1. This is an appeal filed by the assessee against an order of the CIT(A) holding that the assessee is not entitled to exemption of income under Sections 11 and 12. of the Income-tax Act, 1961.
2. The assessee is a trust and the deed was drawn up on 20-10-1988.
There are 18 objects enumerated in the trust deed but the main object relevant for our purpose is object No. (iv), which is reproduced below: (iv) Promotion and propagation of ideologies, opinions and ideas for furtherance of national interest and for this publishing of books, annuals, magazines, weeklies, dailies and other periodicals as also establishing and running printing presses for the same.
3. According to the assessee, a daily newspaper "SAAMANA" was brought out for promotion and propagation of ideologies and opinions of national interest, as per a resolution passed on 20-10-1988 at the meeting of the Board of Trustees, an extract from which is reproduced below: RESOLVED that in order to achieve the objects of the Trust, 'Prabodhan Prakashan' which are to promote and propagate ideologies and opinions of national interest, a daily should be started in Mumbai. The name of such daily should be 'SAAMANA. If the name 'Saamana' is not available, the names 'Jay Jaykar' or 'Onkar' should be registered with the Registrar of Newspapers of India. Mr. Subhash Desai is hereby authorised to make all applications, sign documents and do all incidental things in this regard.
4. A further resolution was passed in the meeting held on 20-10-1988 that the activity of publishing of Saamana shall always be carried on 'no profit no loss basis'. The relevant resolution is reproduced below: Resolved that as per Clause 4 of the Trust Deed, the activity of publishing of Dainik Saamana shall be for the purpose of Promotion and Propagation of National Interest and hence, shall always be carried on No Profit No Loss Basis.
5. Thereafter, the Trustees passed another resolution on 31-12-1989 laying down guidelines and principles for day-to-day running of Dainik Saamana as under : Resolved that for day to day running of Dainik Saamana following guidelines and principles shall be followed : 1. The object of the Trust is 'Promotion and Propagation of ideologies of National Interest' and hence every issue shall be published keeping the object in mind.
2. The Daily shall not be allowed to be used for the benefit of any religion or caste.
3. The activity of Daily shall be utilised for the achievement of the other charitable objects of the Trust also.
6. Thereafter, the Executive Trustee, Secretary and Treasurer of the Trust issued an appeal to the public informing them that a charitable trust by the name of "Prabodhan Prakashan" had been established to preserve Indian cultural heritage and ensure its continuity and inculcate strong nationalistic thought. In order to achieve this purpose, the Trust had decided to publish a daily by the name of "Dainik Saamana". Contributions were invited from the public towards the corpus fund of the Trust in the following words (English Translation) : Establishing a firm financial foundation for 'Dainik Saamana' and Prabodhan Prakashan is in your hands. For this strong foundation we are establishing a Corpus Fund.
Offeratory boxes for the Corpus will be placed in today's meeting and meeting to be held in future.
In order to assist our activities which will always have a nationalistic fevour and social relevance, it is our earnest request that you contribute to the 'Corpus Fund' offeratory boxes to the best of your ability.
7. The assessee claimed that the words "donations towards corpus" were written on the offeratory boxes and this claim has not been disputed by the revenue. The boxes were opened in the presence of the Trustees and the reports of the amounts were prepared and credited to the account "Donations towards Corpus".
8. On the above facts, it v as claimed before the Assessing Officer that there was no taxable income at all. The donations were made to the corpus of the Trust and were, therefore, exempt under Section 11(1)(d) of the Income-tax Act, 1961 and the income of the publication "Dainik Saamana" resulted in a loss. The Assessing Officer, however, negatived these claims in the following manner : 9. Regarding the income from Dainik Saamana, it was explained by the assessee that the activity had resulted in substantial excess of expenditure over income to the extent of Rs. 15,82,545 which indicated that it was not a business activity but only an activity which was incidental or subsequent to the achievement of the main object of the Trust. However, the Assessing Officer observed that the profit-making activity was the appointed means of achieving a charitable object of general public utility and, therefore, the profit would be taxable.
