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Showing contexts for: charitable trust objects in M.A. Namazie Endowment vs Commissioner Of Income-Tax on 11 March, 1988Matching Fragments
4. At the instance of the assessee, the Tribunal referred the following questions of law for the opinion of this court :
"(1) Whether, on the facts and in the circumstances of the case, the assessee-wakf was not entitled to exemption under section 11 of the Act ?
(2) Whether, on the facts and in the circumstances of the case, the assessee is entitled to exemption under section 11 read with section 13(1)(c)(ii), first proviso, of the Income-tax Act, 1961 ?"
5. Mr. Ramamani, learned counsel for the assessee, contended that on a fair reading of the entire document, it was clear that the object of the wakf was only relief to the poor. According to learned counsel, it was only a case of preference to relations from among the poor people. It was also submitted that the dominant purpose of the wakf was charitable and of general public utility. According to learned counsel, the ruling of the Supreme Court in Trustees of the Charity Fund v. CIT [1959] 36 ITR 513 would apply to the facts of this case. Learned counsel contended that a purpose which was recognised to be charitable under the personal law of the parties, should be accepted to be a charitable purpose under the Income-tax Act also. It was further submitted by learned counsel for the assessee that after the passing of the Muslim Wakfs Act, the Wakf Board exercised control and supervision over the performance of the wakfs by the mutawallis and thus there was a change in the situation which obtained prior to the Act. Finally, it was submitted by learned counsel that just because power was given to the mutawallis to utilise the entire income for a non-charitable object, the trust would not cease to be charitable so as to fall outside the scope of section 11 of the Income-tax Act. According to him, if, in a particular year, the mutawallis exercised the power given to them under the proviso and made a definite allocation of a portion of the income for recognised charitable purposes, thereby giving a definiteness to that part of the income to be spent for charitable purposes, the wakf would be entitled to invoke the provisions of section 11 of the Income-tax Act with reference to that part of the income. According to learned counsel, that matter has to be decided every year and the question whether any part of the income was allocated specifically by the mutawallis for charitable purposes during the relevant year has to be decided by the Income-tax Officer on the facts placed before him every year.
8. The above ruling of the Privy Council was relied on by the Supreme Court in East India Industries (Madras) P. Ltd. v. CIT [1967] 65 ITR 611. In that case, a trust was established for various objects, one of which was to manufacture, buy, sell and distribute pharmaceutical, medicinal, chemical and other preparations and other articles. The objects included several charitable and religious purposes. A clause in the trust deed provided that the objects should be independent of each other and that the trustees shall have discretion to apply the property of the trust in carrying out all or any of such objects of the trust as the trustees may deem fit. The question was whether the property of the trust was held wholly for religious or charitable purposes within the meaning of section 4 (3) (i) of the Indian Income-tax Act, 1922, and the donations made by the appellant therein to the trust were, therefore, exempt from tax under section 15B of the Indian Income-tax Act. The Supreme Court held that as the carrying on of a business of manufacture, sale and distribution of pharmaceutical, medicinal and other preparations was neither charitable nor religious in character and the trustees could, under the deed, validly spend the entire income of the trust on that non-charitable object, the trust property was not held wholly for religious or charitable purposes within the meaning of section 4(3)(i) of the Indian Income-tax Act and that the appellant therein was not entitled to claim deduction under section 15B of the Indian Income tax Act in respect of donations made to the trust. After referring to the clause in the trust deed giving discretion to the trustees, the Supreme Court observed thus : (p. 615) "In the present case, there is no special trust, that is to say, no particular item of property has been burdened with the performance of any specific object of the trust. It is, therefore, manifest that under clause 5(i) of the trust deed it is open to the trustees to utilise the income for any one of the objects of the trust to the exclusion of all other objects. In other words, it would not be a violation of the trust if the trustees devoted the entire income to the carrying on of a business of manufacture, sale and distribution of pharmaceutical, medicinal and other preparations. In our opinion, this particular object of the trust is neither charitable nor religious in character. If the trustees can, under a trust held validly, spend the entire income of the trust on this non-charitable object, it is difficult to hold that the trust property is held under a trust or other legal obligation wholly for religious or charitable purposes within the meaning of section 4(3)(i) of the Act."
9. The Supreme Court rejected the contention urged on behalf of the assessee in that case that the charitable object, viz., running of hospitals and dispensaries, was the dominant object of the trust and that the other noncharitable objects were subsidiary and were only for the purpose of carrying out the dominant object. On an interpretation of the trust deed, the Supreme Court found that the charitable and non-charitable objects of the trust were independent of each other and that there was no question of one being dominant and the other being subsidiary.
13. Yet another occasion arose before the Supreme Court to reiterate the principle referred to above in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1. The following observations of the Supreme Court are quite apposite (p. 11) :
"The law is well settled that if there are several objects of a trust or institution, some of which are charitable and some non-charitable and the trustees or the managers in their discretion are to apply the income or property to any of those objects, the trust or institution would not be liable to be regarded as charitable and no part of its income would be exempt from tax. In other words, 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 might be upheld as a valid charity : vide Mohd. Ibrahim Riza Malak v. CIT [1930] LR 57 IA 260 and East India Industries Madras) P. Ltd. v. CIT . 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 not prevent the trust or institution from being a valid charity : vide CIT v. Andhra Chamber of Commerce . The test which has, therefore, to be applied is whether the object which is said to be non-charitable is a main or primary object of the trust or institution or it is ancillary or incidental to the dominant or primary object which is charitable."