Director of Income Tax (Exemptions) vs Agri-Horticultural Society

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.

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 Agri-Horticulture 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.

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 u/s 11 to 13 of the Income Tax Act?

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 u/s 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 utility.

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 u/s 114(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.