Reliance was placed on the decision of the Madras High Court in the case of CIT v. Madras Stock Exchange Ltd. [1976] 105 ITR 546 which had been subsequently approved by the Supreme Court in CIT v. Andhra Chamber of Commerce [1981] 130 ITR 184. The Assessing Officer observed that all the elements of business activity were present and the activity was not of the nature mentioned in Section 11(4A) of the Act.
She, therefore, held that the activity of printing Dainik Saamana was not an activity of general public utility and, therefore, the surplus of income was taxable.
10. Regarding the donations as a result of the appeal mentioned above, the Assessing Officer observed that this amounted to Rs. 13,77,465. The assessee was asked to furnish specific letters from the donors confirming that they had given directions that the donations were to be utilised towards the corpus of the Trust. Such letters could be furnished for donations of Rs. 3,90,277 only but not for the balance amount of Rs. 9,86,188. Regarding the balance amount, it was submitted that nowhere in the Income-tax Act had it been specified that the directions of the donors should be in writing. It was claimed that in view of the appeal issued for donations and the words "donations towards corpus" on the offeratory boxes, it should be held that specific directions were indeed given by the donors. The Assessing Officer did not accept this contention and treated the donations totalling Rs. 9,86,188 as ordinary contributions which were taxable.
11. At the same time, the Assessing Officer did not set off the loss from publication of Dainik Saamana against income from donations stating that the loss would be carried forward for set off in subsequent years. Accordingly, she computed the total income at Rs. 9,86,188 and carried forward business loss of Rs. 15,82,545.
12. It was again submitted before the CIT(A) that the object of the Trust was charitable and Dainik Saamana was being published on "No Profit No Loss Basis". The Trust was registered with the Charity Commissioner and also under Section 12A of the Income-tax Act, 1961.
Publishing of a newspaper was stated to be a charitable activity.
Reliance was also placed on the decision of the Tribunal in the case of Janata Trust v. Fifth TTO [1986] 16 ITD 147 (Bom.) and the judgment of the Allahabad High Court in the case of Pratap Press v. CIT [1961] 41 ITR 577. The CIT(A) first analysed whether the activity of "Dainik Saamana" could be treated as "biisiness" within the meaning of Section 2(13) of the Income-tax Act, 1961, according to which, business includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture. After referring to several case laws, he held that the activity was clearly business as the assessee was carrying on a systematic and organised activity of purchase of paper, printing of newspaper, incurring of various expenses on processing and packing and transportation etc. and also had advertisement income and income from waste paper sales. In fact the advertisement receipts were as much as Rs. 13,92,319.
13. The CIT(A) referred to the Budget Speech of the Hon'ble Finance Minister on 28-2-1983 published in 140 ITR (St.) 33, stating the intention to bring to tax business income of all charitable and religious trusts. He also referred to the Memorandum explaining the provisions of Finance Bill published in 140 ITR 162 where it was proposed that exemption from income-tax would not be available to any religious or charitable trust or institution in respect of profits or gains of business. The CIT(A) justified reference to the speech of the Finance Minister in the light of the decision of the Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597 as well as in CIT v. Birla Education Trust [1985] 153 ITR 579 (Cal.). He relied on the above, for the purpose of interpreting the provisions of Section 11(4A) of the Income-tax Act, 1961.
14. The CIT(A) did not find much weight in the contention of the assessee that publication on no profit no loss basis was an indicator that the objects were charitable. For this, he relied on the decision of the Tribunal in the case of Saurashtra Trust [IT Appeal Nos. 647 to 650 (Bom.) of 1983] for assessment years 1975-76 to 1978-79, wherein it was held that low pricing itself could not be an indicator as to the object and it could be for manifold reasons.
