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2006 (10) TMI 381 - AT - Income TaxExemption of income u/s 11 - incomes other than income under the head “Profits and gains from business and profession” - Object of “general public utility” - charitable purposes u/s 2(15) - HELD THAT:- It is not the Revenue’s case that the activities of the assessee cease to be in the nature of “general public utility”. The assessee was declined exemption only on the ground that it cannot be said that the assessee was “not involved in the carrying on of any activity for profit”. Post April 1, 1984, however, that aspect of the matter ceased to be relevant so far as the scope of “charitable purposes” u/s 2(15) is concerned. The pre-1961 position thus stands restored. In those years, and following the Tribunal’s decision for the assessment year 1943-44, the assessee was held to be pursuing an object of public utility. The Revenue admits and accepts this position, as reflected from the stand taken by the Revenue authorities all along. The post-amendment section 2(15) being pari materia with section 4(3)(i) of the 1922 Act and the material facts being identical, the assessee thus continues to be eligible for exemption u/s 11. As for the disability u/s 11(4A), the same being confined to exemption of business income, the assessee will nevertheless be entitled to exemption in respect of other incomes, such as “income from house property”, “capital gains” and “income from other sources”. We, accordingly, answer the questions Nos. 1 and 4 as follows : (1) Whether the object of the assessee-trust is an object of general public utility u/s 2(15) of the Income-tax Act, 1961? - Yes. In the light of the amendments in section with effect from April 1, 1984, the assessee trust is eligible for being treated as pursuing an object of general public utility u/s 2(15) of the Act. (4) If the answer to the first question is in the affirmative, does the earning of substantial profit by the assessee affect its status as a trust existing for an object of general public utility and consequently the claim for exemption under section 11, and if so, to what extent, in the light of the judgment of the Supreme Court in the case of Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1979 (11) TMI 1 - SUPREME COURT]? - While earning of substantial profit does not affect its status as “a trust existing for an object of general utility”, so far as business income is concerned, earning of substantial profits attracts the disqualification u/s 11(4A) of the Act, from exemption u/s 11. As for the exemption of income of the assessee-trust under the heads of income other than “profits and gains from business or profession” is concerned, the earning of substantial profit does not affect the said exemption. The matter shall now go before the Division Bench for disposal of appeals in accordance with the law, and in the light of our above observations.
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