Document Fragment View

Matching Fragments

9. Thus, it would be clear that according to the latest view of the Supreme Court an activity involved in carrying out charitable purpose must not be motivated by a profit objective but it must be undertaken for the purpose of advancement or carrying out the charitable purposes. It would not be correct to draw invariably an inference that whenever an activity is carried on which yields profit, the activity must be deemed to be for profit and the charitable purpose involves a carrying on of activity for profit. In other words, the object must be of general public utility, that is, it must not involve the carrying on of any activity for profit, but if for advancement of that object it becomes necessary to carry on any activity for profit, such an activity could not detract from the charitable purpose. That the legislature did not intend to debar a trust created for charitable purpose from holding property under trust including a business undertaking is clearly borne out by the language of Sub-section (4) of Section 11 which lays down that for the purpose of this section property held under trust includes a business undertaking so held. Thus, taking into consideration the provisions of Sub-section (4) of Section II, it is clear that a business undertaking can be held for charitable purpose but the object of the trust must not be the carrying on of any activity for profit.

(3) The trustees have agreed to be the first trustees of these presents as is testified by their being parties to and. executing these presents.

Now THIS INDENTURE WITNESSETH and it is agreed and declared that in order to effectuate the said desire the settlor hath on or before the execution of these presents paid, delivered and transferred unto the trustees a sum of Rs. 5,100 (rupees five thousand one hundred) in cash, the payment and receipt whereof the trustees do and each of them doth hereby admit and acknowledge, TO HOLD the same unto the trustees UPON TRUSTS for the charitable object for the benefit of the public and subject to the powers, provisions, covenants and conditions hereinafter declared and contained, of and concerning the same, that is to :--

7. The trustees will also have the following powers :
(i) To get in and/or convert the trust property and/or to vary the investments for the time being.
(ii) To invest and keep invested the trust properties either in the purchase or mortgage of immoveable properties or in shares, debentures or other securities or any business undertaking and investments and to alter, vary or transpose such investments from time to time as the trustees shall in their absolute discretion think fit.
(iii) To set apart the whole or part of the income of the corpus or part thereof for any of the objects of the trust. The trustees shall also have powers by a majority of three-fourths of the trustees for the time being of the trust to have recourse to and utilise the whole or any part or parts of the corpus of the trust property for all or any of the charitable objects or purposes herein mentioned or any of them at such time or times and in such proportions as the trustees shall in their discretion think fit." Now for a proper appreciation of the objects of the trust, it is necessary that we should draw a line of distinction between what are the objects of the trust and what are the powers conferred on the trustees for achieving the objects. It would not be proper to mix the objects of the trust with the powers conferred on the trustees. The opening part of the trust says that " the settlor is desirous of creating a fund for charitable purposes for the benefit of the public ". In order to effectuate the said desire the settlor delivered and transferred to the trustees a sum of Rs. 5,100 as a corpus and the trustees agreed to hold the same for the charitable object for the benefit of the public and subject to certain powers conferred upon them.

19. It was next contended by Mr. Mehta that the trustees have been given discretion to utilise the net income of the trust for such of the charitable objects or purposes as they may, in their discretion, think fit. In other words, his contention is that the trustees have been given liberty to utilise the income of the trust for charitable objects as well as for purposes other than charitable objects. In this connection, reliance has been placed on East India Industries (Madras) P. Ltd. v. CIT [1967] 65 ITR 611 (SC), wherein it was held that under the trust deed it was 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. The court observed that in their opinion this particular object of the trust is neither charitable nor religious in character. We may point out even at the risk of repetition that the objects of the trust, in the present case, are relief of the poor, advancement of education, medical relief, promotion of science, art and literature and any other object of general public utility for the benefit of the public. None of these objects can be said to be other than charitable. Thus the ratio decidendi of E.I. Industries (Madras) case [1967] 65 ITR 611 (SC) has no application to the facts and circumstances of the present case. We may also observe that the words " charitable objects or purposes, as herein mentioned " contained in Clause (5) of the trust deed do not include a purpose other than charitable. The adjective "charitable" occurring before the word "objects" qualifies both the objects as well as purposes and it would not be correct to read charitable with objects and not with purposes. In fact, here the words " objects " and "purposes " mean the same thing. This contention raised on behalf of the revenue is also without force.