Indian Kanoon - Search engine for Indian Law

17. Now a question arises whether the objects of the trust are charitable in nature. The main object of the assessee is avowed to be for promotion of sports, games and sportsmanship. These objects are very wide and also vague. sports and games either tend to improve the physical health of the society or are meant for recreation or amusement. Insofar as the sports are for promotion of physical well-being, they may be regarded as charitable objects but insofar as they promote more amusement or entertainment, they cannot be regarded as charitable. The sports, such as swimming, chess, bridge, wrestling, athletics, Indian games, Gymnastics, Yoga, provision of sports and games to all children will undoubtedly come under the category of sport which promote physical fitness and physical well-being.

53. As regards the training in sports, it has already been stated that some of these activities of Gymkhana like swimming, Indian games, childrens games, athletics etc. are all relating to physical health but it has also been emphasised that a charitable trust having 100 objects which are charitable will fail as a charitable trust if there is one object which is not charitable. The fact that the assessee-trust could draft constitution for starting a club house equipped with bar under the same objects clearly indicates that the purpose of the trust is not entirely charitable.

7. Coming to the third point above, the Standing Counsel submitted that none of the objects of the assessee were of public and charitable character. He submitted that each object was separate by it self and none was ancillary to any other. He relied upon the aforesaid decision of the Supreme Court in the case of Surat Art Silk Cloth Mfrs. Association (supra) and submitted that therefore the assessee-trust could not be regarded as a public charitable trust. He particularly emphasised the objects (f) to (h) and submitted that the assessee could spend its income on any one of these at its own discretion and therefore the claim to exemption must fail. He also submitted that sports and games were given a separate place under caluse (23) of section 10 and that therefore they could not be the basis for exemption under secti on 11 read with section 2(15). He further submitted that the alternative argument based on mutuality showed that the assessee admitted that the benefits were available only to the members thus contradicting the assessees claim that the benefits of the assessee-trust were available to the members of the public. He pointed out that the colony panchayat earned an income of Rs. 1 lakh and that therefore this was a commercial activity which disentitled the assessee to the claim as a public charitable trust. On the other hand, the assessees counsel submitted the objects (a) to (e) were clearly charitable and that the other objects (f) to (h) were only powers and were ancillary to the aforesaid objects (a) to (e). For that purpose, he relied on the following authorities :

"It has been urged on behalf of the appellant that what should be taken into consideration is the activity actually conducted by the assessee, and not what is open to it under the provisions of its Memorandum of Association. We do not agree. Whether a trust is for charitable propose falls to be determined by reference to all the objects for which the trust has been brought into existence...."

In Rex v. Special CIT [1922] 8 TC 286 (CA) it was pointed by the Court of Appeal in England that if the settlor reserves himself the power of appointment under which he might appoint to noncharitable purpose, the trust cannot claim exemption even though the power of appointment is in fact exercised in favour of a charitable object. It would be a different case where one or more of the objects mentioned in the Memorandum of Association, although included therein, was never intended to be undertaken. If there is evidence pointing to that conclusion, clearly, the Court will ignore the object and proceed to consider the case as if it did not exist in the Memorandum. In CIT v. Dharmodayam Co. [1977] 109 ITR 527 (SC), it was that basic on which this Court proceeded when it observed "that the assessee had never engaged itself in any industry or in any other activity of public interest".