15. The CIT(A) then examined whether publication of Dainik Saamana could be considered for the achievement of the object of promotion and propagation of ideologies of national interests. According to him, the newspaper was like any other newspaper and its contents were not limited to promotion and propagation of ideologies. It contained advertisements also for which charges were received. He, therefore, held that the newspaper was not published for the abovementioned purpose. He also held that publishing a newspaper and its circulation by way of sale could not be regarded as charitable activity. In this regard, according to him, the facts were distinguishable from the facts in the case of Pratap Press [supra]. Further, the ratio in the case of Janata Trust [supra] was held to be not applicable since in that case, the Tribunal was concerned with assessment year 1980-81 whereas the law had been changed with effect from 1-4-1984 by insertion of Section 11(4A) of the Act. In view of the above, he came to the conclusion that the publication of newspaper was a non-charitable activity and was not for the purpose of propagation and promotion of ideologies.
16. Regarding the question of donations as a result of the appeal described above, the CIT(A) referred to the provisions of Section 11(1)(d) of the Income-tax Act according to which, income in the form of voluntary contributions made with the specific direction that they shall form part of the corpus of the Trust would not be included in the total income of the person in receipt of the income. According to him, a specific direction of the donor was necessary and the circumstances relevant included the identity of the donor, which was not established in the present case. Merely writing "donations towards the corpus" on the offeratory boxes was not considered sufficient since many of the donors may not even be knowing as to what is the corpus of the Trust.
According to the CIT (A), the burden lay on the assessee to prove that the donations were received towards the corpus of the Trust and this burden had not been discharged. He, therefore, held that the donations of Rs. 9,86,188 had been rightly treated as voluntary contributions by the Assessing Officer.
17. The CIT(A) next considered the question of setting off the loss on the activity of Dainik Saamana of Rs. 15,82,545 against the corpus donations of Rs. 9,86,188. According to him, the voluntary contributions were income derived from property held under trust and the activities of Dainik Saamana were in the nature of business activities and, therefore, the voluntary contributions could not be adjusted against the loss.
18. The assessee is aggrieved by the above findings and is now in appeal before us.
19. The learned Counsel for the assessee referred to the grounds of appeal before the Tribunal running into almost four pages and submitted before us that he would condense the grounds as below and press only these grounds : (i) The Trust did not have any taxable income at all. The donations were made with the specific directions for the corpus of the trust and were, therefore, exempt under Section 11(1)(d) of the Income-tax Act, 1961. The activity of publication of Dainik Saamana had resulted into a loss. Thus, it was claimed that there was no taxable income; (ii) Alternatively and without prejudice, if the donations were held to be not to the corpus of the Trust and, therefore, not exempt, then the income from donations was applied fully to the objects of the Trust, i.e., the running of Dainik Saamana and after this, there was only a loss; (iii) Alternatively and without prejudice, if the donations were not to the corpus of the Trust, and running of Dainik Saamana was not an application of income, then the loss in running Dainik Saamana should be set off against the income from donations.
20. Regarding the first proposition, the learned Counsel for the assessee took us through the paper book and invited our attention to the appeal issued for donations to the corpus and stated that the offeratory boxes had an inscription that the donations were towards the corpus. The record of collection by the Trust showed be that the donations were credited to the corpus account only. He submitted that it was not provided in the Act that specific directions from the donor should be in writing and that the directions are to be inferred from the facts and circumstances. Reliance was placed on the following decisions for the submission that in the present circumstances such a direction could be presumed : (i) U.U. Charitable Trust v. Fifth ITO [IT Appeal No. 1852 (Bom.) of 1983, dated 16-4-1985] for assessment year 1979-80 (copy given); (ii) N.A. Ramachandra Raja Charity Trust v. First ITO [1985] 14 ITD 230 (Mad.); (iii) ITO v. Malirarn Pooranmal Charitable Trust [1981] 12 TTJ 245 (Jp.); and (iv) CIT v. Trustees of Visha Nima Charity Trust [1982] 138 ITR 564 (Bom.).
