TMI Blog1980 (4) TMI 66X X X X Extracts X X X X X X X X Extracts X X X X ..... 03 ITR 777. Actually these decisions were concerned with five trust deeds executed by Seth Ramkrishna Dalmia on various dates in 1946, 1948 and 1949. These trusts were the Jaipur Charitable Trust, Yogiraj Charity Trust, Dalmia Jain (Jind State) Charity Trust, Bhriguraj Charity Trust and Dalmia Jain Charity Trust, Delhi. This explains the difference in the cause title between the decision of the Delhi High Court and the case decided by the Supreme Court. Even now along with the present case of Jaipur Charitable Trust we have also heard the references of Dalmia Jain (Jind State) Charity Trust and the Dalmia Jain Charity Trust for the assessment years 1959-60 to 1966-67 and 1965-66 to 1966-67. These trusts appear to have been subsequently renamed as the Jagdamba Charity Trust and the Durga Trust. However, for purposes of convenience, the other two trusts are dealt with separately as there are some minor differences which require to be noticed. From what has been stated above it would appear to follow that the assessee's claim for exemption for the assessment year 1961-62 has to fail. This claim is based on the trust deed dated April 18, 1948. All the relevant clauses of the trust de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he non-religious and non-charitable objects of the trust were not the primary objects. The property of the trust could not, therefore, be said to be held wholly for religious or charitable purposes " and its income was not exempt from tax under s. 4(3)(i). The words " wholly: for religious or charitable purposes " in s. 4(3)(i) show that the income from trust property would be exempt only if all the objects of the trust are of a religious or charitable nature. In case a trust has ten distinct objects and nine of them are of religious or charitable nature but the tenth is not of a religious or charitable nature and there is nothing to prevent the trustees from applying the property of the trust in carrying out any of the objects of the trust including the object which is not of a religious or charitable nature, the income derived from the property of the trust would not be exempt from taxation under s. 4(3)(i). The reason is that the trustees in such an event can apply the property of the trust exclusively for that object of the trust which is not of a religious or charitable nature. The court followed the principle laid down in this respect by the decision of the Privy Council in M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is, as already stated, in regard to the definition of " charitable purpose ". This definition, contained in s. 2(15), repeats the language of the definition contained in the 1922 Act but adds ten words (underlined hereinbelow) at the end. The definition now reads " 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 ". The additional words introduced in the above definition clause had given rise to good deal of difference of judicial opinion. But now the matter has been set at rest by the decision of the Supreme Court in Surat Art Silk Cloth Mills Manufacturers Association [1980] 121 ITR 1 (SC), on a direct reference made to it by the Income-tax Appellate Tribunal. It may be convenient, without referring in detail to the very exhaustive discussion in the judgment, to summarise the various points decided in the case, in so far as they are relevant for our present purposes. These are: (i) If there are several objects of a trust or institution, some of which are charitable and some non-charitable and the trustees or the managers in their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (AP) approved. Indian Chamber of Commerce v. CIT [1975] 101 ITR 796 (SC) overruled and CIT v. Dharmodaram Co. [1977] 109 ITR 527 (SC) approved. Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC) also accepted on this point. (v) 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 correct it would be the easiest thing for a trust or institution not to mention in its constitution as to how the purpose for which it is established shall be carried out and then engage itself in an activity for profit for carrying out such a purpose and thereby avoid the liability to tax. On the other hand, the correct interpretation is to see whether the purpose of the trust or institution in fact involves the carrying on of an activity for profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e latter renders the former unworthy of account. If the profit-making purpose holds a dominating role or even constitutes an equal component with the purpose of advancement of the object of general public utility, then clearly the definition in s. 2(15) is not satisfied. If the purpose is charitable in reality the carrying on of a business for carrying out the charitable purpose of the trust or institution does not detract from the purpose which permeates it. The real question whether a trust is created or institution is established for a charitable purpose falls to be determined by reference to the real purpose of that trust and not by the circumstance that the income derived can be measured by standards usually applicable to a commercial activity or by the quantum of the income. It is in the light of this judgment of the Supreme Court that we will have to scrutinise the purpose of the charitable trust