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The Commissioner of Income-tax Vs. Jaipur Charitable Trust - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtDelhi High Court
Decided On
Case NumberIncome Tax Reference No. 40 of 1965
Judge
Reported inAIR1971Delhi49; [1971]81ITR1(Delhi)
ActsIncome Tax Act, 1922 - Sections 4(3)(1)
AppellantThe Commissioner of Income-tax
RespondentJaipur Charitable Trust
Advocates: A.N. Kirpal,; D.K. Kapur,; G.C. Sharma,;
Cases ReferredEast India Industries (Madras) Private Limited v. Commissioner of Income
Excerpt:
income-tax act (1922) - section 4(3)(1)--'charitable purpose'--meaning of--expression 'object of general public utility' in the definition--construction of. the use of the word 'include' in sub-section (3) of section 4 shows that the definition of 'charitable purpose' is inclusive and not exhaustive. the words used are, however, of wide amplitude. the expression 'object of general public utility' in the definition of charitable purpose, is not restricted to objects beneficial to the whole of mankind, but an object beneficial to a section of the public is an object of general public utility. it is sufficient if the intention is to be benefit a section of the public as distinguished from specified individuals. the section of the community sought to be benefited must be sufficiently defined.....h.r. khanna, c.j. (1) this judgment would dispose of the following six income-tax references made under section 66(1) of the indian income-tax act, 1922 (hereinafter referred to as the act):- (1)income-tax reference no. 40 of 1965. the commissioner of income-tax v. jaipur charitable trust, delhi. (2)income-tax refernece nc. 25 of 1965. the commissioner of income-tax v. yogiraj charity trust delhi. (3)income-tax reference no. 42 of 1965. the commissioner of income-tax v. dalmia jain (jind state) charity trust, delhi. (4)income-tax reference no. 43 of 1965. the commissioner of income-tax v. bhriguraj charity trust, delhi. (5)income-tax reference no. 37 of 1965. the commissioner of income-tax v. dalmia jain charity trust, delhi. (6)income-tax reference no. 38 of 1965. the commissioner of.....
Judgment:

H.R. Khanna, C.J.

(1) This judgment would dispose of the following six Income-tax References made under Section 66(1) of the Indian Income-tax Act, 1922 (hereinafter referred to as the Act):-

(1)Income-tax Reference No. 40 of 1965. The Commissioner of income-tax v. Jaipur Charitable Trust, Delhi.

(2)Income-tax Refernece Nc. 25 of 1965. The Commissioner of Income-tax v. Yogiraj Charity Trust Delhi.

(3)Income-tax Reference No. 42 of 1965. The Commissioner of Income-tax v. Dalmia Jain (Jind State) Charity Trust, Delhi.

(4)Income-tax Reference No. 43 of 1965. The Commissioner of Income-tax v. Bhriguraj Charity Trust, Delhi.

(5)Income-tax Reference No. 37 of 1965. The Commissioner of Income-tax v. Dalmia Jain Charity Trust, Delhi.

(6)Income-tax Reference No. 38 of 1965. The Commissioner of Income-tax v. Dalmia Jain Charity Trust, New Delhi.

(2) The respondent-trusts were created by Seth Ramkrishna Dalmia. The first four trusts were created as per trust-deeds dated April 12, 1948, March 7, 1949, June 14, 1948 and March 9, 1949 respectively. The Trust which is the subject matter of 5th and 6th References, was created as per trust-deed dated June 1, 1946.

THEfollowing question has been referred to this Court in all the six cases :-

'WHETHERon the facts and in the circumstances of the case the income of the trust which was spent on religious and charitable purposes within the taxable territories was exempt under Section 4(3)(i) of the Indian Income-tax Act, 1922.'

(3) Reference No. 40 of 1965 relates to assessment years 1954- 1955, 1955-56, 1956-57, 1957-58, 1958-59, 1959-60 and 1960-61. The assessment years covered by Reference No. 25 of 1965 are 1953-54, 1954-55, 1955-56, 1956-57, 1957-58 and 1958-59. Reference No. 42 of 1965 pertains to assessment years 1956-57, 1957-58 and 1958-59, while Reference No. 43 of 1965 is in respect of assessment years 1953-54, 1954-55, 1955-56, 1956-57, 1957-58 and 1958-59. Reference No. 38 of 1965 relates to assessment years 1948-49 and 1949-50, while Reference No. 37 of 1965 relates, in respect of the same Trust, to the assessment years 1953-54, 1954-55, 1955-56, 1956-57. 1957 58 and 1958-59.