21. Regarding the second proposition, the learned Counsel for the assessee submitted alternatively that if the donations were not exempt under Section 11(1)(d) of the Income-tax Act, then the provisions of Section 12 of the Act would be applicable. Under this section, voluntary contributions received by a trust created wholly for charitable or religious purposes shall, for the purposes of Section 11, be deemed to be the income derived from property held under trust wholly for charitable or religious purposes and the provisions of that section and Section 13 shall apply accordingly. In this connection, he submitted that the object of the Trust was charitable and so was Clause (iv) of the objects relating to publication of Dainik Saamana and reliance was placed on the following decisions : 22. The learned Counsel further submitted that the decision in the case of Saurashtra Trust v. Seventh ITO [1987] 21 ITD 62 (Bom.), relied upon by the CIT(A), was not really applicable since the decision related to assessment years 1981-82 and 1982-83 whereas the Act had been amended materially with effect from 1-4-1984 by the amendment of Section 2(15) and the introduction of Section 11(4A). Further, taking of advertisements and publication of other news did not detract from the charitable nature of the object, as was held in the above decisions.
23. The learned Counsel for the assessee further submitted that the object was to run the newspaper on no profit no loss basis and it had been held in connection with Sales-tax in 15 STC 644 at 647 that profit motive was relevant to decide whether it was a business.
24. The learned Counsel then submitted that the donations would be exempt under Section 12, r.w. Section 11, if they were applied for charitable purposes and the running of Dainik Saamana amounted to such an application of income.
25. Regarding the third proposition, the learned Counsel for the assessee submitted alternatively and without prejudice that if the donations were not to the corpus of the Trust and if running of Dainik Saamana was not application of income, then under Section 71 of the Income-tax Act, the loss in business in running Dainik Saamana should be set off against income from donations.
26. The learned Departmental Representative, on the other hand, relied on the order of the CIT(A) strongly. He emphasised further that there was no specific directions from the donors to apply the donations towards the corpus and the laymen did not even know the difference between the corpus and other fund. He placed reliance on the decision of the Bombay High Court in the case of R.B. Shreeram Religious & Charitable Trust v. CIT [1.988] 172 ITR 373.
27. The learned Departmental Representative submitted further that the Trust Deed had several objects but the Trust was carrying out only object No. (iv) relating to publication of Dainik Saamana and not carrying out of the other objects would make the income taxable. He further submitted that the newspapers under consideration in the cases of Trustees of the Tribune (supra), Pratap Press (supra) and Janata Trust (supra) were small budget newspapers not having any advertisements and, therefore, there was no commercial activity and they could be treated as charitable but the facts were different in the present case. For these reasons, he submitted that the order of the CIT(A) should be confirmed.
28. We have considered the rival submissions carefully. The first question that arises for consideration is whether the donations received by the Trust can be treated to be exempt under Section 11(1)(d) of the Act, inserted by the Direct Tax Laws (Amendment) Act, 1989, with effect from 1-4-1989. For the purpose of convenience, the relevant section is reproduced below : 11(1) Subject to the provisions of Sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income- (d) income in the form of voluntary contributions made with a specific direction that they shall form part of the corpus of the trust or institution.
29. It is true that there is no stipulation in the above section that the specific directions should be in writing and, therefore, we agree that it should be possible to come to a conclusion from the facts and circumstances of a case whether a specific direction was there or not, even where there were no written directions accompanying the donations.
