICE P.D.DINAKARAN AND THE HON'BLE MRS.JUSTICE CHITRA VENKATARAMAN T.C.(A) No.119 of 2003 Commissioner of Income Tax Virudhunagar .. Appellant Vs. Sri Rao Baghadur APD. Dharmaraja Educational Charity Trust, Rajapalayam. .. Respondent Appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras 'C' Bench dated 16.4.2003 in ITA No.769(Mds)/2000 for the assessment years 1995-96. against the order of the Commissioner of Income Tax (Appeals) IX, Chennai 600 034 dated 27.1.2000 and made in Appeal No.148/98-99. against the order of the Income Tax Officer Ward 1(2) Virudunagar, Dated 30.3.98 and made in PAN/GIR.No.AX-0517 for the Assessment year 1995-96. For Appellant : Mr.J.Nareshkumar, For Respondent : Mr.P.J.Rishikesh ----- J U D G M E N T (Delivered by P.D.DINAKARAN, J.) The Revenue has preferred the above tax case appeal against the order of the Income-tax Appellate Tribunal dated 16.4.2003 in ITA No.769/Mds/2000 for the assessment year 1995-96 raising the following substantial question of law for consideration: https://hcservices.ecourts.gov.in/hcservices/ "Whether in the facts and circumstances of the case, the Tribunal was right in holding that the activity of letting out of property is not a business activity, and that the exemption under section 11 should not be denied to the assessee? 2. The brief facts, necessary for the disposal of the appeal are, the assessee, a trust, claimed exemption of income from properties and lease rentals under sections 10(22) and 11 of the Income-tax Act, 1961 which was disallowed by the Assessing Officer. On appeal, the Commissioner of Income-tax (Appeals) held that the income from properties let out is not a business income, and allowed the exemption. The Appellate Tribunal, on appeal, held that the activities of the assessee cannot be treated as its business activities and confirmed the order of the Commissioner of Income-tax (Appeals). Hence, the appeal by the Revenue, raising the substantial question of law referred to above. 3. Before considering the question of exemption of income of the educational trust, the points to be decided are, (i) what is the object of the assessee trust; and (ii) whether the activity of the assessee in letting out its properties is a business activity or not. 4. It is well settled that if a trust exists solely for educational purposes and it runs an educational institution, its income will be the income of the educational institution and therefore, exempted under section 10(22), which says that any income of a university or other educational institution, existing solely for educational purposes and not for purposes of profit is not includible in the computation of income. 5. This Court in C.I.T. v. K.Girls Schools Managing Board (245 ITR 170) held that the question of eligibility to exemption under section 10(22) of the Act has to be decided with reference to the objects of the society and if the trust, in order to attain its main objects, conducts some business for raising the funds, the claim for exemption under section 10(22) of the Act would still be available to the trust. 6. Reiterating the above view, this Court in C.I.T v. Samyuktha Gowda Saraswatha Sabha (245 ITR 242) held that as the objects of the assessee were education and other objects of general utility, the letting out of the Kalyana Mandapam was not one of the objects of the assessee, but an activity carried on to fulfil the objects of the trust, and hence, the income derived from the Sabha was not its business income, but its property income and the assessee was entitled to exemption under section 11 of the Act. https://hcservices.ecourts.gov.in/hcservices/ 7. It is not in dispute that the main object of the assessee trust is education. On the facts of the case, the Appellate Tribunal found that the assessee trust is running various educational institutions and it is solely existing for educational purposes within the meaning of section 10(22) of the Act. The Appellate Tribunal also found that the assessee trust has let out properties and received lease rentals and hence, such activities cannot be treated as business activities since the assessee is solely existing for educational purpose. 8. We hold that the object of the assessee trust is education and the activities of the assessee in letting out properties and receiving lease rentals is an activity carried on only to fulfil the object of the trust. Hence, the income derived by letting out the properties cannot be treated as business income of the assessee. We are therefore of the view that the Appellate Tribunal was right in holding that exemption under section 11 of the Act should not be denied to the assessee. 9. Accordingly, answering the question of law referred in the affirmative and against the Revenue, we dismiss the appeal. No costs. sra/na Sd/ Asst.Registrar /true copy/ Sub Asst.Registrar To 1.The Assistant Registrar, Income Tax Appellate Tribunal, IIInd Floor Rajaji Bhavan, Besant Nagar Madras. 2.The Commissioner of Income- Tax (Appeals-IX), Madras. 3.The Income-tax Officer, Ward-I(2), Virudhunagar. 4.The Commissioner of Income Tax, Virudhungar, https://hcservices.ecourts.gov.in/hcservices/ 5. The Income Tax Appellant Tribunal, Madras "C" Bench, Madras. + 1 cc to Mr. P. J. Rishikesh, Advocate, SR No.5139 + 1 cc to Pushya Sitaraman Senior Standing Concel for Income Tax, SR No.5618 T.C.(A) No.119 of 2003 PV(CO) SR/12.3.2007 https://hcservices.ecourts.gov.in/hcservices/