1. The question of law which arises for consideration in these cases are common. We, therefore, propose to dispose of these two cases by this common judgment.
2. The assessee in I.T.R.C. No. 57 of 1974 in Aroor Brothers Charitable Trust, Managalore, and the assessee in I.T.R. C. No. 58 of 1974 is A. R. Mohan Rao, Charitable Trust, Mangalore. The assessees were treated by the income-tax department as charitable trusts entitled to the benefit of exemption under s. 11 of the I.T. Act, 1961 (hereinafter referred to as 'the Act'), till the assessment year 1968-69. But in the year 1969-70, the ITO took the view that s there was no charitable trust in existence they were not entitled to the exemption contemplated under s. 11. The assessee's preferred appeals before the AAC of Income-tax. He reversed the decision of the ITO and held that they were charitable trusts entitled to the benefit of s. 11. The department took up the matter in appeal before the Income-tax Appellate Tribunal, Bangalore Bench. The Income-tax Appellate Tribunal dismissed the appeals. Thereafter, at the instance of the department, the Tribunal referred to the following common question of law of this court :
'Whether, on the facts and i the circumstances of the case, the objects of the assesses trust constitute 'charitable purposes' within the meaning of s. 2(15) of I.T. Act, 1961 ?'
3. The trusts deeds of the two trusts in question are before us. Clause 4 in each of those deeds set out the objects of the trust in question. It reads :
'4. The objects of the trust ar the following and the benefits from the trust shall be open to all persons irrespective of caste, community or religion :
(a) Awarding the scholarships to deserving students. The scholarships may be given by way of loan or outright gratuity not returnable and/or partly by way of loan and partly by way of gift or gratuity or in any other matter appropriate to the situation.
(b) To pay for or advance for medical relief, expenses of marriage and other appropriate occasions in deserving cases.
(c) To create or manage endowments for prizes and scholarships in schools and colleges.
(d) To establish and run schools, destitute homes, hospitals, sanatoriums, libraries, art galleries, maternity and child welfare centres, family planning and other clinics, rural or urban medical relief services, etc.
(e) To contribute by way of donation or to advance moneys for the purpose of charitable, religious, education and cultural activities.
(f) To make contributions for renovations of any historical monuments of common interest or religious or cultural institutions.
(g) To construct buildings for schools, hostels, sanatoriums, etc., and donate them to Government, quasi-Government institutions or public bodies or run them under the management of the trust.
(h) To create endowments for doing research work in all branches of science and learning.' Clause 8 in each of the deeds reads : '8. As it is the desire of the author of the trust that the trustees shall endeavour to argument the trust fund, the trustees are hereby empowered to enter into partnership with any person or persons and also to engage in all such trades or business as agents or otherwise as they deem proper.'
4. It is contended on behalf of the department that since clause 8 authorizes the trusts in question to carry on trade or business with a view to making profit, it cannot be said that the cases come within the ambit of the definition of the expression 'charitable purposes' found in clause (15) of s. 2 of the Act and, therefore, the assesses cannot claim the benefit of s. 11
s. 2(15) reads :
''Charitable purpose' includes relief of the poor, education, medical relief and the advancements any other object of general public utility not involving the carrying on of any activity for profit.' It is not disputed before us that the objects of the trusts in question are those falling within the first three categories referred to in s. 2(15) of the Act, namely, relief of the poor, education and medical relief. At any rate it is not contended that the moneys of the trusts are being spent on any activity other than relief of the poor, education or medical relief. We, therefore, proceed on the basis that the objects mentioned in the trust deeds do not fall within the fourth category, namely, 'any other object of general public utility'. The only question which is canvassed before us by the department is that the clause 'not involving the carrying on of any activity for profit' appearing in s. 2(15) qualifies all the activities falling under any of the four categories mentioned in s. 2(15), viz., relief of the poor, education, medical relief and advancement of any other object of general public utility, and would not apply only to the last category, viz., 'advancement of any other object of general public utility'. In Sole Trustee, Loka Shihshana Trust v. CIT : 101ITR234(SC) , Khanna and Gupta JJ. left the above question open with the following observations (page 238) : 'It is, in our opinion, not necessary to express an opinion in this case on the question as to whether the words 'not involving the carrying on of any activity for profit' qualify the fourth object, viz., the advancement of any other object of general public utility or whether they also qualify the other three objects of relief of the poor, education and medical relief, because we are of the view that the object of the appellant-trust was not education but any other object of general public utility.'