(4) Arguments have been addressed in Reference No. 40 of 1965 relating to Jaipur Charitable Trust; According to Mr. Kirpal on behalf of the Commissioner of Income-tax and Mr. Sharma on behalf of the assessed-Trust the terms of the Trusts in all the cases are similar and the pattern of financial dealings of the various Trusts is also the same. It has been further stated by the learned counsel for the parties that the decision in the case of Jaipur Charitable Trust would also govern the other cases. In the circumstances it would be necessary to give the facts leading to Reference No. 40 of 1965.

(5) Jaipur Charitable Trust, as stated earlier, was created by Seth Ramkrishan Damia as per deed of Trust dated April 12, 1948. The preamble of the Trust reads as under :-

'WHEREASthe founder, who originally belongs to Jaipur State, has always been desirous of creating a religious and charitable trust in Jaipur State for the benefits of the public in general and for the people of Jaipur State in particular.

'ANDWHEREAS the Founder has now decided to create such a Trust to be called the Jaipur Charitable Trust (hereinafter referred to as the TRUST) and has dedicated thereforee and endowed the same with Rupees Ten Thousand and has handed over the said sum of Rupees Ten Thousand to the Trust, subject to and on the terms and conditions set out herein : And Whereas with a view to secure the proper and permanent administration of the Trust, it is considered desirable to execute a formal Deed of Trust.'

(6) Clause I of the trust deeds with the name of the Trust, while Clause 2 provides that the sum of Rs. 10,000.00 shall be the property of the Trust. According to Clause 3 of the Trust Property would include the sum of Rs. 10,000.00 and all additions and acquisition therewith. Clause 4 pertains to the location of the Head Office of the Trust, while clause 5 provides for the objects of the Trust and reads as under:-

'5.The objects of the Trust shall include the following: (A)(I)To open, found, construct, establish, take over, equip, promote, conduct, maintain, support, subsidise, grant aids and make donations to schools, colleges, Pathshalas, boarding houses, reading clubs, libraries, art, music or literary societies and other institutions, educational or otherwise, associations, printing presses, journals, news papers, periodicals, and other publications for imparting or developing religious, commercial, industrial, legal, medical, engineering, scientific or other knowledge or training.

(II)To give stipends, scholarships, traveling expenses allowances and monetary aids to students and scholars in India and abroad engaged in any of the pursuits referred to in sub-clause (i).

(III)To found, construct, maintain, support, assist or grant aids or subscriptions to temples, prayer or congregational halls or other buildings for cultural, social or religious discourses.

(IV)To open, found, conduct, maintain or contribute to the opening and maintaining of such institutions where work at living wages can be provided to poor and deserving people and also be conducive to the development of industries and benefit of the poor.

(V)To open, found establish, equip, finance, assist, maintain, or contribute to religious, commercial, technical, industrial, or commercial concerns, institutions, associations or bodies imparting any type of training or providing employment to persons.

(VI)To give donations, subscriptions or contributions to any other charitable Trust in Jaipur State or outside.

(VII)To help widows, orphans, lunatics, indent persons and to give relief to the poor and distressed.

(VIII)To build, equip, take over, conduct maintain and grant aids to dispensaries, maternity homes, Hospitals, lunatic asylums of any other institutions of the like nature.

(IX)To erect and maintain Dharamshalas, poorhouses, public parks etc.

(X)To construct, erect and maintain bridges, bathing ghats, and cremation grounds for the use of the public.

(XI)To give relief by subscription or otherwise during famins, flood, earthquake, pestilence or any other calamity.

(XII)To establish, help or maintain institutions for the cultural, social or economic .advancement of any country or countries.

(XIII)To promote the well-being of humanity by establishing or assisting the formation or aiding of humanitarian institutions, and to start, encourage, promote or support institutions and societies reconcile and harmonise the conflicting social and economic interests of the peoples of the world and to unite them in such a manner as may best ensure the attainment of proper shelter, food and clothing, as well as peace and hapiness of the humanity at large.

