TMI Blog2006 (10) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out that the grounds Nos. (1) and (4) need to be dealt with on the merits and cannot be dismissed as merely academic, inter alia, for the reason that this aspect of the matter was never argued or discussed before the Special Bench . To that extent, and vide order dated February 15, 2006, order dated October 22, 2003, was recalled for the limited purposes of disposing of question Nos. (1) and (4) on the merits. In the meantime, all the Members constituting the original Special Bench have been transferred out of Mumbai Benches, and, accordingly, the Members constituting this Special Bench were nominated to hear the recalled matter and dispose of question Nos. (1) and (4) on the merits. 3. It is in the backdrop set out above that we come to be in seisin of the matter to deal with the following two questions : Whether the object of the assessee-trust is an object of general public utility under section 2(15) of the Income-tax Act, 1961 ? 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act by insertion of section 11(4A), the issue as to whether the assessee-trust can be said to be eligible for exemption under section 11 was referred to the Special Bench. While the Special Bench held that the assessee was engaged in carrying on the activity for profit, and therefore, profits and gains from business and profession earned by the assessee will attract the disability clause set out in section 11(4A), the assessee' s plea that so far as income under the heads other than Profits and gains from business and profession is concerned, the same will be exempt under section 11, remains undisposed of. 5. Shri V. H. Patil, learned counsel submits that right from the assessment year 1943-44, the assessee was treated as involved in pursuing an object of general public utility and it was only because of the words not involving the carrying on of any activity of profit appearing in the 1961 Act, that the assessee lost its exemption of income with effect from April 1, 1961. It was because of these words that the assessee was held to be not covered by the scope of a trust for charitable purposes under section 2(15). Undoubtedly, submits learned counsel, limitation on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es is coupled with the disability clause set out in section 11(4A) which was introduced at the same time as the time when the words not involving the carrying on of any activity for profit were removed from section 2(15) but then, as learned counsel rightly points out, this disability is only to the extent business profits are concerned. 8. We consider it appropriate to reproduce section 11(4A) for the ready reference. This is as follows : 11(4A). Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A), shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the trust, or, as the case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business. 9. The disability clause set out in section 11(4A) clearly and unambiguously refers to the income which can be taxed as business income. Therefore, so far as income under other heads is concerned, the same will be eligible for exemption under section 11. The net effect of the amendments in section 2(15) and insertion of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X
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