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Commissioner of Income-tax Vs. Sree Narayana Trust - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberIncome-tax Reference No. 5 of 1980
Judge
Reported in[1985]155ITR389(Ker)
ActsIncome Tax Act, 1961 - Sections 2(15) and 11
AppellantCommissioner of Income-tax
RespondentSree Narayana Trust
Appellant Advocate P.K. Ravindranatha Menon, Adv.
Respondent Advocate S. Eswara Iyer and; E. Subramonian, Advs.
Excerpt:
.....of the above objects and in particular to accept and administer any trust created in the name of sree narayana guru for the purpose of propagating his teachings or for the purpose of working for the educational advancement of backward people or for the material and spiritual well being of the people. ' 4. section 2(15) defines 'charitable purpose' as follows :2. (15) 'charitable purpose' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility. 13): where, therefore, the purpose of a trust or institution is relief of the poor, education or medical relief, the requirement of the definition of 'charitable purpose' would be fully satisfied, even if an activity for profit is carried on in the course of the actual carrying out..........purpose. 3. the objects of the trust, as stated in the deed, are: '(a) to maintain and develop the sree narayana college, the sree narayana college for women, the sree narayana college for men, the sree narayana college hostel for women, the staff hostel attached to the sree narayana college for women ; (b) to complete the work of establishing a technological institution at quilon and a college at sivagiri; (c) to establish and maintain other institutions intended for the educational, cultural, economic, social and religious welfare and advancement and for the physical well being of the people; (d) to accept any other trust created by anyone or body of persons for any of the above objects and in particular to accept and administer any trust created in the name of sree narayana guru for.....
Judgment:

Kochu Thommen, J.

1. The Income-tax Appellate Tribunal, Cochin Bench, has, pursuant to the judgment of this court in O. P. No. 1960 of 1977, referred to us the following question :

'Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that the income of the assessee for the assessment year 1971-72 is exempt from tax under Section 11 of the Income-tax Act, 1961 ?'

2. The assessee is the Sree Narayana Trust, Quilon, The trust was constituted by a deed of trust dated August 18, 1952. During the previous year relevant to the assessment year 1971-72, the assessee received a sumof Rs. 34,590 over and above expenditure. Its claim for exemption underSection 11 of the I.T. Act, 1961, was disallowed by the ITO on the ground that Clauses (c) and (d) of the objects of the trust did not disclose charitable purpose. Overruling that decision, both the AAC and the Tribunal held that neither of the Clauses was inconsistent with a charitable purpose.

3. The objects of the trust, as stated in the deed, are:

'(a) to maintain and develop the Sree Narayana College, the Sree Narayana College for women, the Sree Narayana College for men, the Sree Narayana College Hostel for women, the staff hostel attached to the Sree Narayana College for women ;

(b) to complete the work of establishing a technological institution at Quilon and a college at Sivagiri;

(c) to establish and maintain other institutions intended for the educational, cultural, economic, social and religious welfare and advancement and for the physical well being of the people;

(d) to accept any other trust created by anyone or body of persons for any of the above objects and in particular to accept and administer any trust created in the name of Sree Narayana Guru for the purpose of propagating his teachings or for the purpose of working for the educational advancement of backward people or for the material and spiritual well being of the people.'

4. Section 2(15) defines 'charitable purpose' as follows :

'2. (15) 'charitable purpose' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility.'

5. Referring to the first three limbs of that definition, the Supreme Court in Addl. CIT v. Surat Art Silk Cloth Mfrs. Association : [1980]121ITR1(SC) stated (p. 13):

'Where, therefore, the purpose of a trust or institution is relief of the poor, education or medical relief, the requirement of the definition of 'charitable purpose' would be fully satisfied, even if an activity for profit is carried on in the course of the actual carrying out of the primary purpose of the trust or institution.'

6. We do not see anything in Clauses (c) and (d) which is inconsistent with 'charitable purpose' as defined under the Act. We see no merit in the contention urged on behalf of the Revenue that the word 'physical' appearing in Clause (c) or 'material' in Clause (d) takes the object of the trust out of the definition. In our view, these clauses refer to the educational activity and matters incidental thereto which the trust is authorised to undertake to promote the interest of a backward people whose advancement is the most concern of, the trust.

7. The word 'physical' in Clause (c) refers to an aspect of educational activity. Clause (d) authorises the trust to accept any other trust created for the promotion of any of the objects mentioned in the deed of trust. The only objects of the trust, as shown in the deed of trust, are those closely connected with educational and related activities. Clause (d) authorising the trust to accept any other trust thus refers to an object which is purely charitable in scope. Promotion of material and spiritual well being of a backward people is indeed a charitable purpose. In the circumstances, we do not agree that either the word 'physical' or 'material' takes it out of charitable purpose. Both the AAC and the Tribunal have correctly, in our view, found that this is so. In the circumstances, we answer the question referred to us in the affirmative, that is, in favour ofhe assessee and against the Revenue. We direct the parties to bear their respective costs in this tax referred case.

8. A copy of the judgment under the seal of the High Court and the signature of the Registrar shall be forwarded to the Income-tax Appellate Tribunal, Cochin Bench.


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