5. Beg J. (as he then was), in his concurring judgment in that case, however, made some observations which implied that the last clause in s. 2(15) qualified only the fourth object and not the first three.
6. But the above question directly arose for decision before this court in Addl. CIT v. A. L. N. Rao Charitable Trust : 102ITR474(KAR) . The object clause of the trust in that case was identical with the object clauses in these cases and clause 8 of the trust deed in that case was similar to clause 8 in these cases. In that case a Division Bench of this court which included one of us (Srinivasa Iyengar J.) held that words 'not involving the carrying in any activity for profit' appearing in s. 2(15) qualified only the fourth object, viz., 'any other object of general public utility' and did not control the other three objects, namely, 'relief of the poor, education and medical relief'. In view of the above conclusion reached by the Division Bench it was held that the assessee in that case was a charitable trust entitled to relief under s. 11. Against that judgment the department filed a special leave petition before the Supreme court in Petition for Special Leave to Appeal (Civil) No. 1349 of 1977 and that was rejected by the Supreme Court by its order dated April 27, 1977.
7. S. R. Rajasekharamurthy, learned counsel for the department, however, argued, depending upon some of the observations made by the Supreme Court in Indian Chamber of Commerce v. CIT : 101ITR796(SC) that the decision of this court in the case of A. L. N. Rao Charitable Trust : 102ITR474(KAR) required to be considered. We do not think that the decision in Indian Chamber of Commerce's case : 101ITR796(SC) has in any way unsettled the view taken by this court. In the case of A. L. N. Rao Charitable Trust : 102ITR474(KAR) the object clause was similar to the object clauses in these two cases. The objects of the Indian Chamber of Commerce as can be seen from the facts narrated in the decision were those falling under the fourth category, namely, advancement of any other object of general public utility. The Supreme Court had occasion to notice and consider the effect of the decision in the case of Indian Chamber of Commerce : 101ITR796(SC) in a subsequent case, viz., CIT v. Dharmodayam Co. : 109ITR527(SC) . In the latter case, the Supreme Court held that the former decision had not in fact overruled the decision of the Kerala High Court in CIT v. Dharmodayam Co. : 94ITR113(Ker) although there were some observations to that effect and that the decision of the Kerala High Court in that case was in fact correct. In that view, the appeal filed against the decision of the Kerala High Court was dismissed.
8. It is also not shown that in the case of Indian chamber of Commerce : 101ITR796(SC) the Supreme Court has held that the last clause in s. 2(15), namely, 'not involving the carrying on of any activity for profit' would apply to all the four objects mentioned therein. On the other hand, it appears that the Supreme Court has held that the said clause qualifies only 'any other object of general public utility' from the following observation made therein (page 802) :
'When Parliament found this dubious growth of charitable chameleons the definition in s. 2(15) was altered to suppress the mischief by qualifying the broad object of 'general public utility' with the additive 'not involving the carrying on of any activity for profit'.
9. Moreover, the special leave petition filed against the decision in the case of A. L. N. Rao Charitable Trust : 102ITR474(KAR) had been dismissed by the Supreme Court after the decision in the case of Indian Chamber of Commerce : 101ITR796(SC) . Hence, no assistance can be derived by the department from that case.
10. We feel that there is no justifiable ground to take a view contrary to the view taken by this court in this case of A. L. N. Rao Charitable Trust : 102ITR474(KAR) . The first three objects in s. 2(15), namely, relief of the poor, education and medical relief are by themselves considered as charitable purposes and there was no need to qualify them. Because Parliament was introducing into the definition of 'charitable purpose' a new category of a general nature, namely, 'advancement of any other object of general public utility', it added the qualifying words appearing in the last clause to prevent adventures of purely commercial nature claiming the benefit of exemption under the Act.
11. Hence, following the decision in the case of A. L. N. Rao Charitable Trust : 102ITR474(KAR) , we answer the question referred to us in each of these cases in the affirmative and against the department. The assessees are entitled to costs. Advocate's fee Rs. 250, one set.