Indian Kanoon - Search engine for Indian Law

5. In respect of the assessment years 1968-69 and 1969-70, the appellate authority held that it would be safe to presume that the High Court in C.S. No. 90 of 1961 upheld the validity of the supplementary deed dated June 28, 1961. He also held that the High Court by passing judgment and decree in the manner it had done in C.S. No. 90 of 1961, had accepted the assessee's plea that the original objects of the trust had been fulfilled and hence the decree passed by the High Court was mandatory in nature and all authorities functioning within its jurisdiction were bound to follow the same. On the question as to whether the assessee could be said to have applied its income for charitable purposes, the appellate authority held that in view of the fact that the college authorities had subsequently withdrawn and utilised the amounts credited to its account in the books of the assessee, it could not be said that the assessee had not applied its income for charitable objects. He also stated that there was no time limit prescribe by the Act for such application. Aggrieved by the order of the appellate authority, the Income-tax Officer preferred an appeal to the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal, but its order dated April 22, 1978, and September 25, 1978, has held that by reason of the judgment and decree of this court in C.S. No. 90 of 1961, the objects of the trust are only those set out in the schedule to the decree and they are charitable objects and that the petitioner will be entitled to exemption from tax in respect of such income derived from the business as is shown to have been actually parted with by it and actually spent on such charitable objects during the relevant previous years. On a reference made by the Tribunal, the Division Bench of this court in Tax Cases Nos. 1240 to 1245 of 1979 held that the petitioner-trust is entitled to claim exemption under section 11 of the Act. This judgment is in CIT v. Thanthi Trust [1982] 137 ITR 735. The special leave petition filed by the Department was dismissed by the Supreme Court.

(3) Whether the writ petitions are liable to be dismissed on the ground that the petitioner has not exhausted the alternative remedies of appeal to the appellate authority and the further appeal to the Tribunal against the orders of assessments, challenged in these writ petitions ?

Point No. 1. - According to section 11(1)(a) of the Act, income derived from property held under trust wholly for charitable or religious purposes to the extent to which such income is applied to such purposes in India; and, where such income is accumulated for application to such purposes in India, to the extent to which the income so accumulated or such part is not in excess of 25 per cent. of the income from such property, shall not be included in the total income of the previous year of the person in receipt of the income. Section 11(4) of the Act provides that for the purposes of section 11, property held under trust includes a business undertaking so held. According to section 2(15) of the Act, "charitable purpose" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility. In the petitioner's own case in respect of the assessment years 1968-69 and 1969-70, the Division Bench of this court, in Tax Cases Nos. 1240 to 1245 of 1979, in CIT v. Thanthi Trust [1982] 137 ITR 735, considering the character of the petitioner trust created under the trust deed dated March 1, 1954, and the supplementary trust deed dated June 28, 1961, and the effect of the judgment of this court in C.S. No. 90 of 1961 has held that the founder of the trust has created a public charitable trust, that the decision of this court in C.S. No. 90 of 1961 creates a legal obligation on the trustees to spend the income from the trust, after defraying the expenses of the newspaper business for the charities set out in the schedule to the decree in C.S. No. 90 of 1961, and, therefore, the trust property, which is the business itself should be taken to be held under a legal obligation for the various charitable objects, that those charitable objects fall under relief of the poor and education referred to in section 2(15) of the Act and that the primary purpose of the trust is to carry out the charitable objects and the business is carried on only as a means in the course of the actual carrying out of the primary purpose of the trust and not as an end in itself. In view of the said decision of the Division Bench of this court in CIT v. Thanthi Trust [1982] 137 ITR 735, rendered in a proceeding between the same parties interpreting the very same trust deeds and the decisions in C.S. No. 90 of 1961, on the file of this court, there is no difficulty in holding that the petitioner-trust is a charitable trust for the relief of poor and education and that the business undertaken is property held under the trust and that the business is carried on only in the course of the actual carrying out of the primary purpose of the trust and therefore, the petitioner is entitled to claim the exemption under section 11(1) of the Act. As already stated, today, we have passed orders allowing Writ Petitions Nos. 198 to 202 of 1989 (Thanthi Trust v. Asst. CIT [1995] 213 ITR 626), which relate to the assessment years 1979-80 to 1983-84, relying on the decisions of the Division Bench of this court in CIT v. Thanthi Trust [1982] 137 ITR 735, holding that the primary purpose of the trust is to carry out charitable objects and that the business is carried on only as a means in the course of the actual carrying out of the primary purpose of the trust and, therefore, section 13(1)(bb) of the Act, cannot stand in the way of the petitioner claiming the exemption under section 11(1) of the Act, in respect of the assessment years 1979-80 to 1983-84.