However, at the same time, it has to be kept in view that the specific direction should be that of the donor and not of the donee. In other words, it will not be sufficient for the donee alone to declare that the voluntary contributions were being allocated to the corpus. There should be evidence to show that the direction carne from the donor. We have gone through the four decisions relied upon by the learned Counsel for the assessee and find that the facts were distinguishable from the facts of the present case. In the case of U.U. Charitable Trust (supra), the facts were that there were confirmatory letters made by the donors subsequently where they had specifically stated that the donations made by them were towards the corpus of the trust, though three of such letters were not placed before the departmental authorities but were produced before the Tribunal. Further, Clause 8 of the Indenture of Waqf entitled the Waqf to receive donations for the corpus only. However, in the present case, the total donations were Rs. 13,77,465 and specific letters from donors were produced in respect of amounts totalling Rs. 3,90,277 and these were treated as exempt by the Assessing Officer. It is only for the balance amount of Rs. 9,86,188 that the dispute has arisen. Further, there is no stipulation in the Trust Deed that the donations will be exclusively for the corpus. Even after the issue of the appeal for donations towards corpus, the Trust was entitled to receive donations otherwise also, according to the Trust Deed.
30. In the case of N.A. Ramachandra Raja Charity Trust (supra), the assessee-trust received donations and on the counter-foils of the receipts the words "towards corpus only" were rubber stamped. At the same time, certificates were produced from the donors corroborating the statements in the receipts. It was in these circumstances that the Tribunal held that it had to be construed that the donations were made with the specific direction that they shall form part of the corpus of the trust. However, we have already seen that in the present case, there was no such corroboration from the donors in respect of the disputed sum. In the case of Maliram Pooranmal Charitable Trust (supra), the donations were not shown as income and they were not carried to the profit and loss account. The partners of a firm which had given the donations had given affidavits that they had not been cross-examined and they remained unrebutted. On the basis of these affidavits, it was held that the donations were made with the specific directions for the corpus. In the present case, there are no affidavits or even letters and as the CIT(A) has pointed out, even their identity is not known. The facts are, therefore, distinguishable.
31. In the case of Trustees of Visha Nima Charity Trust (supra), the relevant assessment year was assessment year 1965-66 and it was held that under the law as it stood at that time contributions made by way of tickets and for advertisements were merely voluntary contributions and were exempt under Section 12(1) of the Act even assuming that the receipts constituted the income of the assessee and not the corpus thereof. Thus, it is not a case where it was held that the donations were to the corpus of the trust and the ratio is not applicable to the issue before us.
32. We have also gone through the decision of the Bombay High Court in the case of R.B. Shreeram Religious & Charitable Trust (supra), relied upon by the learned Departmental Representative and find that the facts are distinguishable there also. The dispute related to assessment year 1966-67 and the question under consideration was whether there was a specific directive for applying the donations to solely charitable or religious purposes in connection with the law as it stood at that time.
It has been observed that it was nobody's case that there was any such specific directive when the donation was made. Thus, there was no such dispute in that case and, therefore, the ratio is not. applicable.
33. Thus, in none of the cases has it been held that there were specific directions from the donors for use as corpus of the Trust only without at least some corroboration or confirmation from the donor, even if obtained subsequently. In our opinion when there is no accompanying letter to that effect with the donation, at least such subsequent confirmation from the donor is a necessity. In the present case, such subsequent confirmation is also absent and all we have is the intention of the donee and their actual carrying out of the intention. In our opinion, this does not fulfill the requirement of Section 11(1)(d) of the Act and, we accordingly, hold that it cannot be said that there was a specific direction from the donor to use the contribution towards the corpus of the Trust in regard to the disputed amount and, therefore, the amount is not exempt under Section 11(1)(d) of the Act.
34. Coming to the second proposition, the first question for consideration is whether the publication of Dainik Saamana can be treated to be a charitable purpose, which has been defined in the Income-tax Act, 1961, as under : 'Charitable purpose' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility.
35. The words "not involving the carrying on of any activity for profit" were omitted by the Finance Act, 1983, with effect from 1-4-1984 and simultaneously Section 11(4A) was introduced, which is reproduced below for the sake of convenience : (4A): Sub-section (1) or Sub-section (2) or Sub-section (3) or Sub-section (3A) shall not apply in relation to any income, being profits and gains of business, unless - (a) the business is carried on by a trust wholly for public religious purposes and the business consists of printing and publication of books or publication of books or is of a kind notified by the Central Government in this behalf in the Official Gazette; or (b) the business is carried on by an institution wholly for charitable purposes and the work in connection with the business is mainly carried on by the beneficiaries of the institution, and separate books of account are maintained by the trust or institution in respect of such business.
