Excess of income over exp. can’t be a reason to hold that trust isn’t engaged in charitable activities: HC

Case details: CIT v. Angels Educational Trust - [2021] 129 taxmann.com 305 (Madras)

Judiciary and Counsel Details

• • T.S. Sivagnanam and Sathi Kumar Sukumara Kurup, JJ.  
  • J. Narayanaswamy, Sr. Standing Counsel for the Appellant.
  • R. Sivaraman for the Respondent.

Facts of the Case

The principal object of the assessee-Trust was established and administering Matriculation School offering education both in Tamil and English medium. It has also established a Teachers Training College. It applied for registration under section 12AA. However, the Commission of Income-tax (CIT) rejected the application.

It was stated in the order that the income for four financial years was taken into consideration and noting the figures, it was found that the income of the trust was in excess of expenditure for both the educational institutions. Thus, it can be concluded that the trust was established with a clear motive of earning profits.

Trust preferred an appeal before the Tribunal and tribunal ruled in favour of assessee. Aggrieved-CIT filed the instant appeal before the Madras High Court.

High Court held

The Madras High Court held that the CIT had not brought down any material on record to show that assessee-trust was motivated by earning profit. The Tribunal was right in its observation that excess of income over expenditure by itself is not a reason to hold that the assessee-Trust is not engaged in charitable activities.

Furthermore, there was no finding that the Trustees had applied the monies of the Trust for their personal benefit or any other purpose other than education. The infrastructure facilities, which were provided by the assessee-Trust were also rightly taken note of by the Tribunal.