In the absence of anything on record to suggest that any part of the income offered under the head House property being derived from letting out of kalyana mandapam, gnanavapi and community hall are not used for the objects of the trust the High Court in  17 ITR-OL 231 (Mad) issued following demand :
“23. It is to be noted herein that both the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal have not discussed about the facts in respect of the surplus income having been utilized for the objects of the trust, viz., running educational institution, providing medical relief to the poor, etc. Absolutely there is no discussion of the facts relating to the utilization of earned income from letting out of kalyana mandapam and gnanavapi towards charitable objects such as education and medical relief to the poor as given in the objects of the trust. Further, the Assessing Officer has not looked into the fact as to whether the entire income from community hall, kalyana mandapam and gnanavapi are utilised for fulfill- ing the objects of the trust that is being education, medical relief and relief to the poor. In such circumstances, the order dated April 6, 2016 passed by the Income-tax Appellate Tribunal, Chennai “D” Bench in Sri Ram Samaj (supra) is set aside. The matter is remitted back to the Assessing Officer for de novo consideration as to whether the entire revenue derived from let- ting out of kalyana mandapam, gnanavapi and community hall are utilized for charitable objects of the trust and also to consider as to whether the income received from the properties of the trust, namely, community hall, kalyana mandapam and gnanavapi to be classified as “income from house property” or “business income” since the income therefrom is utilized for charitable purpose of the trust. The Assessing Officer shall consider the above said questions and decide the matter on merits.”
The case of the assessee was that that the surplus income from community hall, kalyana mandapam and gnanavapi was utilized only to meet the shortfall in the income of the educational institution run by the trust.
The AO rejected the claim of deduction under section 24(a) of the Act at 30 per cent and further declined exemption u/s 11/12alleging such incomes as from business and that the amendment to section 2(15) of the Act with effect from April 1, 2009 makes business income taxable even if it is incidental to the objects as long as such objects are of general public utility.