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8. It was contended that the mere fact that the assessee had shown its income or loss under the head "Business" or had recorded depreciation of its assets would not convert the activity of the assessee to an activity carried on for making profit. It was emphasised that the Commissioner himself had found that the objects of the trust were charitable but in carrying out the trust, the assessee had indulged in business activities. The decisions in the cases of Loka Sikshana Trust [1915] 101 ITR 234 (SC) and Indian Chamber of Commerce , it was contended, were distinguishable on facts. The assessees concerned in those cases had a non-charitable commercial business before they were converted into a trust.

19. It was observed in the judgment of Khanna J. that if the activity of a trust consisted of carrying on of a business and there was no restriction on its making profits, the court would be justified in assuming in the absence of any indication to the contrary that the object of the trust involved carrying on of an activity for profit.

20. It was, however, observed in the judgment of Beg J. that if the terms of the trust permitted carrying on of an activity for profit, the same was prima facie evidence of a purpose which was not charitable. The same would indicate that the object of the trust was profit-making unless it was shown that the terms of the trust compelled the trustee to utilise the profits of business also for charity. It was observed that if the profits must necessarily feed the charitable purpose under the terms of the trust, the mere fact that the activities of the trust yielded profit would not alter the charitable character of the trust.

23. It was further held that if the primary or dominant purpose of a trust was charitable, any other objects merely ancillary or incidental to the primary or dominant purpose and by itself not charitable would not preclude the trust from being charitable. When the purpose of a trust was the advancement of an object of general public utility, it is that object and not its accomplishment which must not involve the carrying on of any activity for earning profit. As long as that purpose did not by itself involve carrying on of any activity for profit, the definition under Section 2(15) of the Income-tax Act, 1961, would apply. If the purpose itself involved carrying on of an activity for profit, then it would not be a charitable purpose within the meaning of Section 2(15) of the Income-tax Act, 1961. The earlier decision of the Supreme Court in Indian Chamber of Commerce's case was overruled. The observations of Beg J. in Sole Trustee, Loka Shikshana Trust were approved and those of Khanna J. in the said decision were disapproved.

26. There was a direct reference from the decision of the Tribunal to the Supreme Court which upheld the decision of the Tribunal, following its earlier decision in Surat Art Silk Cloth Manufacturers Association . It was held by the Supreme Court that the clauses in the memorandum of the assessee enabling it to undertake and execute trusts or undertakings which may seem to it to be desirable, were merely powers incidental or ancillary to the main purpose of the assessee.

(c) CIT v. Thanthi Trust [1982] 137 ITR 735 (Mad). In this case, the assessee was a trust constituted to take over an existing Tamil daily newspaper and to provide for its efficient running. Under the terms of the deed, the trust was also required to devote its surplus income for certain specified educational purposes. In the assessment year concerned, the assessee claimed exemption from income-tax under Section 11 of the Act of 1961 on the ground that 75% of its income had been applied for charitable purposes. The claim of the trust was rejected by the Income-tax Officer but upheld by the Tribunal which held that the income to the extent it was spent for charitable purposes was exempt from income-tax. On a reference, it was found by the Madras High Court that the property which was held under trust was the business itself and the entire income of the business had to be utilised for various charitable objects as specified in the trust deed which had been considered and construed by the Madras High Court in an originating summons. Merely because the assessee was carrying on an activity for profit for the purpose of carrying out charitable objects, it could not be deprived of the benefit of Section 11 of the Income-tax Act, 1961.