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"It has been pointed out in the earlier part of the judgment that in the definition of charitable purpose as given in s. 2(15) of the Act the words "not involving the carrying on of any activity for profit" have been added at the end of the definition as it was given in s. 4(3) of the Indian IT Act, 1922. The position as it existed under the Act of 1922 was that once the purpose of the trust was relief of the poor, education, medical relief or the advancement of any other object of general public utility, the trust was considered to be for a charitable purpose. As a result of the addition of the word "not involving the carrying on of any activity for profit" at the end of the definition in s. 2(15) of the Act, even if the purpose of trust is "advancement of any other object of general public utility", it would not be considered to be "charitable purpose" unless it is shown that the above purpose does not involve the carrying on of any activity for profit. The result thus of the change in the definition is that in order to bring a case within the fourth category of charitable purpose, it would be necessary to show that : (1) the purpose of the trust is advancement of any other object of general public utility, and (2) the above purpose does not involve the carrying on of any activity for profit. Both the above conditions must be fulfilled before the purpose of the trust can be held to be charitable purpose. It is not necessary for the decision of the case, as already mentioned above, to go into the question as to whether the words "not involving the carrying on of any activity for profit" also qualify the first three categories of charitable purpose, namely, relief of the poor, education and medical relief.

(4A) Sub-section (1) or Sub-section (2) or Sub-section (3) or Sub-section (3A) shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the trust or, as the case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business.

Department Circular No.642 dated 11-12-1992 has explained that Sub- section (4A) has thus been amended to permit trusts and institutions to carry on business activities if the business activities are incidental to the attainment of its objective and the charitable or religious trust will no longer lose complete exemption from income tax, but however, the profits and gains from such business activity will be subject to tax.

incidental profit so earned would be liable to income tax unless it is applied for the objects of the charitable institution.

11.7. In the scheme of the Act and provisions, a charitable institution is eligible for exemption u/s.11 of the Act, provided it fulfils the conditions prescribed u/s.11 to 13 of the IT Act. Sec.11(1) lays down certain conditions regarding application of income by the trust on charitable objects which should be fulfilled before claiming exemption under that section. Therefore, the exemption u/s11 is not automatic and the AO is required to examine the fulfillment of the conditions specified under sections 11 to 13during the assessment proceedings of the relevant assessment years. The first and foremost basic requirement for claiming the benefit of exemption under s.11 is registration u/s.12A/ 12AA of the Act and without the same, exemption under s.11 would not be available at all. Section 12 specifies the income which is to be deemed to be the income of the charitable institution, while sec.12A prescribes the conditions for applicability of sections 11 and 12 and section 12AA prescribes the procedure for registration. Section 13 specifies the conditions under which section 11 is not applicable.