Summary
The Servants of the People Society, founded by Lala Lajpat Rai, runs schools and a medical centre and publishes the Oriya newspaper 'Samaj'. It was denied exemption for assessment years 2010-11 and 2011-12 under the proviso to Section 2(15) because its newspaper earned large sale and advertisement revenue. The appellate authorities and the Delhi High Court allowed the exemption, following India Trade Promotion Organisation. The Supreme Court held that this approach no longer holds after Ahmedabad Urban Development Authority. Advertisement publishing by a newspaper trust is business, and it is permissible only within the quantitative limit in the proviso. The matter was remitted to the Assessing Officer for fresh findings.
Issues
- Whether a society advancing objects of general public utility which publishes a newspaper and earns advertisement revenue is entitled to exemption, having regard to the proviso to Section 2(15) of the Income Tax Act, 1961 as interpreted in CIT v. Ahmedabad Urban Development Authority.
Provisions considered
- Sections 2(15) and proviso, 11 and 11(4A), Income Tax Act, 1961A general public utility charity may carry on trade or business only if it is connected with the actual carrying out of its objects and the receipts do not exceed the quantified limit in the proviso; publication of advertisements for consideration by a newspaper is business, and though intrinsically linked with the newspaper activity, the quantitative condition must also be met. (¶¶ 3, 8, 9, 10)
Held
- The Commissioner (Appeals), the ITAT and the High Court merely followed India Trade Promotion Organisation, but the interpretation of Section 2(15) changed with Ahmedabad Urban Development Authority, which held in the Tribune Trust's case that advertisement receipts of a newspaper are business receipts that must fall within the limit in sub-clause (ii) of the proviso; the nature of the assessee's receipts, including about Rs. 9.52 crore from newspapers, must therefore be examined afresh. (¶¶ 8, 9, 10, 11)
Result
Civil Appeal No. 614 of 2023 partly allowed; the Delhi High Court judgment dated 16.11.2021 set aside and the matter remitted to the Assessing Officer to examine the records and render fresh findings on whether the assessee is a charitable trust entitled to exemption under Section 2(15) or Section 11, within four months.