(XIV)(a) To subscribe to such other charitable objects as the Trustees may deem proper.

(B)For the purpose of carrying out the aforesaid objects, the Trustees may :

(I)Purchase or otherwise acquire any property, rights, leases, concessions, etc.

(II)Purchase or otherwise acquire, start, establish, equip or close any business, undertaking or industry.

(III)Purchase acquire or undertake the whole or any part of property and/or liabilities of any person, firm or company.

(IV)Train persons in any business or industry and grant the stipends, allowances or bonuses as may be determined by the Trustees from time to time.

(V)Enter into all necessary contracts incidental or conducive to the fulfillment of the aforesaid objects.

(7) Provided that all the income and profits derived from these shall be utilised for the objects herein before mentioned and in the manner provided in this Trust Deed.

ACCORDINGto Clause 6 the property of the Trust shall vest in Trustees, while clause 7 provides as to who shall be the Trustees including Life Trustees. Clause 8 makes provision for the Chairman of the Board of Trustees. Clause 9 reads as under :-

'9.The Trustee shall carry out the aforesaid objects from out of the net income of the Trust left after meeting the expenses of management and all charges and outgoings so far as such income shall permit, and shall not utilize the income or any portion thereof for any other objects or purpose.'

(8) Clause 10 provides for the utilization of the income of the Trust within the Jaipur State up to a prescribed minimum, while clause 11 was under :-

'11.The Trustees are hereby authorised and invested with powers to acquire, hold, carry on and manage any trade or business or any share thereof or utilise the Trust property of funds belonging to the Trust, and the income, profits, and gains thereof shall be utilised and applied only for and on behalf of the Trust. The Trustees shall have full power and discretion in employing the whole or any portion of the Trust property or any funds of the Trust in such trade or business or running business concerns or Managing Agencies or other investments or shares or securities as they may deem proper. They shall have full right and power to carry on such trade or business for as long a time as they may decide or to extend or vary the same or any branch or portion thereof or to change such investment into such other trade or business or investments or shares of public or private limited companies and other securities as the Trustees may deem proper.'

(9) Clauses 13, 14, 16, 19 and 30 were in the following terms :- '13. The Trustees shall have the power to sell all kinds of assets and property of the Trust or any part thereof of exchange the same for equality of exchange and to apply the money to arise from any such sale or to be received from equality of exchange as aforesaid for adding to the general funds of the Trust or for the purchase of any business or trade, lands or buildings, or for effecting alterations or improvements or fore repairs thereto or for any other purpose of the Trust.

14.The Trustees may lease or let out on rent or royalty any land or building or any part thereof belonging to the Trust or acquired or constructed for the purposes of the Trust or any land or building vested .in it, or sub-lease or give right to exploit any concession or licenses or royalty to any person either from year to year or for a term of years or at such rent and subject to such conditions and convenants as they may think fit, and the rent or royalty so received shall form part of the income of the Trust property and be applicable accordingly.

16.The Trustees may, at any time, if they consider it necessary or beneficial to the Trust raise or borrow money for the use and benefit of the Trust on any terms and on any security or otherwise as they consider proper.

19(A).The Trustees may deposit any money, subject to the terms of these presents and whether required for the expenses of the Trust or not, in any bank or in any Joint Stock Company and withdraw the same from time to time a sthey may decide.

(B)No portion of the Trust Fund shall be lent to or kept in deposit with any of the Trustee apply any portion partner, nor shall any of the Trustees apply any portion of the Trust property or fund for his own use of benefit either directly or indirectly.

30.The aim, object, purposes pursuits and other provisions of this Trust Deed have been framed and laid down in accordance with law so that this Trust shall never fail. But if at any time the Trustees find or come to know that any provision herein is invalid or contrary to law, it shall be their duty to cancel and treat as cancelled such provision so that the other provisions hereof may not be rendered invalid or otherwise affected'.

