TMI Blog2000 (4) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessment year 1971-72, the Assessing Officer held that the assessee was a charitable trust and accordingly issued an exemption certificate under section 15B of the Indian Income-tax Act, 1922. However, subsequently, the matter was scrutinised and as a result, a notice under section 147(a)/148 of the Act was served on the assessee on February 7, 1980. A fresh assessment was made under section 143(3)/147(a) of the Act for the said assessment year. The Assessing Officer rejected the plea of the assessee that since the profits derived by it were utilised for the charitable objects for which the trust was formed, in view of the decision of the Supreme Court in CIT (Addl.) v. Surat Art Silk Cloth Manufactures Association [1980] 121 ITR 1, its income was exempt from tax. The Assessing Officer found that in the present case, the objects themselves involved an activity for profit and hence the assessee fell outside the scope of section 2(15) of the Act. He accordingly assessed the assessee as an association of persons without granting the benefit of exemption under section 11 of the Act on a total income of Rs. 1,58,906 and also charged tax at the maximum marginal rate as provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent had accepted that objects of the trust were for charitable purpose, which certificate was in vogue even in the assessment year 1970-71 and subsequent years, and, therefore, the Revenue could not be permitted to change its stand with effect from the assessment year 1971-72 and subsequent years by reopening the already concluded assessments, particularly when there was no change in the objects of the trust. In support, reliance was placed on a decision of the Supreme Court in Radhasoami Satsang v. CIT [1992] 193 ITR 321 and of the Madras and Orissa High Courts, respectively, in M. A. Namazie Endowment v. CIT [1988] 174 ITR 58 and CIT v. Belpahar Refractories Ltd. [1981] 128 ITR 610. On the merits, it was submitted that in the light of the law laid down by the Supreme Court in CIT (Addl.) v. Surat Art Silk Cloth Manufactures Association [1980] 121 ITR 1, the assessee was entitled to exemption from tax, because the profits derived by it were utilised for the charitable objects for which the trust was formed. On the contrary, while supporting the decisions of the lower authorities, it was submitted by Mr. jolly, learned senior standing counsel for the Revenue, that since all the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... institution would not be liable to be regarded as charitable and no part of its income would be exempt from tax. (c) The ten words underlined above qualify the expression 'object of general public utility' and not the phrase 'advancement'. In other words, what is inhibited by these ten words is the linking of an activity for profit with the object of general public utility and not its linking with the accomplishment or carrying out of the object. The words require only that the object should not involve the carrying on of any activity for profit ; it is not necessary that the accomplishment of the object or the means to carry out the object should not involve an activity for profit. (d) The words. 'object of general public utility not involving the carrying on of any activity for profit' cannot be interpreted as covering a case merely on the ground that the purpose can be achieved without the trust or institution engaging itself in an activity for profit. In other words it would not be correct to interpret the expression as meaning that the object or purpose must be of such a nature that it involves the carrying on of an activity for profit, for, if such an interpretation were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rust for any one of the objects, then the trust cannot be held to be a charitable trust. We shall scrutinise the objects of the assessee-trust in the light of the aforenoted broad principles and determine, the question whether the assessee has been rightly denied exemption under section 11 of the Act. As noted above, the trust came into existence on the basis of a deed of trust registered on December 12, 1956. Clause 5 of the trust deed requires the trustees to promote the objects of the trust. It reads as follows : "Income arising from the trust funds, securities and properties shall be spent by the trustees in promoting the objects of the trust in accordance with the rules and regulations in force from time to time." Clause 21 of the trust deed is in the following terms : "The account of the trust shall be opened with such bank as may be approved by the trustees. The trustees may, from time to time, purchase immovable property and other securities with the surplus funds in their hands, but the chairman, Shri D. R. Gupta, will have full discretion in the matter of investments and after his death, the trustees will be guided for such investments by the next chairman who is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st are non-charitable. Clause 21 of the trust deed gives an unfettered discretion to the chairman of the trust to spend the funds of the trust on the purchase of immovable property or any other securities or on any of the objects of the trust, whether they are charitable or non-charitable. As held in Yogiraj Charity Trust's case [1976] 103 ITR 777 (SC), where there are several objects of a trust, some of which are charitable and some non-charitable and the trustees in their discretion are to apply the income to any of the objects, the whole trust fails and no part of income is exempt from tax, in the present case, as no part of the income of the trust has been allocated specifically for a charitable purpose, exemption under section 11 of the Act cannot be granted to the assessee. Moreover, it is also evident from the assessment orders for the relevant assessment years that the total income of the trust comprises only dividend and interest from the investment insecurities and no part of it seems to have been applied on any specific charitable purpose. In this view of the matter, we are of the opinion that the Tribunal has rightly come to the conclusion that the assessee is not entit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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