and in doing so we have also to bear in mind the interpretation placed upon the trust deed by the earlier decision of the Supreme Court in Yogiraj Charity Trust [1976] 103 ITR 777. The previous decisions of the Supreme Court and this court have proceeded on the footing that the va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could be achieved. However, it is not open to us to consider this interpretation of the trust deed because, as already stated, this contention has been specifically considered and rejected by this court and the Supreme Court. In view of the findings in the earlier decisions in the case of the present assessee the trust cannot be considered as having a primary purpose of the charity with powers to the members to carry on a business in order to subserve that purpose. On the other band, each one of the objects set out in the trust deed should be treated as equal components of the trust deed. We have, therefore, to read sub-cl. (v) of cl. 5(a) of the trust deed as setting out an independent object and when read in the context of cls. 5(b), 9,11,13 and 16 there is no escape from the conclusion that one of the objects of the trust is to carry on a commercial activity and run a business. Once the argument that the primary purpose of the trust deed is charitable is out of the picture, it is also not possible to say that the activity contemplated by sub-cl. (v) of cl. 5(a) is intended to subserve the charitable character of the trust. To put in other words, having regard to the interpretat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. He invites attention in this connection to the observations at pp. 27 and 28 of the report of the Supreme Court decision where the court has dissented from the observations of Khanna J. and Krishna Iyer J. in Sole Trustee, Loka Shikshana Trust [1975] 101 ITR 234 (SC) and Indian Chamber of Commerce [1975] 101 ITR 796 (SC) cases. This argument appears to be attractive but the observations have to be taken in the context in which they occur. The Supreme Court was considering in the relevant passages the question of a trust or institution which has a predominant object of general public utility. The question was whether the exemption would be lost by such a charitable institution merely because it involves itself in the carrying on of an activity which results in profit. In dealing with this question the court observed that the mere fact that a profit-making activity or a business is carried on is not conclusive and that what is to be seen is whether the activity was propelled by to dominant profit motive or whether the dominant object of the activity was to carry out a charitable purpose. For instance, to take the facts of Surat Art Silk Cloth Mfrs. Association's case [1980] 121 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the trust in the present case could not be diverted for the benefit of the founder or any private individual but can only be utilised for the objects of the trust. This is so, but as the law stands at present, this alone is not conclusive. The question is whether the property is held in trust for religious or charitable purposes and this has to be answered in the negative for the above reasons. We have, therefore, come to the conclusion, though with some hesitation, that even the assessee's claims for exemption for the assessment years 1962-63 and 1963-64 are governed by the earlier decision of the Supreme Court in Yogiraj Charity Trust v. CIT [1976] 103 ITR 777. We, therefore, answer the question referred to us in the negative and in favour of the revenue. In the circumstances of the case, however, we make no order as to costs. I.T.Rs. Nos. 73 to 80172 These references raise the question of the eligibility for exemption of the Dalmia Jain (Jind State) Charity Trust, renamed as M/s. Jagdamba Charity Trust. The references relate to the assessment years 1959-60 to 1966-67. The trust deed in this case is dated 14th June, 1948. The provisions of the trust deed are similar to tho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... institutions commercial, technical or religious or pertaining to fine arts or industries, such as workshops, factories and other institutions for impart in-education in workmanship and for providing employment and means of earning adequate wages for the unemployed and the needy." Mr. G. C. Sharma, learned counsel for the petitioner, contends that the wording of these clauses is totally different and that unlike the case of the other two trusts this trust deed does not at all envisage the carrying on of any business. He points out that this distinction between the actual terms of the two sets of the trust deeds was not brought to the notice of the court here or before the Supreme Court when references relating to the earlier years were taken up. He, therefore, requests that the terms of this trust deed should be independently considered and that it should be held that the objects are wholly charitable. We find force in the contention of the learned counsel. Clauses (x) and (xi), though a little similar to the impugned clauses in cl. 5 of the trust deed in the case of the Jaipur Charitable Trust are, however, in substance fundamentally different. They do not envisage the carrying ..... X X X X Extracts X X X X X X X X Extracts X X X X
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