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1 - 10 of 15 (0.40 seconds)Commissioner Of Income Tax vs Dharmodayan & Co., Kerala on 22 August, 1977
If this interpretation were correct, it would be the easiest thing for a trust or institution not to mention in its constitution as to how the purpose for which it is established shall be carried out and then engage itself in an activity for profit in the course of actually carrying out of such purpose and thereby avoid liability to tax. That would be too narrow an interpretation which would defeat the object of introducing the words 'not involving the carrying on of any activity for profit'. We cannot accept such a construction which emasculates these last concluding words and renders them meaningless and ineffectual. The other interpretation is to see whether the purpose of the trust or institution in fact involves the carrying on of an activity for profit or in other words whether an activity for profit is actually carried on as an integral part of the purpose or to use the words of Chandrachud, J., as he then was, in CIT vs. Dharmodayam Co. 'as a matter of advancement of the purpose'. There must be an activity for profit and it must be involved in carrying out the purpose of the trust or institution or to put it differently, it must be carried on in order to advance the purpose or in the course of carrying out the purpose of the trust or institution. It is then that the inhibition of the exclusionary clause would be attracted. This appears to us to be a more plausible construction which gives meaning and effect to the last concluding words added by the legislature and we prefer to accept it. Of course, there is one qualification which must be mentioned here and it is that if the constitution of a trust or institution expressly provides that the purpose shall be carried out by engaging in an activity which has a predominant profit motive, as, for example, where the purpose is specifically stated to be promotion of sports by holding cricket matches on commercial lines with a view to making profit, there would be no scope for controversy, because the purpose would, on the face of it, involve the carrying on of an activity for profit and it would be non-charitable even though no activity for profit is actually carried on or, in the example given, no cricket matches are in fact, organised."
Additional Commissioner Of Income-Tax ... vs Surat Art Silk Cloth Manufacturers ... on 19 November, 1979
In my minority opinion in the Surat Art Silk's case, I had endeavoured to give reasons why the correctness of the majority decision was open to question. There is no point in traversing the same ground over again. It was clearly inconsistent with the settled principles to hold that if the dominant or primary object of a trust was 'charity' under the fourth head 'any other object of general public utility', it was permissible for such an object of general public utility, to augment its income by engaging in trading or commercial activities."
Section 2 in The Income Tax Act, 1961 [Entire Act]
Commissioner Of Income-Tax, Madras vs Andhra Chamber Of Commerce on 1 October, 1964
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 vs. 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." and
"The definition of 'charitable purpose' in the Indian statute must be construed according to the language used there and against the background of Indian life. The English decisions may be referred to for help or guidance but they cannot be regarded as having any binding authority on the interpretation of the definition in the Indian Act."
Dharmadeepti, Alwaye, Kerala vs The Commissioner Of Income Tax, Kerala on 24 July, 1978
Where an activity is carried on as a matter of advancement of the charitable purpose or for the purpose of carrying out the charitable purpose, it would not be incorrect to say as a matter of plain English grammar that the charitable purpose involves the carrying on of such activity, but the predominant object of such activity must be to subserve the charitable purpose and not to earn profit. The charitable purpose should not be submerged by the profit making motive; the latter should not masquerade under the guise of the former. The purpose of the trust, as pointed out by one of us (Pathak, J.) in Dharmadeepti vs. CIT must be 'essentially charitable in nature' and it must not be a cover for carrying on an activity which has profit-making as its predominant object.... The test which has, therefore, now to be applied is whether the predominant object of the activity involved in carrying out the object of general public utility is to subserve the charitable purpose or to earn profit. Where profit-making is the predominant object of the activity, the purpose, though an object of general public utility, would cease to be a charitable purpose. But, where the predominant object of the activity is to carry out the charitable purpose and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. The exclusionary clause does not require that the activity must be carried on in such a manner that it does not result in any profit. It would indeed be difficult for persons in charge of a trust or institution to so carry on the activity that the expenditure balances the income and there is no resulting profit. That would not only be difficult of practical realisation but would also reflect unsound principle of management."
C.I.T. Bombay vs Bar Council Of Maharashtrabar Council ... on 22 April, 1981
5. The Constitution Bench has pronounced that it is not at all necessary that there must be a provision in the constitution of the trust or institution that the activity shall be carried on on no profit no loss basis or that profit shall be proscribed. Even if there is no such express provision, the nature of the charitable purpose, the manner in which the activity for advancing the charitable purpose is being carried on and the surrounding circumstances may clearly indicate that the activity is not propelled by a dominant profit motive. What is necessary to be considered is whether having regard to all the facts and circumstances of the case, the dominant object of the activity is profit-making or carrying out a charitable purpose. If it is the former, the purpose would not be a charitable purpose, but if it is the latter, the charitable character of the purpose would not be lost. This, however, involves in each case, an examination of not only the object of the trust, but also how the monies earned by the trust are utilised. Before granting exemption, it is necessary to see whether the trust has genuinely carried out charitable purpose and it is not masquerading under the guise of a charitable purpose. 6. By a majority of two judges in the subsequent judgments in the cases of CIT vs. Bar Council of Maharashtra and CIT vs. Federation of Indian Chambers of Commerce & Industry , the Supreme Court has reiterated the above observations of the Supreme Court in Surat Art Silk Cloth Manufacturers' Association's case (supra).
Commissioner Of Income Tax, New Delhi vs Federation Of Indian Chambers Of ... on 15 April, 1981
5. The Constitution Bench has pronounced that it is not at all necessary that there must be a provision in the constitution of the trust or institution that the activity shall be carried on on no profit no loss basis or that profit shall be proscribed. Even if there is no such express provision, the nature of the charitable purpose, the manner in which the activity for advancing the charitable purpose is being carried on and the surrounding circumstances may clearly indicate that the activity is not propelled by a dominant profit motive. What is necessary to be considered is whether having regard to all the facts and circumstances of the case, the dominant object of the activity is profit-making or carrying out a charitable purpose. If it is the former, the purpose would not be a charitable purpose, but if it is the latter, the charitable character of the purpose would not be lost. This, however, involves in each case, an examination of not only the object of the trust, but also how the monies earned by the trust are utilised. Before granting exemption, it is necessary to see whether the trust has genuinely carried out charitable purpose and it is not masquerading under the guise of a charitable purpose. 6. By a majority of two judges in the subsequent judgments in the cases of CIT vs. Bar Council of Maharashtra and CIT vs. Federation of Indian Chambers of Commerce & Industry , the Supreme Court has reiterated the above observations of the Supreme Court in Surat Art Silk Cloth Manufacturers' Association's case (supra).