In I.T.A. No. 363/DEL/2016, Sanatan Dharam Shiksha Sammittee vs Vs. CIT (Exemptions), observed that the society purchased the property out of surplus funds and earned rental income from the shops which have been constructed out of these funds. The CIT(Exemptions) also observed that the society has no investment clause, amendment clause, irrevocability clause, utilization clause, or beneficiary clause in the by-laws of the society. The Tribunal noted that from the perusal of the by-laws of the society, all the clauses are general clauses which do not point out any charitable activity. In fact, from the objectives, the society will purchase and sell the immovable property as per society’s needs.
Based on the findings, the Delhi bench of the Income Tax Appellate Tribunal (ITAT) decided that the rental income received by a Trust from the properties purchased out of the surplus fund is not exempted under the Income Tax Act, 1961.
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