36. The phrase "object of general public utility" covered a large field but a constraint had been placed by the 1961 Act that the object should "not involve the carrying on of any activity for profit". Such a constraint was not there in the Indian Income-tax Act, 1922 with the result that several decisions rendered under the 1922 Act ceased to be applicable to the definition under the 1961 Act till 31-3-1984.
However, from 1-4-1984, the definition of "charitable trust" under the 1961 Act became substantially the same as the definition under the 1922 Act and, therefore, the decisions under the 1922 Act would again be applicable. It is important to keep these distinctions in view when applying the case law so that only the relevant case law is considered.
37. Although the definition of the term "charitable purpose" with effect from 1-4-1984 is substantially the same as the definition under the 1922 Act, still there is an important difference in law regarding exemption of income, inasmuch as Section 11(4A) has been introduced with effect from 1-4-1984 by the Finance Act, 1983. Thus, even though the trust continues to be a trust for charitable purpose, its income from profits and gains of business would be denied exemption under Section 11 of the Act, subject to certain exceptions, even though applied or accumulated for application to charitable purposes.
38. In the case of Pratap Press (supra), the aim of the newspaper was to encourage all that would lead to the progress of the nation and political matters were to accord with aims and objects of Indian National Congress. It was held that the object of the trust was that of supplying an organ of educated public opinion which was a charitable object within the meaning of Section 4(3)(0 of the Indian Income-tax Act, 1922, the trust was a charitable trust and the income was exempt under Section 4(3)(0 of the said Act. In coming to the conclusion, the Allahabad High Court applied the decision of the Privy Council in Trustees of the Tribune's case [supra). These decisions support fully the contention of the learned Counsel for the assessee that the object of the Trust in running Dainik Saamana was a charitable purpose within the meaning of Section 2(15) of the Act, as it stood from 1-4-1984.
39. We may mention that for this purpose, it is not necessary to consider the decision of the Tribunal in the case of Janata Trust [supra), as it dealt with assessment year 1980-81 and, therefore, the law under the 1961 Act prior to 1-4-1984. Similarly, the case of Saurashtra Trust (supra), relied upon by the CIT(A), related to assessment years 1981-82 and 1982-83, Le., under the 1961 Act, prior to its amendment on 1-4-1984 and, therefore, the ratio is not applicable to the year before us.
40. For the above reasons, we hold that the object of running Dainik Saamana was a charitable purpose. The department has not brought out any objection to any other objects of the trust, though they have been referred to and, therefore, we hold that the objects of the trust, as a whole, were for charitable purpose within the meaning of Section 2(15) of the Act.
41. We have already held that the donations received by the Trust were not exempt under Section 11(1)(d) of the Act. However, even other voluntary contributions received by a trust created wholly for charitable purposes shall, for the purpose of Section 11, be deemed to be income derived from property held under trust wholly for charitable purposes. This is laid down in Section 12 of the Act. Further, according to Section 11(1)(a) of the Act, income derived from property held under trust wholly for charitable purposes shall not be included in the total income to the extent to which such income is applied to such purposes in India. The learned Counsel for the assessee has sought exemption under Section 11(1)(a) for the contributions on the ground that the contributions have been applied wholly for charitable purposes by utilising them in running Dainik Saamana. Though the argument looks attractive in the first instance, a little reflection shows that running of Dainik Saamana does not amount to application of income at all but amounts to earning of income (which includes loss). Earning of income and application of income are opposites. The expenditure incurred in the course of running of Dainik Saamana is not expenditure incurred out of income earned but, on the other hand, is expenditure for the purpose of earning the receipts and is, therefore, a deduction for the very computation of income. Only that expenditure can be described as application of income which is not deductible for the purpose of computation of income. When this test is applied, the contention of the learned Counsel for the assessee is found unacceptable. We accordingly reject the same.
