IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED:19/07/2004
CORAM
THE HONOURABLE Mr. JUSTICE P.D.DINAKARAN
AND
THE HONOURABLE Mr. JUSTICE N.KANNADASAN
T.C.(A).No.442 of 2004
Director of Income Tax (Exemptions)
Chennai .... Appellant
-VS-
Agri-Horticultural Society
Chennai - 600 086. .... Respondent
Appeal under Section 260 A of the Income Tax Act, 1961 against the
order of the Income Tax Appellate Tribunal Chennai Bench "D" dated 26.06.2003
in I.T.A.1831 (Mds)/2002.
!For Appellant : Mr.K.Subramaniam
^For Respondent : --
* * * * *
:ORDER
(Order of the Court was made by P.D.DINAKARAN, J,.)
Heard. The appeal is directed against the order of the Income Tax
Appellate Tribunal, Chennai Bench “D” dated 26.06.2003 holding that the
respondent/assessee is a charitable institution within the meaning of 2(15) of
the Income Tax Act 1961, as they are engaged in commercial activity by growing
plants, selling seeds and getting corpus donation by using the premises for
shooting movie, TV serials etc. and therefore was not entitled for the
exemption under Sections 11 to 13 of the Income Tax Act.
2. The issue is relating to the assessment year 2000-2001. The
assessee is a society claiming the status as association of persons, who are
engaged in the business of purchase and sale of AgriHorticulture products like
manure, seeds, garden implements, flower pots, etc. having engaged more than
259 members and 54 employees. The respondent/society was established,
registered and functioning for the charitable purpose within the meaning of
Section 2(15) of the Income Tax Act. However, on the ground that they have
not conducted a flower show for the last 10 years and they are using the
premises for shooting of films and TV serials, the assessing authority
disputed the status of the respondent/society as a charitable nature and
rejected the exemption claimed by the respondent/assessee, a benefit of
exemption applicable under Sections 11 to 13 of the Income Tax Act, by an
order dated 27.03.2002.
3. The appeal preferred by the respondent/assessee before the
Commissioner of Income Tax (Appeals) in I.T.A.No.16/2002-03 also failed and
the order of the assessing authority was confirmed by the Commissioner of
Income Tax (Appeals), Chennai on 23.10.2002. However, the further appeal by
the respondent/assessee before the Tribunal was allowed in favour of the
assessee by an order dated 26.06.2003. Hence, the revenue has filed the above
appeal on the following substantial question of law:
“Whether on the facts and in the circumstances of the case the Income
Tax Appellate Tribunal was right in holding that the assessee was entitled to
exemption as a charitable institution under Section 11 to 13 of the Income Tax
Act?”
4. The fact that the assessee develops various kinds of plants that
restores environmental balance and also helps in the conservation of various
plants in the State of Tamilnadu is not in dispute. Similarly, the fact that
the respondent/assessee-society are growing plants, which are sold in pots and
also develops seeds, garden implements, manure etc. by engaging 54 employees
is also not disputed. If that be so, the respondent has to receive a minimum
sale consideration for giving payment to the employees and such act of the
respondent/ assessee-society by itself, in our considered opinion, cannot be
construed as commercial in nature. Similarly the reason that they have not
conducted flower show for the past 10 years has not changed the character of
the charitable object of the society as defined under Section 2(15) of the
Income Tax Act , which reads as follows:
Section 2(15):
“Charitable purpose” includes relief of the poor,education, medical
relief, and the advancement of any other object of general public uitlity.”
(emphasis supplied)
5. It is a trite law that inclusive definition widens the
etymological meaning of the expression or term including therein that which
would ordinarily not be comprehended therein. The words used in an inclusive
definition denote extension and cannot be treated as restricted in any sense.
While dealing with an inclusive definition it would be inappropriate to put a
restriction interpretation upon terms of wider denotation. Therefore, even
assuming that they have charged for shooting the movies, T.V. Serials etc.,
in our considered opinion, it only amounts to corpus donation, but will not
change the charitable object and purpose of the respondent/assessee-society as
commercial.
We are, therefore, of the considered opinion that the respondents are
entitled for exemption under Section 11 4 (A) of the Income Tax Act as held by
the Tribunal and answering the substantial question of law in favour of the
assessee, the appeal stands dismissed.
Index :Yes
Internet:Yes
sl
To
1. The Assistant Registrar,Income Tax Appellate Tribunal
Madras Bench “D”, Rajaji Bhavan III Floor, Besant Nagar,
Chennai-92.
2. The Secretary, Central Board of Direct Taxes, New Delhi.
3. The Commissioner of Income Tax (Appeals), Chennai.
4. The Assistant Director of Income Tax, (Exemptions) I Ward
ADIT (E)-I, Chennai.
?IN THE HI