1984 (2) TMI 7 - HC - Income Tax

Summary

Issues:
1. Whether the sum spent on charity by the trust is exempt under section 11 of the Income-tax Act, 1961.
2. Whether the business of running a printing press by the trust qualifies for exemption under section 11.

Detailed Analysis:
Issue 1:
The assessee, a trust, filed a return for the year 1974-75 claiming exemption of Rs. 18,628 spent on charity under section 11 of the Income-tax Act, 1961. The Income-tax Officer contended that the trust carried on an activity for profit and was not entitled to any exemption. The Appellate Assistant Commissioner upheld this view. However, the Tribunal held that the business of running the printing press was held under trust, making the sum of Rs. 18,628 exempt under section 11. The Tribunal relied on the decision in CIT v. Madras Stock Exchange Ltd., differentiating between a business held under trust and a business carried on as the object of charity. The Tribunal concluded that the printing press business was held under trust for charity, entitling it to exemption under section 11.

Issue 2:
The Tribunal found that the founder of the trust had endowed a printing press as a trust with the income to be utilized for charitable purposes outlined in the trust deed. The trust's objectives included providing free cow's milk to poor children and promoting primary education among girls. The Tribunal determined that since the printing press itself was endowed as a trust for charitable purposes, the business was held under trust. The High Court agreed with the Tribunal's conclusion, citing the Supreme Court's decision in CIT v. Dharmodayam Co., where a business conducted under trust for charitable purposes was held exempt under section 11. The High Court emphasized that the trust's activities fell within the definition of "charitable purpose" in section 2(15) of the Act, justifying the exemption under section 11.

In conclusion, the High Court affirmed the Tribunal's decision, stating that the business of the printing press was held under trust for charitable purposes, making it eligible for exemption under section 11 of the Income-tax Act, 1961. The High Court directed the Revenue to pay the costs of the assessee's counsel.