14. The next question we have to examine is whether sub-section (4A) of section 11 can be applied to the case of the petitioner-trust under section 11, on the ground that sub-section (4A) stands in the way of the petitioner getting the exemption under section 11 for the assessment years in question. Section 11(4A) came into effect from April 1, 1984, and it says that sub-section (1) or sub-section (2) or section (3) or sub-section (3A) shall not apply in relation to any income, being profits and gains of business, unless (a) the business is carried on by a trust wholly for public religious purposes and the business consists of printing and publication of books or publication of books or is of a kind notified by the Central Government in this behalf in the Official Gazette; or (b) the business is carried on by an institution wholly for charitable purposes and the works in connection with the business is mainly carried on by the beneficiaries of the institution. It is not in dispute that the petitioner-trust is not a trust created wholly for public religious purposes. It is also not in dispute that the petitioner-trust is not an institution. On the other hand, the petitioner-trust is a trust created for a public charitable purpose, falling in section 2(15) of the Act. Clause (a) of section 11(4A) will not apply to the case of the petitioner-trust as it is public charitable trust, whereas clause (a) of sub-section (4A) deals with the income being profits and gains of business carried on by a trust created wholly for public religious purposes; and clause (a) does not deal with the income derived from the business undertaking held under the trust for public charitable purposes. Similarly, clause (b) of section 11(4A) also will not apply to the petitioner, because clause (b) will apply only to the income being profits and gains of person carried on by an institution and not by a trust. The contention of learned senior counsel for the Revenue is that the exemption under section 11(1) of the Act will be available to the petitioner only if it satisfies both the conditions prescribed in clauses (a) and (b) of section 11(4A), that the petitioner-trust is neither a trust created wholly for public religious purposes, nor it is an institution and thus it does not satisfy either of the conditions prescribed in clauses (a) and (b) of section 11(4A) of the Act and, consequently, the petitioner cannot claim exemption under section 11(1) of the Act. We are unable to accept the above contention of learned senior counsel for the Revenue. As already pointed out, according to section 11(1)(a) of the Act, income derived from property held under trust (which includes a business undertaking), wholly for charitable or religious purposes to the extent to which such income is applied to such purposes in India, shall not be included in the total income of the previous year of the person receiving the same. It is clear that section 11(1)(a) concerns itself with income derived from the property held under trust which includes business undertaking so held, wholly for charitable or religious purposes, whereas sub-section (4A) of section 11, does not concern itself with any income derived from property held under trust for charitable purposes, but only concerns itself with income being profits and gains of business carried on by a trust wholly for public religious purposes or business carried by an institution wholly for charitable purposes. Thus, it is clear that the provisions of sub-section (4A) can be applied only to income being profits and gains of business carried on by a trust, which is not held under trust and the said sub-section (4A) cannot be applied to a case where the business undertaking itself is held under trust for charitable purposes as in the present case. There is force in the contention of learned senior counsel for the petitioner that sub-section (4A) of section 11 will apply only in a case where the business carried on by the trust is not held under trust for a charitable purpose, but the said income from business being the profits and gains of business earned by a trust, created wholly for public religious purposes or by an institution in such a case, the income will be eligible for exemption only when the two conditions laid down in clauses (a) and (b) of sub-section (4A) of section 11 are satisfied. In the present case, inasmuch as the business carried on by the petitioner is itself held under trust for public charitable purposes and the business is carried on only for the purposes of carrying on the charitable objects as found by the Division Bench of this court in CIT v. Thanthi Trust [1982] 137 ITR 735, the provisions of sub-section (4A) of section 11 cannot have any application. Section 11(1)(a) grants exemption to income derived from property held under trust wholly for charitable or religious purposes to the extent indicated in that section, whereas section 11(4A) denies exemption to income being profits and gains of business carried on by a trust wholly for public religious purposes or an institution, unless the conditions prescribed in clause (a) or (b) of sub-section (4A) of section 11 are satisfied. Section 11(4A) has no application to the petitioner-trust as it is not a trust wholly for public religious purposes, but it is a trust created for public charitable purposes.

"Moreover, another consequence of the construction canvassed on behalf of the Revenue would be that section 11, sub-section (4), would be rendered wholly superfluous and meaningless. section 11, sub-section (4), declares that for the purpose of section 11 'property held under trust' shall include a business undertaking and, therefore, a business can also be held under trust for a charitable purpose and where it is so held, its income would be exempt from tax, provided, of course, the other requisite conditions for exemption are satisfied. It may be pointed out that section 11, sub-section (4), where it provides that a business may also be properly held under trust, does not bring about any change in the law because even prior to the enactment of that provision, it was held by the Judicial Committee of the Privy Council in the Tribune's case [1939] 7 ITR 415 that properly in the corresponding section 4(3) (i) of the Act of 1922 included business and this principle was affirmed by the pronouncements of this court in J. K. Trust v. CIT [1957] 32 ITR 535 and CIT v. P. Krishna Warriar [1964] 53 ITR 176. section 11, sub-section (4), merely gave statutory recognition to this principle. Now, section 13(1)(bb), introduced in the Act of 1961 with effect from April 1, 1977, provides that in the case of a charitable trust or institution for the relief of the poor, education or medical relief which carries on any business, income derived from such business would not be exempt from tax unless the business is carried on in the course of the actual carrying out of a primary purpose of the trust or institution. Where, therefore, there is a charitable trust or institution falling within any of the first three categories of charitable purpose set out in section 2, clause (15), and it carries on business which is held by it under trust for its charitable purpose, income from such business would not be exempt by reason of section 13(1)(bb). section 11, sub-section (4), would, therefore, have no application in the case of a charitable trust or institution falling within any of the first three heads of 'charitable purpose'. Similarly, on the construction contended for on behalf of the Revenue, it would have no applicability also in the case of a charitable trust or institution falling under the last head of 'charitable purpose' because according to the contention of the Revenue, even if a business is held under trust by a charitable trust or institution for promotion of an object of general public utility, income from such business would not be exempt since the purpose would cease to be charitable. The construction contended for on behalf of the Revenue would thus have the effect the rendering section 11, sub-section (4), totally redundant after the enactment of section 13(1)(bb). We do not think we can accept such a construction which renders a provision of the Act superfluous and reduces it to silence. If there is one rule of interpretation more well-settled than any other, it is that if the language of a statutory provision is ambiguous and capable to two constructions, that construction must be adopted which will give meaning and effect to the other provisions of the enactment rather than which will give none. The construction which we are placing on section 2, clause (15), leaves a certain area of operation to section 11, sub-section (4), notwithstanding the enactment of section 13(1)(bb) and we must, therefore, in any event, prefer that construction to the one submitted on behalf of the Revenue."