(10) We are not concerned with the other Clauses It was claimed before the Income-tax Officer that the income of the Trust was exempt under section 4(3) (i) of the Act on the ground that the property was held under Trust for religious or charitable purposes. The Income-tax Officer referred to the various clauses of the Trust and held that some of the objects of the Trust gave a discretion to the Trustees for applying funds of the Trust for purposes which could not be regarded charitable in the eye of law. It was further observed that if out of several objects of the Trust, some of them were found to be noncharitable, the whole Trust would fail and no part of its income would be exempt from tax. The Income-tax Officer further consider the financial dealings of the Trust and observed that they save the appearance of a sham affair. It was also observed that it was not a genuine charitable Trust as claimed by the assessed but its creation and existence were only meant to be devices for the benefit of the settler and the concerns controlled by him.

(11) On appeal it was contended that the sole and dominant purpose of the Trust was for charitable purposes including advancement of public utility. The Appellate Assistant Commissioner concurred with the view of the Income-tax Officer and confirmed his findings that some of the objects of the Trust were not of charitable nature and that the Trustees in their discretion had been authorised to utilise the Trust income for any of the purposes enunciated in the Trust deed. The Appellate Assistant Commissioner thereforee held that the Trust was of a noncharitable nature and no part of its income was exempt from tax. The assessed then preferred appeals to the Tribunal and urged that no clause of the Trust deed was in conflict with the provisions of Section 4(3) (i) of the Act. The Tribunal held that objects of the Trust were wholly for religious and charitable purposes. The Tribunal further observed that in the Deed of Trust the Founder had expressed in unambiguous terms his anxiety that the deed should not become invalid for the reason that some object might be considered unlawful. The Trust was, accordingly, held entitled to exemption under Section 4(3) (i) in respect of the amount spent on religious and charitable purposes within the taxable territory. On applications by the Commissioner of Incometax, the Tribunal referred the question reproduced above to this Court.

SECTION4(3)(i) of the Act reads as under:-

'ANYincome, profits or gains falling within the following classes shall not be included in the total income of the person receiving them :

(I)Subject to the provisions of clause (c) of subsection (1) of section 16, any income derived from property held under trust or other legal obligation wholly or religions or charitable purposes, in so far as such income is applied or ac cumulated for application to such religious or charitable purposes as relate to anything done within the taxable territories, and in the case of property so held in part only for such purposes, the income applied or finally set apart fro application thereto : 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 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;'

(12) According to the last clause of sub-section (3) of Section 4, 'in this sub-section 'charitable purpose' includes relief of the poor, education, medical relief and the advancement of any other object of general public utility, but nothing contained in clause (i) or clause (ii) shall operate to exempt from the provisions of this Act that part of the income from property held under a trust or other legal obligation for private religious purposes which does not ensure for the benefit of the public.' The use of the word 'include' shows that the definition of 'charitable purpose' is inclusive and not exhaustive. The words used are, however, of wide amplitude. The expression 'object of general public utility' in the definition of charitable purpose, is not restricted to objects beneficial to the whole of mankind. An object beneficial to a section of the public is an object of general public utility. It is sufficient if the intention is to benefit a section of the public as distinguished from specified individuals. The section of the community sought to be benefited must be sufficiently defined and identifiable by some common quality of a public or impersonal nature: where there is no common quality uniting the potential beneficiaries into a class, it might not be regarded as valid. See in this connection: Commissioner of Income-tax v. Andhra Chamber of Commerce : [1965]55ITR722(SC) .

(13) Although the words 'charitable purpose' have a wide connotation, the language of Section 4(3)(i) makes it manifest that to claim exemption under the clause it has to be shown that the income was derived from property which was held under trust or other legal obligation wholly for religious or charitable purposes. The words 'wholly for religious or charitable purposes' show that the income from trust property would only be exempt if all the objects of the trust are of a religious or charitable nature. In case a trust has ten distinct and separate objects and nine of them are of a 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 the above clause. The reason for that 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. It has, thereforee, been enacted that to claim the benefit of the above exemption the property must be held under trust or other legal obligation wholly forreligious or charitable purposes. The only relaxation, which has been permitted in such cases, is that if 'all the primary objects of the trust are of a religious and charitable nature, the existence of an ancillary or secondary object which is not of a religious or charitable nature but which is intended to subserve the religious and charitable objects, would not prevent the grant of such an exemption. This is so because such an ancillary or secondary object even though not of a religious or charitable nature, is intended to effectuate the main and primary objects of the trust which are of religious or charitable nature.

