TMI Blog1994 (12) TMI 62X X X X Extracts X X X X X X X X Extracts X X X X ..... dated December 8, 1983. The petitioner-trust was created under an instrument of declaration of trust on March 1, 1954, for the purpose of establishing the Tamil daily ("Daily Thanthi") by the founder of the said newspaper one Sri S. B. Aditanar, who was carrying on the business of printing and publishing the said newspaper as the sole proprietor since 1943. The petitioner-trust is an assessee on the file of the second respondent Income-tax Officer in P. A. No. 47-005-AZ-5117. On July 9, 1957, the founder of the trust executed a supplementary deed wherein he declared that the trust created by the document dated March 1, 1954, was irrevocable. Again, the founder of the trust, on June 28, 1961, executed a supplementary deed. By the said supplementary deed, the founder directed that the surplus income of the said trust, after defraying all the expenses, should be devoted by the trustees for the following purposes: (1) Establishing and running a school or college for the teaching of journalism. (2) Establishing and/or running or helping to run schools, colleges or other educational institutions for teaching arts and science. (3) For establishing of scholarships for students of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated April 22, 1978, and September 25, 1978, has held that by reason of the judgment and decree of this court in C. S. No. 90 of 1961, the objects of the trust are only those set out in the schedule to the decree and they are charitable objects and that the petitioner will be entitled to exemption from tax in respect of such income derived from the business as is shown to have been actually parted with by it and actually spent on such charitable objects during the relevant previous years. On a reference made by the Tribunal, the Division Bench of this court in Tax Cases Nos. 1240 to 1245 of 1979 held that the petitioner-trust is entitled to claim exemption under section 11 of the Act. This judgment is in CIT v. Thanthi Trust [1982] 157 ITR 735. The special leave petition filed by the Department was dismissed by the Supreme Court. By Act 41 of 1975, the following clause was inserted in section 13 of the Act as section 13(1)(bb) with effect from April 1, 1977 : " 15. (1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof. . . . (bb) in the case of a charitable trust or institut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness is carried on by an institution wholly for charitable purposes and the work in connection with the business is mainly carried on by the beneficiaries of the institution, and separate books of account are maintained by the trust or institution in respect of such business..." For the assessment years 1984-85 to 1991-92, the second respondent herein passed orders of assessment in respect of the petitioner-trust, holding that the petitioner-trust is not entitled to claim exemption under section 11 of the Act, in view of Circular No. 372, dated December 8, 1983, issued by the Central Board of Direct Taxes and in view of sub-section (4A) of section 11 of the Act. Aggrieved by the said orders of assessment denying exemption to the petitioner under section 11 of the Act for the assessment years 1984-85 to 1991-92, the petitioner has filed these writ petitions seeking the reliefs set out earlier in the opening paragraph of this order. Dr. Debi Prasad Pal, learned senior counsel for the petitioner, submitted in the first place that the orders of the second respondent denying the claim of the petitioner regarding exemption under section 11 of the Act is based solely on Circular No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioner is not entitled to the exemption under section 11 of the Act, in view of the introduction of sub-section (4A) in section 11 of the Act, with effect from April 1, 1984. The further contention of learned senior counsel for the Revenue is that the petitioner has effective alternative remedies under the Act itself for challenging the assessment orders and, therefore, the petitioner is not entitled to any relief in these writ petitions. In the light of the rival contentions of learned senior counsel for the parties, the following points arise for consideration in these writ petitions : (1) Whether, on the facts and circumstances of the case, the second respondent is correct in denying exemption to the petitioner under section 11 of the Act, for the assessment years 1984-85 to 1991-92, in view of sub- section (4A) of section 11 of the Act ? (2) Whether Circular No. 372 dated December 8, 1983, is invalid on the ground that it is inconsistent with the provisions contained in sections 11(4A) and 11(4) of the Act, and whether the said Circular No. 372 dated December 8, 1983, and the orders of assessment challenged in these writ petitions, are liable to be quashed ? (3) Whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tself. In view of the said decision of the Division Bench of this court in CIT v. Thanthi Trust [1982] 137 ITR 735, rendered in a proceeding between the same parties interpreting the very same trust deeds and the decision in C. S. No. 90 of 1961, on the file of this court, there is no difficulty in holding that the petitioner-trust is a charitable trust for the relief of poor and education and that