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4. Aggrieved by the same, the trust had filed an appeal before the Commissioner of Income-tax (Appeals). The Commissioner of Income-tax (Appeals) found that the objects of the trust were of general public utility and that the institution qualified for exemption under Section 11 of the Act, held that the only property under the trust was initially an amount of Rs. 1,116 which was provided by the Hyderabad Race Club as the corpus of the trust fund and that amount alone could have been exempted. The Commissioner of Income-tax (Appeals) was of the view that the income from conducting races and inter-venue betting as promoted by the Hyderabad Race Club Charitable Trust could not be treated as income from the property. He also held that it cannot be said that the business was carried on in pursuance of the primary objects of the trust and as such the same was hit by Section 13(1)(bb) of the Act and thus confirmed the assessments. The assessee filed further appeal before the Income-tax Appellate Tribunal. The Appellate Tribunal had categorically held that the objects of the trust are clearly charitable in nature. The assessee obtained a licence, on letter from the Hyderabad Race Club to conduct races and inter-venue betting from the Government of Andhra Pradesh. The explanatory note relating to the resolution for creation of the trust as well as the terms of the trust did clearly contemplate the assessee getting such property from the Hyderabad Race Club. The licence obtained by the trust could be treated as property. The Appellate Tribunal further held that even if it is not to be treated as property held under trust, it can be treated as voluntary contribution given by the Hyderabad Race Club to the assessee and such voluntary contribution cannot have the character of an income and it could only be a capital receipt in the assessee's hands. It is not possible to hold that there has been business in the normal course. Even if it were to be a business, in the facts and circumstances of the case, it is not such a business as to be hit by Section 13(1)(bb) of the Act, since the assessee satisfies the conditions of Section 2(15), read with Section 11 of the Act and as such allowed the appeal in toto.

6. The main objects of the trust relate to the relief of poor, education and medical relief. The exemption under Section 11 of the Act would be available only to a trust, which is carrying on any business in the course of the actual carrying out of the primary objects of the trust and not otherwise. In the instant case, the business conducted by the trust cannot be said to be in the course of the actual carrying out of the primary purpose of the trust. The objects mentioned in the trust deed are not all charitable in nature. The objects are distributive in nature and some of them being charitable and the remaining being non-charitable in nature, the trustees had absolute discretion to select the objects for which the trust income could be utilised.

15. Sri C. Kodandaram, learned counsel for the respondent-assessee, submits that the income earned by the trust is not income from the business of the race club. The races and the inter-venue betting were conducted by the assessee-trust for the objects sought to be achieved by the trust under a licence granted by the competent authority and as such it must be deemed that it is also not income from the business of the trust. But it is an income from property held under trust. He also argued that it is not a business of regular nature conducted by the assessee-trust. Every year two or three days are devoted for this purpose and the income derived from this solitary transaction is being spent for the charitable purposes for which the trust has been established. The objects of the trust and the legality of the trust and the grant of licence by the Government are not in dispute. According to him, Section 13 takes away the benefit given under Section 11. But, in fact this is a case which falls under Section 2(15), read with Section 11 of the Act. He further stated that the activity undertaken by the trust for the benefit of the trust to carry on the objects of the trust smoothly, cannot be called a business systematically organised and any income derived from such transaction cannot be called to be an income from the business and taxable under the Act. He had drawn our attention to the resolution of the club and the relevant clause of the trust deed, which read as under :

21. None of the objects of the trust can be said to be non-charitable in nature. Rather the objects of the trust are purely of a charitable in nature. The main objects of the trust are advancement and propagation of education, medical aid and relief to the poor. In fact, promotion of sports and games is also one of the charitable objects. Merely because a discretion is vested in the trustees to utilise the income to any one or more of the objects will not make any difference. The contention of the Revenue that conducting of sports and games cannot be treated as primary object of the trust is without any substance in view of the decision rendered by the Bombay High Court in C1T v. Trustees of Visha Nima Charity Trust . Since there is no payment of club's funds to the trust, there is no scope for retrieval of the funds of the race club from the assessee-trust. Thus, it satisfies the test that the objects of the trust are not only charitable in nature, but also of general public utility and as such, attracts the provisions of Section 11 of the Act and, therefore, the income derived by the trust is exempted under Section 11 of the Act.