TMI Blog1970 (2) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... er the said trust, the trustee was conducting a printing press and publishing a daily paper called Samyuktha Karnataka and a weekly paper called Weekly Samyuktha Karnataka which was later called Karma Veer and also published certain books, pamphlets and other literature ; as a result thereof, the property of the trust increased from time to time and the said property comprised of printing presses, buildings, land and other property set out in the schedule to the trust deed dated April 10, 1947. Since doubts arose regarding the legal validity of the trust declared under the deed dated July 15, 1935, the trust deed dated April 10, 1947, was executed for a redeclaration of the trust. The object of the Loka Shikshana Trust are set out in clause 2 of the said trust deed. The said clause reads as follows : " 2. The objects of the trust shall be to educate the people of India in general and of Karnatak in particular by : (a) establishing, conducting and helping directly or indirectly institutions calculated to educate the people by spread of knowledge on all matters of general interest and welfare ; (b) founding and running reading rooms and libraries and keeping and conducting printin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words " not involving the carrying on of any activity for profit " applied only to the last head of charitable objects ; that the object of the trust would fall only under the last head ; that the main object of the trust relating to supply of an organ of educated public opinion would not fall under the head " education " ; that, in the context of section 2(15), " profit " could not mean private profit and it could only mean any surplus earned by an organised activity without any limitation of the extent of the distribution of such profits and that the activity of the trust could be carried on and its objects could be advanced without expecting any profit, and the income of the trust was, therefore, entitled to exemption under section 11(1)(a) of the Act. Before we deal with the question referred, it is necessary to dispose of some of the grounds urged by the learned counsel for the Commissioner. Sri G. R. Ethirajulu Naidu, the learned counsel appearing for the Commissioner, urged that the first deed, dated 15th July, 1935, creating the National Literature Publication Trust was irrevocable and, therefore, the trust deed, dated 10th of April, 1947, was void and if the trust deed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ublic opinion and that the object of the newspaper conducted by the trust was political. In that view, we cannot, in exercise of our powers under section 258 of the Act, call for a supplementary statement of the case and to embark on a fresh line of enquiry. The main contention of Sri Naidu, learned counsel for the Commissioner, rested on the definition of " charitable purpose " found in section 2(15) of the Act. The said sub-section reads thus : " (15) 'charitable purpose' includes 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. " (Underlining is ours). The definition of " charitable purpose " in the Indian Income-tax Act of 1922 was found in section 4(3) of the said Act, which reads as follows : " In this sub-section 'charitable purpose' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility. " The argument of Sri Naidu was that the activities which were undoubtedly of general public utility and regarded as charitable till the enactment of the Act have ceased to be so regarded where it in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Indian Income-tax Act of 1922, before the Act came into force. In In re The Trustees of the Tribune it was held by the Judicial Committee of the Privy Council, reversing the judgment of the High Court of Punjab, that a trust with the object of supplying the province with an organ of educated public opinion was, prima facie, an object of general public utility and that the income of the trust was exempt under section 4(3)(i) of the Act of 1922. In All India Spinners' Association v. Commissioner of Income-tax, running of an institution for the hand spinning of Khadi yarn and weaving then by handlooms and selling the cloth in the open market, utilising the sale proceeds thereof for purchase of charka, handlooms and cotton and for payment of the weavers, etc., was held to be an object of general public utility and as such entitled to exemption under section 4(3)(i) of the 1922 Act. With reference to the words " any other object of general public utility ", Lord Wright, who delivered the opinion of the Judicial Committee, stated thus : " These last are very wide words. Their exact scope may require on other occasions very careful consideration. They were applied in the Tribune Pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by a trust was entitled to exemption. The Act which emerged from Parliament however made material alterations in the Bill. In the definition clause, the restrictive words " not involving the carrying on of any activity for profit " was added to qualify the words " advancement of any other object of general public utility ". Section 12 of the Bill was altogether omitted and in section 11, sub-section (4) was introduced stating that for the purpose of this section " property held under trust " includes a business. There is no provision corresponding to clause (b) of section 4(3)(i) of the Act of 1922, providing for exemption of income from business carried on by a trust for a charitable purpose. The argument of the learned counsel for the assessee was that, in order to give effect to this change in the law, the clause was added in the definition sub-section. His further argument was that if the clause " not involving the carrying on of any activity for profit " is construed in the manner contended for by the learned counsel for the department, then there will be contradiction between clause (a) of sub-section (1) and sub-section (4) of section 11. He elaborated his argument thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n and medical relief. Where the trust is for the first three purposes, income derived from a business undertaking held under trust is exempt from taxation ; but where a trust is for an object of general public utility and a business undertaking is held under the trust, it involves the carrying on of a commercial activity for profit and such a case ceases to be a trust for charitable purposes under the Act. When section 11 and section 2(15) of the Act are so construed, there ceases to be any conflict between sub-sections (1)(a) and (4) of section 11 of the Act. We are also unable to accede to the argument of Sri Kolah that the word " profit " in section 2(15) has to be understood as " private profit ". If that was the intention, Parliament need not have made any changes in the definition of " charitable purpose ". As the old definition stood, the Judicial Committee of the Privy Council had held that the words " any other object of general public utility " excludes the object of private gain, such as an undertaking for commercial profit. We have to give effect to the deliberate words used by Parliament in section 2(15). In the instant case, the main object of the trust is supplying ..... X X X X Extracts X X X X X X X X Extracts X X X X
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