the business undertaking is property held under the trust and that the business is carried on only in the course of the actual carrying out of the primary purpose of the trust and therefore, the petitioner is entitled to claim the exemption under section 11(1) of the Act. As already stated, today, we have passed orders allowing Writ Petitions Nos. 198 to 202 of 1989 (Thanthi Trust v. Asst. CIT [1995] 213 ITR 626), which relate to the assessment years 1979-80 to 1983-84, relying on the decision of the Division Bench of this court in CIT v. Thanthi Trust [1982] 137 ITR 735, holding that the primary purpose of the trust is to carry out charitable objects and that the business is carried on only as a means in the course of the actual carrying out of the primary purpose of the trust and, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olly for public religious purposes, nor it is an institution and thus it does not satisfy either of the conditions prescribed in clauses (a) and (b) of section 11(4A) of the Act and, consequently, the petitioner cannot claim exemption under section 11(1) of the Act. We are unable to accept the above contention of learned senior counsel for the Revenue. As already pointed out, according to section 11(1)(a) of the Act, income derived from property held under trust (which includes a business undertaking), wholly for charitable or religious purposes to the extent to which such income is applied to such purposes in India, shall not be included in the total income of the previous year of the person receiving the same. It is clear that section 11(1)(a) concerns itself with income derived from the property held under trust which includes business undertaking so held, wholly for charitable or religious purposes, whereas sub-section (4A) of section 11, does not concern itself with any income derived from property held under trust for charitable purposes, but only concerns itself with income being profits and gains of business carried on by a trust wholly for public religious purposes or busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nless the conditions prescribed in clause (a) or (b) of sub-section (4A) are satisfied, leaving the income derived from property held under trust for charitable purposes, to be taken care of by the provisions of section 11(1)(a) read with section 11(4) of the Act. In these circumstances, we are of the view that the provisions contained in section 11(1)(a), so far is they relate to income derived from property held under trust for charitable purposes, as in the present case, are concerned, they are not affected or touched by the amendment introduced to section 11 by the insertion of sub-section (4A). Again by inserting sub-section (4A), if it was intended to narrow down the scope of section 11(1)(a) so as to withdraw the exemption enjoyed by income derived from property held under trust for charitable purposes, it would have been mentioned specifically that the scope of section 11(1)(a) was being restricted to that extent. But this not being done here, it cannot at all be contended that something that was already included in section 11(1)(a) has been removed by the insertion of sub-section (4A). If the petitioner can claim exemption on the plain wording of section 11(1)(a) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the business is mainly carried on by beneficiaries of the institution.' After the amendment of 1953, the clause read as follows: '(3) Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them : (i) . . . . any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, in so far as such income is applied or accumulated for application to such religious or charitable purposes as relate to anything done within the taxable territories. . . . Provided that such income shall be included in the total income--.... (b) in the case of income derived from business carried on on behalf of a religious or charitable institution, unless the income is applied wholly for the purposes of the institution and either-- (i) the business is carried on in the course of the actual carrying out of a primary purpose of the institution ; or, (ii) the work in connection with the business is mainly carried on by beneficiaries of the institution; (c) if it is applied to purposes other than religious or charitable purposes or ceases to be accumulated or set a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s income derived from business of the trust distinct from income derived from business carried on on behalf of a religious or charitable institution. Proviso (b), on the other hand, does not concern itself with 'any income derived from any property (including business) held under trust' but with 'income derived from business carried, on on behalf of a religious or charitable institution', that is to say, on behalf of a religious and charitable institution as distinct from a trust which latter is specifically governed by the provisions of section 4(3)(i) of the Act in regard to all kinds of property including business. The contention that the provisions contained in proviso (b) are a further restriction on the provisions of section 4(3)(i) and take the income derived from business of the trust from out of its ambit has been negatived in Charitable Gadodia Swadeshi Stores v. CIT [1944] 12 ITR 385 (Lah) ; J. K. Trust v. CIT [1958] 33 ITR 32 (Bom) ; Trustees of the Charity Fund v. CIT [1959] 36 ITR 513, [1959] Supp. 2 SCR 923 (SC) ; Dharma Vijaya Agency v. CIT [1960] 38 ITR 392 (Bom) ; CIT v. Cotton Textiles Export Promotion Council [1968] 67 ITR 539 (Bom) ; Dharmodayam Co. v. