Madras High Court
Commissioner Of Income-Tax vs Nahata Charitable Trust on 27 July, 1998
Equivalent citations: [2000]246ITR450(MAD)
Author: R.Jayasimha Babu
Bench: R. Jayasimha Babu
JUDGMENT R.Jayasimha Babu, J.
1. The questions referred to us at the instance of the Revenue are :
"(1) Whether, on the facts and in the circumstances of the case and having regard to the provisions of Section 2(15) of the Act, the Appellate Tribunal was right in holding that the assessee is a charitable institution and that its income is exempt under Section 11 of the Act ?
(2) Whether, on the facts and in the circumstances of the case and having regard to the trust deed dated September 19, 1969, and the agreement dated July 1, 1970, with Vijayalakshmi Pictures, the Appellate Tribunal's view that the objects of the assessee-trust are charitable within the meaning of Section 2(15) of the Act, is sustainable in law ?
(3) Whether the Appellate Tribunal's view that the predominant object of the assessee-trust was to promote relief of the poor, advancement of education and medical relief, is based on correct appreciation of the trust deed dated September 19, 1969, and a reasonable one to take, on the facts of the case ?"
2. The correctness of the order of the Tribunal holding that the assessee-trust is entitled to exemption as a charitable institution notwithstanding the fact that it had carried on business for profit, namely, exhibition of pictures, has been called into question by the Revenue in this reference, relating to the assessment years 1974-75 to 1976-77.
3. The trust known as Nahata Charitable Trust was created under the deed dated September 19, 1969. A perusal of the object clause shows that the objects of the trust are to promote the relief of the poor, advancement of education, medical relief, spiritual and cultural advancement and other objects of general public utility. The provisions of the trust include a provision conferring powers on trustees to carry on business.
4. A charitable trust is not to be denied exemption under Section 11 of the Income-tax Act, 1961, solely on the ground that it carries on business. The Tribunal has rightly followed the decision of the Constitution Bench of the apex court in the case of Addl CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1. That decision of the Constitution Bench has been reiterated by the later decision by the apex court, recently, in the case of Thiagarajar Charities v. Addl CIT [1997] 225 ITR 1010. It is not the case of the Revenue that the objects of the trust are not charitable. The only ground on which the exemption was denied by the Assessing Officer was that the trust had entered into an agreement with one Vijayalakshmi Pictures and that agreement resulted in the trust undertaking a business activity. As held by the apex court in the case of Addl CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 and in the case of Thia-garajar Chanties v. Addl. CIT , carrying on business by a trust alone, would not render the trust ineligible for exemption under Section 11 of the Act.
5. The questions referred to us, at the instance of the Revenue, are, therefore, answered in favour of the assessee and against the Revenue. The assessee shall be entitled to cost in the sum of Rs. 1,000.