TMI Blog1995 (8) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... ption under section 11 of the Act, despite what is contained in section 13(1)(bb) of the Act. The assessee is a society, registered under the Societies Registration Act and its objects as found in its memorandum of association are as follows : "....to run the Virudhunagar Hindu Nadars' Abivirudhi Panjukadai Mahamai and to develop it and thereby, (i) to provide relief of the poor, education and medical relief ; (ii) to establish and maintain educational institutions . . . . to give aid to educational institutions ; . ... (x) to establish and run income earning industries to achieve the three main objects of our society, viz., to provide relief of the poor, education and medical relief." The society is in existence for the past 150 years or so. Clauses 3 and 4 of the Rules and Regulations of the society run as follows : " 3. The funds of the society shall comprise its income from the Mahamai contributed by its members as fixed by the general body from time to time, the rent and other incomes from the properties owned by the society, the cooly receipts of the cotton ginning machinery owned by the society and donations. 4. Mahamai shall be collected at such rates as ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in section 11 . ... shall operate so as to exclude from the total income . . . ., (bb) in the case of a charitable trust or institution for the relief of the poor, education or medical relief, which carries on any business, any income derived from such business, unless the business is carried on in the course of the actual carrying out of a primary purpose of the trust or institution." The first two authorities in relation to the case in Tax Case No. 648 of 1985 held that the abovesaid business of ginning and decorticating were not " carried on in the course of the actual carrying out of primary purpose of the trust or institution " and hence, was not exempt. The first authority in relation to the case in Tax Case No. 451 of 1986 also held so, though the first appellate authority therein differed, favouring the assessee. While dealing with this question, the Tribunal, in its order dated June 24, 1983 (in relation to the first of the two cases), inter alia, observed as follows : " Obviously, the business carried on by the assessee is not in the course of the actual carrying out of the primary objects of the trust. If we ignore the provisions of section 11(4), it would appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he old Act of 1922, income derived from a business carried on for the purpose of advancing an object of general public utility was excludible from the assessee's total income, even if such advancing involved the carrying on of an activity for profit, if the income was applied wholly for the purposes of the institution and either the business was carried on in the course of the actual carrying out of a primary purpose of the institution or the work in connection with the business was mainly carried on by the beneficiaries of the institution, In CIT v. Dharmodayam Co. [1977] 109 ITR 527 (SC), which only affirmed the decision in CIT v. Dharmodayam Co. [1974] 94 ITR 113 (Ker), the assessee derived income from the business of kuries (chits), apart from interest on security and income from property. In that context, the Supreme Court held taking into account what is contained in proviso (b) to the said section 4(3)(i), that the said kuries business itself was held under a trust for religious or charitable purposes and hence, the said business activity cannot be taken as undertaken by, or on behalf of the assessee and so the income derived by the assessee from the said kuries was exempt f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to, the realisation of the charitable purpose, the income therefrom will be entitled to exemption under section 11. In this connection, it is appropriate to note that section 11(4) specifically defines ' property held under trust ' as including a business undertaking. Moreover when it was found that judicial decisions had, held the restrictive clause in section 2(15) to control the fourth head only, and not also the first three heads in the definition, Parliament attempted to secure its original, intent by enacting clause (bb) in section 13(1). (emphasis supplied.) The two provisions represent the mode of finding finance for working out the purpose of the trust or institution, by deriving income from the corpus of the trust property and also from an activity carried on in the course of the actual carrying out of the purpose of the trust or institution." In the light of the abovesaid observation of the Supreme Court, we see great force in the argument of learned counsel for the Revenue. No doubt in CIT v. Thanthi Trust, [1982] 137 ITR 735 (Mad), this court found on the facts of the said case thus : " In the case on hand, the property held under trust is the business itself and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee in the present case. No doubt, clause 10 of the objects of the present trust as mentioned above, speaks as one of its objects, the establishment and running of income earning industries to achieve the " three main objects " of the said society that is, to provide relief to the poor, education and medical relief, but the Tribunal itself observes that the abovesaid clause 10 remains dormant. Further, in the initial portion of the abovereferred to objects of the assessee's society, as found in its memorandum of association, it is as follows : "to run the Virudhunagar Hindu Nadar's Abivirudhi Panjakadai Mahamai and to develop it and thereby, (1) to provide relief of the poor, education and medical relief. ..." From this it appears that the primary object of the abovesaid trust is to run the abovesaid Panjakadai Mahamai and to develop it, and that thereby only, relief of the poor, education or medical relief are to be provided. Thus, it may be said that providing relief of the poor, education and medical relief are not primary objects but secondary. But, however, in the abovesaid clause 10, these three are mentioned as " three main objects of our society ". From this it ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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