TMI Blog1954 (8) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... ation. The Tribunal permitted the assessee to raise this point and answered it in its favour, and one of the questions that the Commissioner has asked the Tribunal to raise, and which has been referred to us, is: Whether the Tribunal is competent in law in permitting an assessee to raise a ground at the time of the hearing of the appeal-a ground which was not raised either before the Income-tax Officer or before the Appellate Assistant Commissioner, or in the grounds of appeal before the Appellate Tribunal ? On this question rule 12 of the Appellate Tribunal Rules, 1946, is quite clear. The Tribunal has been given the authority to permit a new point to be raised provided that the party who is affected by the raising of this new point has been given sufficient opportunity of being heard on this point and the Tribunal in the statement of the case points out that when this point was raised the representative of the Department never asked for an adjournment to consider the question and the matter was argued without the appeal being adjourned and therefore in the opinion of the Tribunal the Department was not denied sufficient opportunity of being heard on this new ground raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the trust is not a charitable trust. It is urged that one of the objects of the trust is to supply refreshments including alcoholic , liquors to persons resorting to the bath and that object in no view of the case can be a charitable object. Mr. Joshi would be perfectly right if he could satisfy us that one of the objects of the trust was to supply refreshments to persons who went to the shimming bath, but, in our opinion, a clear distinction must be drawn between the object of the trust and the powers conferred upon the trustees of the trust which powers are incidental to the carrying out of the object of the trust. Now, the only object of the trust, and that is perfectly clear both from the original indenture of trust and the scheme framed by the High Court, is the maintenance and construction of a salt water swimming bath at Breach Candy. The provision with regard to the supply of refreshments is a power conferred upon the trustees to exercise it or not according to their discretion in the carrying out of the object of the trust. Now, the matter may be looked at from another point of view. It would be incumbent upon the trustees to carry out the object of the trust, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... motion of public health must be an object of general public utility. Mr. Joshi has relied on a decision of the English Court reported in In re Nottage : Jones v. Palmer [1895] 2 Ch. 649 for the purpose of contending that a trust for the purposes of giving recreation to the public or for the amusement of the public is not a charitable trust. When we look at the case, apart from the fact that this is a case which deals with the English law of charity, the facts are very different from the facts that we have to consider here. That was a case where a testator bequeathed a fund in trust to provide annually for ever a cup to be given to the most successful yacht of the season, stating that his object in giving the cup was to encourage the sport of yacht-racing, and it was this gift which was held to be not a charitable gift, and in the judgment of Lord Justice Rigby it is expressly pointed out that the Yacht Racing Association was a society of yacht-owners, the prizes were to be won by yacht-owners and the testator told them that his object in founding the prize was to encourage the sport of yacht-racing? Therefore here we have a case where the sole object was the encouragement of sports ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not an essential element of charity. A settlor or a donor may make a charity by setting up an institution and also providing funds by which those who take advantage of the institution can do so without paying any charge; or we may have a case where the charity may not go to those limits and one may confine his charity to merely setting up the institution and providing that those who wish to take advantage of the institution must pay reasonable charges for the same. In both cases the setting up of the institution would be a charitable object if the institution serves a purpose of general public utility. The only essential factor to determine whether it is a charity or not would be whether there is any private gain by the setting up of the institution. If the gain derived by running the institution continues to be impressed with the trust which is a charitable trust, then it is immaterial whether the institution is run as a commercial institution or not, but if in the running of the institution profits are made and the profit goes to any private individual or if the institution is intended for any private gain, then undoubtedly the running of the institution could not be consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the same effect are the observations of the Privy Council in All India 'Spinners' Association v. Commissioner of Income-tax [1944] 12 ITR 482where their Lordships point out that the words object of general public utility should exclude the object of private gain such as an undertaking for commercial profit though all the same it would subserve general public utility. As in this case it is not suggested that any private gain is made out of the income of the undertaking carried on by the trust the mere fact that profits are made by the trust will not prevent the trust still being a trust having a charitable object. Now, it is urged by Mr. Palkhiwala that the case would fall under section 4(3)(ia) because the conditions laid down in that section are satisfied. In order that the conditions of that sub-section should be satisfied we must have an income derived from business carried on behalf of a religious or charitable institution. The second condition is that the income of the business must be applied solely to the purposes of the institution, and the third condition is that the business is carried on in the course of the carrying out of a primary purpose of the instit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... falling under section 4(3)(ia). In the first place it is pointed out that an income is never ascertained till the end of the year and the trustees would never know what the income is so that they should apply to any purpose of the trust. The other difficulty that is pointed out is that it is only after all the purposes of the trust are satisfied that there is a surplus and it is in regard to that very surplus income exemption is sought, but on Mr. Joshi's contention whenever there is a surplus income which is not spent for the purposes of the trust, that income cannot claim exemption under section 4(3)(ia). Our object, therefore, should be to give an interpretation to section 4(3)(ia) and 4(3)(i) which removes these difficulties and anomalies and which is an interpretation which reconciles clauses (i) and (ia) and presents a fairly complete and coherent picture of this aspect of the Income-tax Act. Now, it seems to us that section 4(3)(i) deals with property which is held under trust or other legal obligation from which an income is derived, and the property may be even business which may be settled on trust or which may be an integral part of the trust. If that is the posi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in order to earn exemption under section 4(3)(ia). But Mr. Joshi says that it is not open to us to consider this aspect of the matter because the only question that is submitted to us by the Tribunal is whether the income of the three relevant years is exempt under section 4(3)(ia) of the Indian Income-tax Act or on the ground raised by the assessee, and Mr. Joshi says that if the case of the assessee does not fall under section 4(3)(ia) then he must fail in the reference and he must pay tax on the income. Now, in our opinion, the real object of making a reference, stating a case, and raising questions is to bring out the real controversy between the department and the assessee, so that the High Court under its advisory jurisdiction can give an opinion on which the Tribunal can act; and there can be no dispute that the High Court has ample jurisdiction to alter and reformulate questions submitted by the Tribunal in order to bring out the real controversy between the parties. Now, what is the real controversy between the parties in this case? The contention of the assessee is that it is not liable to pay tax on the income derived from certain activities carried on by the trus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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