(14) We may in this context refer to some of the decided cases on the subject. In Maulana Mohammad Ibrahim Riza Malak v. Commissioner of Income-lax Air 1930 P.C. 226 some property was vested in the assessed as the head of Dawood Borah tribe. The profits from the property were to be treated as part of the income of the community. On reference to the trust-deeds it was found that some of the purposes were not of a religious or charitable nature. It was held that the income derived from the property was not entitled to exemption under Section 4(3) (i) of the Act and that it was assessable to incometax. A case of which the facts are more akin to those of the present case, is East India Industries (Madras) Private Limited v. Commissioner of Income-tax : [1967]65ITR611(SC) . In that case a trust was established for various objects, one of which was to manufacture buy, sell and distribute pharmaceutical, medicinal, Chemical and other preparations and articles. The objects included several charitable and religious purposes. According to one of the clauses of the trust-deed, the objects shall be independent of each other and the trustees would have discretion to apply the property of the trust in carrying out all or any of such objects of the trust as the trustees might deem fit. Question arose whether the property o.f the trust was held wholly for religious or charitable purposes within the meaning of Section 4 (3)(i) of the Act. It was held that, as the carrying of a business of manufacture, sale & distribution of pharmaceutical, medicinal and other preparations was neither charitable nor reli- gious in character, and as the trustees could under the deed validly spend the entir income of the trust on that non-charitable object, the trust property was not help wholly for religious or charitable purposes within the meaning of Section 4(3)(i). Ramaswami, J., speaking for the court observed:

'INthe present case, it appears from the deed of trust that one of the objects of the trust, .namely, item 4, is not for charitable or religious purposes. Item No. 4 is 'to manufacture, buy, sell and distribute pharmaceutical, medicinal, Chemical, and other preparations and articles such as medicines, drugs, medical and surgical articles, preparations and restoratives of food'. It may be that most of the other objects of the trust are religious and charitable in nature but it item No. 4 is not charitable, then the conditions envisaged by section 4(3)(i) of the Act are not fulfillled a,nd the exemption conferred by section 15B of the Act cannot be applied. Clause 5(i) of the trust deed states that 'the trustee shall have power to apply the whole or any part of the trust property or fund whether capital or income in or towards payment of the expenses of the trust or for or towards all or any of the purposes of the trust provided any property or money held in special trust shall be applied only for that purpose and not otherwise'. In the present case, there is no special trust that is to say no particular item of property has been burdened with the performance of any specific object of the trust. It is thereforee mainfest that under clause 5(i) of the trust deed it is open to the trustees to utilise the income for any one of the objects of the trust to the exclusion of all other objects. In other words it would not be a violation of the trust if the trustees devoted the entire income to the carrying on of a business of manufacture, sale and distribution of pharmaceutical, medicinal and other preparations. In our opinion this particular object of the trust is neither charitable nor religions in character. If the trustees can, under a trust held validity, spend the entire income of the trust on this non-charitable object, it is difficult to hold that the trust property is held under a trust or other legal obligation wholly for religious or charitable purposes within the meaning of section 4(3)(i) of the Act.'

(15) Similar view was taken in the case of Lakshmi Narain Lath Trust v. Commissioner of Income-tax One of the objects of the trust deed in that case was not of a religious or charitable nature though in fact it was found that the income of the trust had been used exclusively for purposes. It was held that in view of the full discretion in the trustees to spend the trust funds for an object other than a religious or charitable nature, the exemption under section 4(3)(i) of the Act was not available to the assessed. In the case of Commissioner of Income-tax v. Andhra Chamber of Commerce, (supra), the primary objects of the Andhra Chamber of Commerce were to promote and protect trade, commerce and industries, to aid, stimulate and promote the development of trade, commerce and industries, and to watch over and protect the general commercial interests of India or any part thereof. It was provided that the income and property of the Chamber of Commerce would be applied solely towards the promotion of its objects. The Chamber of Commerce, after purchasing a building, made some alterations in it a.nd moved its offices into that building and let out portions of it to tenants. Question arose whether the building was property held under a trust or other legal obligation wholly for charitable purposes and the income from that building was exempt from tax under section 4(3)(i) of the Act. It was held that the primary objects of the trust being of general public utility were of a charitable nature. It was pointed out on behalf of the revenue that according to clause 3(g) of the memorandum of association of the Chamber, it could urge and oppose legislative and other measures affecting trade, commerce or manufacturers, and such objects of the Chamber was not wholly of a charitable nature. Repelling the above contention, Shah, J., speaking, for the Court, observed:

'BUTclause 3(g) is not the primary object of the assessed : it is merely incidental to the primary objects of promotion or protection of trade, commerce and industries, or to aid stimulate and promote the development of trade, commerce and industries or to watch over and protect the general commercial interests.

