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M/S.Ashis Super Merchato, Cochin vs Assessee on 5 December, 2014 cites

Additional Commissioner Of Income-Tax ... vs Surat Art Silk Cloth Manufacturers ... on 19 November, 1979

12. This distinction was recognized by the Supreme Court in the case of Addl. CIT vs. Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1 wherein it was observed that if a business undertaking is held under trust for a charitable purpose, the income therefrom would be entitled to the exemption u/s. 11(1) of the Act. In the present case, the finding of the CIT(A) is that the super market business was not held under trust, but it was business commenced/carried on by the Society, subsequent to the formation of trust. Though the business was commenced by the Society and it was carried on by the Society after its formation, it cannot be said to constitute property held under trust. U/s. 11(4), it is only the business which is held under the trust that would enjoy exemption in respect of its income u/s. 11(1) of the I.T. Act and there is a distinction between the objects of a trust and the powers given to the trustees to effectuate the purpose of the trust. Though the objects of the trust were charitable, they were mere powers conferred upon the trustees to carry on the business and the profits from such business would benefit the charitable objects. The exemption u/s. 11 cannot be granted on the reason that the business itself 14 I.T.A. Nos.67&68/Coch/2014 was not in existence at the time of formation of the trust and the property held under trust at the time of formation of the trust was not spelt out in the Memorandum of Association of the assessee. The business of supermarket was not at all in existence at the time of formation of the trust so as to say that the business is property held under trust. Thus, the supermarket business was not even in the contemplation of the Memorandum of Association on the basis of which the Society is formed and, therefore, could not have been settled upon trust. The business carried on behalf of a trust rather indicates a business which is not held in trust, than a business of the trust run by the assessee. In this case, the supermarket business was carried on by the assessee for and on behalf of the trust and it was not business held under trust. Section 11(1) of the Act confers exemption from tax only where the property is itself held under trust or other legal obligation; it does not apply to cases where a trust or legal obligation is not created on any property but only the income derived for a charitable or religious purpose. Surplus funds of a trust, which was claimed to be exempt on the footing that it was property held under trust within the meaning of sec. 11(1) of the Act, was not property held under trust since the property from which the surplus was generated was itself not held under trust. In other words, merely carrying on business for and on behalf of the trust and applying the profits of the same for the object of the 15 I.T.A. Nos.67&68/Coch/2014 trust does not entitle for exemption u/s. 11(4) of the Act unless the business is incidental to the attainment of the objects of the trust.
Supreme Court of India Cites 45 - Cited by 2322 - P N Bhagwati - Full Document
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