Document Fragment View

Matching Fragments

37. It is in view of the above considerations, it was suggested by me that this Bench has no jurisdiction to go against the finding of the larger Bench and consequently, it was further suggested that matter be referred to the Honble President for considering the issue by the Special Bench. Since this suggestion was not accepted, this dissenting view is being expressed by me.

38. Section 11 of the Income Tax Act, 1961, clearly provides that exemption is available only if the trust is wholly charitable or religious. Honble Supreme Court had to consider the scope of section 11 in the case of Yogiraj Charity Trust v. CIT ss(1976) 103 ITR 77 (SC). In that case a clear distinction was made between the primary and dominant object and the objects which are ancillary to the main object. The primary or dominant object must be wholly charitable. It is only the ancillary object which may be itself be not charitable and such ancillary object would not render the trust non-charitable if such ancillary object are for the advancing of primary or dominant object. However, if the main object is not wholly charitable, then the trust would not be entitled to exemption. The relevant observations of their Lordships at p 781 of 103 ITR may be usefully quoted as under :

"The question is whether exemption can be granted where some objects are charitable and some non-charitable. Where there are several objects of a trust, some of which are charitable and some non-charitable, and the trustees in their discretion are to apply the income to any of the objects, the whole trust fails and no part of the income is exempt from tax. Where the objects are distributive, each and every one of the objects must be charitable in order that the trust might be upheld as a valid charity. If no definite part of the property or its income is allocated to charitable purposes and it would be open to the trustees to apply the whole income to any of the non-charitable objects, no exemption can be claimed. (See East India Industries (Madras) (P) Ltd. v. CIT and Mohammed Ibrahim Raza Malak v. CIT).
If the primary or dominant purpose of a trust is charitable, another object which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent the trust from being a valid charity. "

Again, the Supreme Court, in case of Addl. CIT v. Surat Art & Silk Cloth Manufacturers Association (1980) 121 ITR 1 (SC) held as under :

"(ii) Where the main or primary objects are distributive, each and every one of the objects must be charitable in order that the trust or institution may be upheld as a valid charity. But if the primary or dominant purpose of a trust or institution is charitable, another object which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would be prevent the trust or institution from being a valid charity."

19. Turning to the decision of the learned AM that after the amendment of the trust deed and in view of the changed circumstances, the objects of the trust have become charitable in nature, the learned JM proceeded to record his view. According to him, clause 5(a) of the trust deed, when compared to the original deed, shows that there was no fundamental change in the object. The change, according to him, was only in language and not in spirit. The preaching of the Acharya still continues to be spread and imparted by the trust, which has already been held by the TMB as not a charitable object. The Acharya had also written around 650 books and the preachings of the Acharya, which were found by the TMB to be against general public utility and accepted norms of religion, had not been excluded by the assessee-trust even after the amendment. Thus, according to the learned JM, clause 5(a) was substantially the same, both before and after the amendment and that the primary and dominant object was non-charitable. According to the judgment of the Supreme Court in the case of Yogiraj Charity Trust v. CIT (1976) 103 ITR 777 (SC), the primary or dominant object must be wholly charitable. This has also been reiterated by the Supreme Court in the case of Addl. CIT v. Surat Art & Silk Cloth Manufacturers Association (supra). The earlier finding of the TMB that the preachings of Acharya Rajneesh are against general public utility and accepted norms of religion continue to hold good. Therefore, according to the learned JM, the assessee is not entitled to the exemption under section 11.