(16) The expression object of general public utility' in section 4(3) would prima facie include all objects which promote the welfare of the general public. It cannot be said that a purpose would cease to be charitable even if public welfare is intended to be served thereby if it includes the taking of steps to urge or oppose legislation affecting trade, commerce or manufacture. If the primary purpose be advancement of objects general public utility, it would remain charitable even if an incidental entry into the political domain for achieving that purpose, e.g., promotion of or opposition to legislation concerning that purpose, is contemplated.

(17) Keeping the above principles in view, we are of the opinion that the property held by the assessed-trust was not 'wholly for religious or charitable purposes' and as such the assessed is not entitled to the exemption under section 4(3)(i) of the Act. The objects of the trust have been reproduced above and though a good many of them are of a religious or charitable nature, some of them are not a religious or charitable nature. Under clause 5(a)(v) of the trust deed dated April 12, 1948, it can be a valid object of the trust to open and establish an industrial or commercial concern providing employment to persons under clause 5(b) of the deed for the purpose of carrying out the object of the trust, the trustees may purchase or otherwise acquire any property rights, leases or concessions or might acquire or start establish, equip or close any business, undertaking or industry. Power has also been given for that object to the trustees to purchase, acquire or undertake the whole or any part of property and/or liabilities of any person, firm or company. According to clause 11 of the trust deed, the trustees are authorised to acquire, hold, carry on and manage any trade or business or any share thereof. The trustees have also been given full power and discretion in employing the whole or any portion of the Trust property or any fund of the Trust in such trade or business or running business concerns or Managing Agencies or other investment or shares or securities of properties as they may deem proper. The trustees have further been given power to change investment of the trust property into such trade or business or investments or shares of public or private limited companies and other securities as they might deem proper. Power has also been given under clause 16 of the trust deed to the trustees to borrow money for the use and benefit of the trust. According to clause 30 if any object of the trust was found to be invalid or contrary to law it would not affect the other objects of the trust. The various objects of the trust can, thereforee, be taken to be independent. There is nothing in the trust deed which can prevent the trustees from applying the entire trust property for an object which is not of religious or charitable nature like the one mentioned in clause 5(a)(v) of the trust deed for establishing an industrial or commercial concern providing employment to persons. The condition in that clause that the industrial or commercial concern must provide employment to persons is manifestly superfluous and redundant because an industrial or commercial concern must in the very nature of things provide employment to some persons. The establishment of industrial or commercial concern normally postulates a profit motive and there is nothing in the trust deed which rules out the element of profit by the trust. A trust founded for the object of setting up industrial or commercial concern would obviously be not for a religious or charitable purpose. It also cannot be said that the .non-religious and non-charitable objects of the trust in the present case are not primary objects but are of secondary and ancillary nature to subserve other objects. We, thereforee, have arrived at the conclusion that the property of the trust in question cannot be held to be wholly for religious or charitable purposes.

(18) Shri Sharma on behalf of the assessed has referred to the case of Commissioner of Income-tax v. P. Krishna Warriar : [1964]53ITR176(SC) . The testator in that case who was carrying on the business of making and selling Ayurvedic medicines under the name of Arya Vaidya Sala, by his will, vested the business on trustees directing them to apply 60 per cent. of the income thereof to charitable purposes and 40 percent for the benefits of his family. Question arose whether 60 per cent. of the income, which was to be applied for charitable purposes, was liable to tax under proviso (b) to section 4(3)(i) of the Act on the ground that the entire income was not applied for charitable purposes. It was held that the business was 'property' held in trust partly to charitable purposes within the meaning of the main part of section 4(3)(i) and that clause (b) of the proviso did not apply to a business held in trust. 60 per cent. of the income from the business was held to be exempt from income-tax under section 4(3)(i) of the Act. Section 4(3)(i), it was further observed, takes in every property or fractional part of property held in trust wholy for religious and charitable purposes. Subha Rao J. (as he then was), who spoke for the Court in the above case, dealt with the expression 'in part' as used in section 4(3)(i) and held that it did not refer to an aliquot part and that it must apply to a case other than a property a part of which is wholly held for religion or charitable purposes. It would thus appear that the question which arose in that case was different from that which needs determination in the present case. As such, the assessed, in our opinion cannot derive much help from the above authority.