42. Lastly, the learned Counsel for the assessee has submitted, in the alternative and without prejudice that if voluntary contributions are not treated as made with the specific direction to form part of the corpus and if the running of Dainik Saamana is not an application of income consisting of voluntary contributions, then the loss in Dainik Saamana should be allowed to be set off against income from voluntary contributions under the provisions of Section 71 of the Income-tax Act, 1961. For this purpose, it is necessary to look into the scheme of the Act in Chapter III from Section 10 to Section 13A, consisting of "Incomes which do not form part of total income". We have already noticed that the trust had collected donations totalling Rs. 13,77,465 out of which the Assessing Officer has exempted donations totalling Rs. 3,90,277 which were made with the specific directions that they shall form part of the corpus of the Trust. They are, therefore, exempt under Section 11(1)(d) of the Income-tax Act, 1961. Thereafter, Chapter IV of the Act comprises of Sections 14 to 44D under the heading "Computation of Total Income". Section 14 classifies all income "for the purposes of charge of income-tax and computation of total income" under heads A to F, out of which head D relates to "profits and gains of business or profession" and head F relates to "income from other sources".
Thereafter, Chapter VI of the Act is comprised of Sections 66 to 80, under the head "Aggregation of income and set off or carry forward of loss". Section 71(1) relates to set off of loss from one head against income from another, except for capital gains, and is reproduced for the sake of convenience hereunder: 71(1) Where in respect of any assessment year the net result of the computation under any head of income, other than 'Capital gains', is a loss and the assessee has no income under the head 'Capital gains', he shall, subject to the provisions of this Chapter, be entitled to have the amount of such loss set off against his income, if any, assessable for that assessment year under any other head.
43. It is seen from the above that if there is a loss under one of the heads classified in Section 14 of the Act and there is income under any other head classified in Section 14, then the loss should be set off against the income. The sum of Rs. 3,90,277 is exempt under Section 11(1)(d) of the Act which falls in Chapter III and does not, therefore, fall under any of the heads classified in Section 14 of the Act. There cannot be any set off of loss against voluntary contributions totalling Rs. 3,90,277 and we direct accordingly.
44. However, the remaining voluntary contributions of Rs. 9,86,188 fall to be considered under Sections 12 and 11(1)(a) of the Act. They will be exempt only if they are applied to charitable purposes in India. We have already held that running of Dainik Saamana did not amount to such application of income for charitable purposes. In the circumstances, the voluntary contributions go outside the purview of exemption contained in Sections 12 and 11(1)(a) of the Act, in Chapter III thereof and will have to be considered in Chapter IV, comprising of computation of total income. The voluntary contributions have been brought to tax in the assessment order and though the head is not mentioned therein, it can be classified only as "income from other sources".
45. All that now remains is to examine the nature of income or loss sustained by the publication of Dainik Saamana. The Assessing Officer has treated the same as a business loss and the CIT(A) has also confirmed the finding that it was a business in a reasoned manner. We find ourselves in agreement with him that it was business being a systematic and organised activity of purchase of paper, printing of newspaper, incurring of various expenses on processing, packing and transportation, etc. Further, in this alternate contention, we do not see how the assessee can dispute this finding when it is claimed that a set off should be given under Section 71 of the Act. We hold accordingly that the loss incurred by Dainik Saamana should be classified as "profits and gains of business or profession" under Section 14 of the Act.
46. In the light of the above findings, it follows that the business loss incurred by Dainik Saamana is entitled to be set off against the income taxable under "any other sources" comprised of voluntary contributions. It also follows that the business loss incurred in Dainik Saamana is not entitled to be set off against voluntary contributions exempt under Section 11(1)(d) of the Act. This contention of the assessee is, therefore, allowed in part to the above extent.