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of section 11(4A), as canvassed by learned senior counsel for the Revenue is accepted, no exemption can be granted under section 11(1)(a) in relation to any income derived from the property held under trust, unless the conditions prescribed under clause (a) or (b) of sub-section (4A) are satisfied. The construction of sub-section (4A), contended for on behalf of the Revenue, would thus have the effect of rendering sub-section (4) of section 11 redundant, after the enactment of sub-section (4A). As pointed out by the apex court, in Addl. CIT v. Surat Art Silk Cloth Manufacturers' Association [1980] 121 ITR 1, we cannot accept such a construction which renders sub-section (4) of section 11 superfluous and meaningless. On the other hand, the construction which we are placing on sub-section (4A), namely, that section 11(4A) will have no application to income derived from property held under trust for charitable purposes, leaves a certain area to section 11(4) of the Act, for its operation, notwithstanding the enactment of sub-section (4A) and, therefore, we must prefer that construction to the one submitted on behalf of the Revenue. The above view of ours is also fortified by the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the area of operation of section 11(4) of the Act, after the introduction of section 13(1)(bb) of the Act, held as follows : " Moreover, another consequence of the construction canvassed on behalf of the Revenue would be that section 11, sub-section (4), would be rendered wholly superfluous and meaningless. Section 11, sub-section (4), declares that for the purpose of section 11 'property held under trust' shall include a business undertaking and, therefore, a business can be held under trust for a charitable purpose and where it is so held, its income would be exempt from tax, provided, of course, the other requisite conditions for exemption are satisfied. It may be pointed out that section 11, sub-section (4), where it provides that a business may also be property held under trust, does not bring about any change in the law because even prior to the enactment of that provision, it was held by the Judicial Committee of the Privy Council in the Tribune's case [1939] 7 ITR 415 that property in the corresponding section 4(3)(i) of the Act of 1922 included business and this principle was affirmed by the pronouncements of this court in J. K. Trust v. CIT [1957] 32 ITR 535 and CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efer that construction to the one submitted on behalf of the Revenue." For all the reasons stated above, we have no hesitation in holding that sub-section (4A) of section 11 will have no application to income derived from property held under trust which includes business for charitable purposes, as in the present case and that the second respondent is not correct in denying exemption to the petitioner under section 11, for the assessnent years 1984-85 to 1991-92, in view of sub-section (4A) of section 11 of the Act and, therefore, the impugned orders are liable to be quashed. point No. 1 is answered accordingly. Point No. 2.--Circular No. 372, dated December 8, 1985, issued by the Central Board of Direct Taxes, which is also challenged in these writ petitions, reads thus : "The Finance Act has inserted it new sub-section (4A) in section 11 of the Income-tax Act to provide that the provisions of sub-section (1) of that section relating to exemption of income derived from property held under trust for charitable or religious purposes ; or of sub-section (2) thereof relating to iccumulation or setting apart of such income for application to such purposes ; or the connected provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, it is seen, from the records that some of the writ petitions in this batch, have been entertained by this court in the year 1989 and they are pending for nearly five years. The counter-affidavits in these writ petitions have been filed before this court, only on November 28, 1994, when these writ petitions were taken up for final hearing, raising the contentions that the petitioner is having an alternative remedy and that the writ petitions are liable to be dismissed on that ground. However, as the writ petitions have been admitted and kept pending before this court all these years, we are of the view that it is not proper to dismiss these writ petitions, at this stage, on the ground that the petitioner has not exhausted the alternative remedy. Inasmuch as these cases involve interpretation of section 11(4A) of the Act, on the undisputed facts of this case, and as it is also in the interest of the Revenue to have the issues in question settled early, the petitioner is not directed to avail of the remedy of appeal. Point No. 3 is answered accordingly. In the result, in view of our findings on points Nos. 1 to 3, the writ petitions are allowed, the orders of assessment passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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