(19) Reference has been made on behalf of the assessed to the case of Alt India Spinners' Association v. Commissioner of Incometax. Bombay, reported in (1944) 12 Itr 482. The assessed in that case, the Ail India Spinners' Association, was formed as an unregistered association by a resolution of the All India Congress Committee passed in 1925 for the purpose of the development of the village industry of hand-spinning and handweaving. It was held by their Lordship of the Judicial Committee that the property of the association was held under trust or under a legal obligation and as the primary object of the association was the relief of the poor and the advancement of other purpose of general public utility the income of the association was exempt under section 4(3)(i) of the Act. It was further held that if an association is set on foot by a political organisation and is connected with it but still has for its real object the relief of poverty, its connection with political organization would not make it real object any the less charitable. The material question, as would appear from the narration of facts in the cited case. was substantially different and as such it cannot be of much avail to the assessed.

(20) The other cases to which reference has been made on behalf of the asessee are Commissioner of Income-tax v. Bengal Home . Industries Association (1963) 48 Itr 181, Hyderabad Stock Exchange Ltd. v. Commissioner of Income-tax : [1967]66ITR195(AP) , and Commissioner of Income-tax v. Radhaswami Satsang Sabha (1954) 25 Itr 473. The primary object of the Bengal Home Industries Association was to promote and develop home industries arts and crafts in the Presidency of Bengal. The income of the association was to be applied solely towards the promotion of and carrying out of its objects and no portion of it could be paid or transferred directly or indirectly by way of dividend to its members. In the case of winding up the surplus could not be distributed to its members but had to be transferred to a similar institution. It was held by the Calcutta High Court that the assessed was a public charitable institution and, as such, entitled to exemption under section 4 (3)(i) of the Act. In the case of Hyderabad Stock Exchange Ltd. v. Commissioner of Income-tax(8), the aims and objects of the assessed were not only to further the interests of brokers and dealers but also to assist, regulate and control the trade in securities, to maintain high standards of commercial honour and integrity, to promote and inculcate honourable practices, discourage and suppress malpractices, to settle disputes and decide all questions of usage, custom or courtsey in the conduct of trade and business. The profits were not be distributed between the members but were to be utilised for the promotion of the objects of the exchange. It was held by the Andhra Pradesh High Court that an object beneficial to a section of the public is an object of general public utility and as that test was satisfied by the stock exchange its income was exempt from tax under section 4 (3)(i) of the Act, In the case of Commissioner of Income-tax v. Radhaswami Satsang Sabha (9), the assessed was an association of the followers of Radhaswami faith of the Dyalbagh School of Satsangis. The Sabha was a body registered under the Charitable Societies Registration Act, 1860. Under the guidance of the Guru and as a result of the contributions made by his followers several industrial and commercial concerns were started for the benefit of Satsangis but they were not run by the Sabha for indvidual profit nor were the profits divided among the members. One of the questions, which arose in that case, was whether the income of the industrial and commercial concerns started by the Sabha was exempt under section 4 (3)(i) of the Act. The Allahabad High Court answered this question in the affirmative. It was held that the starting of industrial and commercial concerns by the Sabha was in furtherance of its object of a religious and charitable nature. The learned Judges in this context referred to the history of the Sabha and the previous litigation to which the assessed was a party. The above-mentioned cases were decided on their own facts. In any event so far as the present case is concerned, as mentioned earlier, its facts are much more akin to those of East India Industries (Madras) Private Limited v. Commissioner of Income-tax(8).

(21) We would, thereforee, answer the question, referred to this Court in the six cases, in the negative. The parties, in the circumstances, shall bear their own costs.


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