Indian Kanoon - Search engine for Indian Law

5. It is seen from the narration of facts herein that one T.Iya Nadar created a Trust in August, 1956, settling certain properties in the name of the Trust, namely P.Iya Nadar Charitable Trust. The Trust was registered on 20.8.1956. The following are the objects of the Trust:

"(a) To establish, maintain, run, develop, improve, extend, grant donations for, and to aid and assist in the establishment, maintenance, running, development, improvement and extension of hospitals, clinics, dispensaries, maternity homes and similar institutions affording treatment, cure, rest, remuneration and other advantages in the way of alleviating the suffering of humanity;

28. In the decision reported in [1980] 121 ITR 1 (Additional CIT Vs. Surat Art Silk Cloth Manufacturers Association (S.C.), the Apex Court laid down the principle that if a business is carried on by a trust or institution for the purpose of accomplishing or carrying out an object of general public utility and the income from such business is applicable only for achieving that object, the purpose of the trust or institution would cease to be charitable and not only income from such business but also income derived from other sources would lose the exemption. Pointing out to the far reaching consequence that may come, the Supreme Court held that nevertheless the restrictive words "not involving the carrying on of any activity for profit" in Section 2 Sub Section (15) would apply to a case of any other object of general utility. The Supreme Court pointed out that what is inhibited by the words "not involving the carrying on of any activity for profit" is the linking of activity for profit with the object of general public utility and not its linking with the accomplishment or carrying out of the object. It is not necessary that for the accomplishment of the object, the means to carry out the object should not involve an activity for profit. The language of the Section has to be gathered by the clear terms of the Section and full effect has to be given to the intention of the Legislature that the Trust having its primary object of a charitable disposition in the field of education, in its granting relief to the poor, must necessarily have the means to carry on business for the benefit of earning income for its application towards realising its objects. Referring to the amendment brought forth to Section 13(1)(bb), the Supreme Court held that the construction of the phrase under Section 2(15) leaves certain area of operation to Section 11 Sub Section (4), notwithstanding the enactment of Section 13(1)(bb). It further observed that Section 13(1)(bb) cannot result in rendering Section 11(4) a redundant provision and the construction should be adopted to give effect to the provisions of the enactment rather than nullifying the effect of the Section. The crux of the decision reported in [1980] 121 ITR 1 (Additional CIT Vs. Surat Art Silk Cloth Manufacturers Association (S.C.) is that so long as the primary object of the Trust is not of a business for profit, but to achieve its objective it carried on business to earn income, the negative effect of Section 13(1)(bb) would not be visited on the assessee Trust to deny the benefit of exemption under Section 11. To the same effect is the decision reported in [1997] 225 ITR 652 (Samaritan Society Vs. Commissioner of Income Tax).

(ii) Establishing and/or running or helping to run schools, colleges or other educational institutions for teaching arts and science;

(iii) Establishing of scholarships for students of journalism, arts and science;

(iv) Establishing and/or running or helping to run hostels for students;

(v) Establishing and/or running or helping to run orphanages;

(vi) Other educational purposes. "

31. It is also a matter of record that that in C.S. No.90 or 1961, the trustees took out an application before this Court under Order XIII Rule 1(g) of the Original Side Rules. The founder of the Trust was impleaded as the sole defendant. By order dated 2nd March 1962, this Court passed a decree confirming the supplementary deed to utilise the surplus income and the funds of the Thanthi Trust, after meeting out all expenses in connection with the newspaper business, for one or other of the purposes set out in the schedule to the decree. In the context of the order passed, the question arose as to whether the author of the Trust had the authority to change the tenor of the Trust. Taking the stand that the Trust had a legal obligation flowing from the order of this Court in C.S.No.90 of 1961, this Court considered whether the assessee Trust was entitled to exemption under Section 11. This Court held on an analysis of the Trust Deed and the order of this Court, that the objects of the Charitable Trust referred to in the schedule to the decree clearly showed that the objects had to be fulfilled from and out of the income from the business carried on and that the primary purpose flowing out of the legal obligation was to fulfil the charitable objects. It further held that business was carried on as a means in the course of the actual carrying out of that primary purpose and not as an end in itself.

34. As far as the relevance of the decision reported in [2001] 247 ITR 785 (Assistant Commissioner of Income-tax v. Thanthi Trust) to the present case is concerned, as already noted, the reported decision has to be seen in the light of the findings arrived at on the terms of the Trust deed. As far as the present case is concerned, with the finding given by the Tribunal that the primary purpose of the Trust was to afford relief of poor, education and medical relief, the means employed by exploiting its assets to earn income to achieve the objects, cannot, in any manner, be applied to defeat the claim of the assessee under Section 11. Thus, guided by the decision reported in [1980] 121 ITR 1 (Additional CIT Vs. Surat Art Silk Cloth Manufacturers Association (S.C.) and applying Section 11(4A) and Section 13(1)(bb), we have no hesitation in agreeing with the assessee's case what when the main object of the Trust is charitable and to afford relief to the poor, to promote education and medical relief, we have no hesitation in confirming the order of the Tribunal and thereby rejecting the Revenue's appeal. Consequently, all these the Tax Case Appeals filed by the Revenue stand dismissed. No costs.