TMI Blog2007 (9) TMI 229X X X X Extracts X X X X X X X X Extracts X X X X ..... M. S. Mittal for the assessee. JUDGMENT M. Y. EQBAL J.— 1. By this application under section 256(1) of the Income-tax Act, 1961, the following questions of law have been referred to this court for opinion "1. Whether, in the facts and circumstances of the case, the Tribunal was justified in holding that the trust was charitable-cum-religious trust and it was not hit by section 13(1)(bb) of the Act? 2. Whether, in the facts and circumstances of the case, the Tribunal was justified in holding that even if there is some miscarriage on account of breach of trust by the trustees, the benefit of section 11 cannot be denied if such miscarriage does not affect the vires of the validity of the trust? 3. Whether, in the facts and cir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed the claim of the assessee for entitlement of exemption under section 11 of the Act. Thereafter, for the assessment year in question, i.e., 1981-82, the Assessing Officer again disallowed the assessee-trust exemption under section 11 of the Act on the ground that there was violation of the provisions of section 13(1)(bb) of the Act inasmuch as the assessee-trust was cariying on business which is not for the primary purposes of the trust. The Assessing Officer also held that the assessee has violated the provisions of section 13(1)(c) of the Act because it has rented out the two cinema halls to one M/s. Kapur Chand Private Limited which, in their turn, gave the management and exhibition of films to one M/s. Ruhee Enterprises of Jamshedpu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K. Jhunjhunwala, learned counsel appearing for the Revenue, and Mr. M. S. Mittal, learned counsel appearing for the assessee. 7. The undisputed facts are that the assessee-trust was created by the late Hussainy Tafazul Karim of Jamshedpur by registered deed dated May 6, 1945, for religious and charitable purposes. The trust had its primary purposes and objects of spreading and imparting education according to Muslim tenets to Mohammadan boys and girls of the town of Jamshedpur. In that trust deed, complete details and the scheme of the management for disposal of the trust income have been incorporated. By the said deed, two cinema halls, namely, Jamshedpur Talkies and Karim Talkies, with its goodwill including the buildings, machinerie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o exclude from the total income of the previous year of the person in receipt thereof— (a) any part of the income from the property held under a trust for private religious purposes which does not enure for the benefit of the public; (b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste; (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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3) in so far as such use or application relates to any period before the 1st day of June, 1970." 11. Clause (bb) in section 13 was inserted by the Taxation Laws (Amendment) Act, 1975, with effect from April 1, 1977, but the said clause was finally omitted by the Finance Act, 1983, with effect from April 1, 1984. 12. In the instant case, as noticed above, in all assessment proceedings from 1969 onwards the character and objects of the trust were not disputed and had always been accepted by the Assessing Officer, the Commissioner of Income-tax (Appeals) and up to the Tribunal. 13. At the very outse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that its obligation being discharged by applying the income or property for those avowed or cherished purposes and even the existence of the trust deed is not required and this proposition is very much clear from the proviso to Explanation 1 to section 13 of the Income-tax Act where the word 'trust' has been given amplitude to encompass a valid or legal obligations to the discharged for the charitable or religious purposes. It is also to be noted that there is nothing in the appeal record to show that such omissions and commissions from the income-tax point of view rendered the trust invalid. We agree with the finding of the learned Commissioner of Income-tax (Appeals) that even if there being breach of trust which are in fact extraneo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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