1981 (12) TMI 28 - HC - Income Tax

Summary

Issues Involved:
1. Eligibility for exemption under Section 11 read with Section 2(15) of the Income Tax Act, 1961.
2. Whether the All India Hindu Mahasabha is a political organization.
3. Determination of the dominant purpose of the Sabha.
4. Extent of income applied for charitable purposes.
5. Whether the Sabha qualifies as a "person" under Section 2(31) of the Income Tax Act, 1961.

Detailed Analysis:

1. Eligibility for Exemption under Section 11 read with Section 2(15) of the Income Tax Act, 1961:
The primary issue was whether the income derived by the All India Hindu Mahasabha (the Sabha) from its property could be exempted under Section 11 read with Section 2(15) of the Income Tax Act, 1961. Section 2(15) defines "charitable purpose" to include the relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit. The court examined the constitution of the Sabha and its objects to determine if they fell within the ambit of "charitable purposes."

2. Whether the All India Hindu Mahasabha is a Political Organization:
The Tribunal concluded that the Sabha was a political organization based on its aim to establish a democratic Hindu State and re-establish Akhand Bharat by constitutional means. The court agreed with this conclusion, noting that the Sabha's constitution and activities were inherently political. The court referenced the definition of "political" from Webster's Dictionary, which includes activities related to the conduct of government and the management of state affairs.

3. Determination of the Dominant Purpose of the Sabha:
The court needed to ascertain whether the dominant purpose of the Sabha was political or charitable. The Tribunal observed that while some objects of the Sabha could be considered charitable, the dominant purpose was political. The court emphasized that if the dominant purpose of an organization is political, any incidental charitable activities do not qualify the organization for tax exemption. The court cited the All India Spinners' Association case, which distinguished between charitable organizations affiliated with political parties and those primarily serving political objectives.

4. Extent of Income Applied for Charitable Purposes:
The AAC had granted partial exemption, estimating that 25% of the Sabha's income was applied for charitable purposes. However, the Tribunal and the court found that this estimate was not supported by concrete evidence. The court noted that the Sabha's accounts did not provide clear details of expenditures on charitable activities, and the affidavit provided by the Sabha's secretary was insufficient. The court concluded that the Sabha was not entitled to any exemption as it could not prove that a specific portion of its income was applied for charitable purposes.

5. Whether the Sabha Qualifies as a "Person" under Section 2(31) of the Income Tax Act, 1961:
The court examined whether the Sabha could be considered a "person" under Section 2(31) of the Income Tax Act, 1961, which includes an association of persons or a body of individuals. The court concluded that the Sabha, being a registered society, qualifies as a "person" under the Act. The court referenced the judgment in Satyavarat Sidhantalankar v. Arya Samaj, Bombay, which established that a registered society enjoys the status of a legal entity capable of suing or being sued.

Conclusion:
The court concluded that the All India Hindu Mahasabha is a political organization with a dominant political purpose. Consequently, it does not qualify for tax exemption under Section 11 read with Section 2(15) of the Income Tax Act, 1961. The court also determined that the Sabha qualifies as a "person" under Section 2(31) of the Act. Therefore, the entire income of the Sabha is liable to tax, and no portion of its income is exempt under Sections 11 and 12 of the Income Tax Act, 1961.