High Court Of Madras
CIT vs. P. Iyya Nadar Charitable Trust
Sections 11, 13(1)(bb)
Asst. Years 1981-82, 1982-83, 1983-84
P.D. Dinakaran & P.P.S. Janarthana Raja, JJ.
Tax Case (Appeal) Nos. 259 to 261 of 2004 and 1547 to 1549 of 2005
20th February, 2006
Counsel Appeared
Mrs. Pushya Sitaraman, for the Appellant : J. Balachandar, for the Respondent
JUDGMENT
P.P.S. Janarthana Raja, J. :
The Tax Case (Appeal) Nos. 1547 to 1549 of 2005 are filed under s. 260A of the IT Act, 1961 by the Revenue, against the order of the Tribunal, Madras, ‘C’ Bench, in ITA Nos. 447, 448 and 449/Mad/1996. The Tax Case (Appeal) Nos. 259 to 261 of 2004 are filed by the Revenue against the order of the Tribunal, Madras, ‘C’ Bench in ITA Nos. 4186, 4187 and 4188/Mad/1987 and the same were admitted on 23rd July, 2004. The common substantial questions of law raised in the above appeals are as under :
“1. Whether, in the facts and circumstances of the case, the Tribunal was right in holding that s. 13 (1)(bb) would not apply to the trust although it was carrying on business ?
2. Whether the ratio of the Supreme Court’s judgment in the case of Asstt. CIT vs. Thanthi Trust (2001) 165 CTR (SC) 681 : (2001) 247 ITR 785 (SC) is not squarely applicable to the facts and circumstances of the case ?” 2. The facts leading to the above questions of law are as under :
(i) The assessment years are 1981-82, 1982-83 and 1983-84 and the accounting years ended on 31st March, 1981, 31st March, 1982 and 31st March, 1983, respectively. The assessee is a public charitable trust. Sri P. Iyya Nadar settled certain properties at Sivakasi in favour of the assesseetrust. The trust was accordingly formed by a deed, which was registered on 20th Aug., 1956. The objects of the trust are as follows :
“(a) To establish, maintain, run, develop, improve, extend, grant donations for, and to aid and assist in the establishment, maintenance, running, development, improvement and extension of hospitals, clinics, dispensaries, maternity homes and similar institutions affording treatment, cure, rest, remuneration and other advantages in the way of alleviating the suffering of humanity;
(b) To establish, maintain, run, develop, improve, extend, grant donations for, and to aid and assist in the establishment, maintenance, running, development, improvement and extension of educational institutions, technical industrial and otherwise, including schools, colleges, polytechnics and research associations and the institutions, workshops etc. hostels for the benefit of students and to award scholarships for the study, research and apprenticeship for all or any of the said purpose;
(c) To establish, maintain, run, develop, improve, extend, grant donations for, and to aid in the establishment, maintenance, running, development, improvement and extension of libraries, reading rooms, recreation centres and other facilities as are calculated to be of use in imparting education to the Indian public.
(d) To build, erect and construct and to aid and assist in the building, erection and construction of houses, tenements and places of residence for the poor, needy and defectives and to afford them all comforts and amenities.
(e) To conduct poor feeding and to give food, clothing and cash grants to the poor, needy and defectives and to afford relief to people in distress and affected by earthquake, flood, famine, pestilence and other causes and to grant donations for the support of the inmates of orphanages, rescue houses and similar institutions and societies.
(f) To engage in, carry on, help, aid and assist and promote rural reconstruction work, cottage industries and all other matters incidental thereto.”
(ii) The trust deed allowed the trustees to exploit the proprietary trademark “CAMEL”, a well-known brand of safety matches. In 1980, a safety manufacturing unit called the South Indian Lucifer Match Works, Sivakasi was settled in favour of the trust, by means of deed dt. 1st Oct., 1980. The income has been assessed for 3 years as follows :
The AO was of the view that the assessee was not entitled to the exemption under s. 11 of the Act on the ground that the case will come within the purview of s. 13(1)(bb) of the Act. Aggrieved by the order, the assessee filed an appeal to the CIT(A). The CIT(A) allowed the appeal of the assessee-trust and set aside the order of the AO. Aggrieved by that order, the Revenue filed an appeal to the Tribunal. The Tribunal dismissed the Revenue’s appeal and confirmed the order of the CIT(A) and held that the assessee-trust was entitled to exemption under s. 11, as a charitable trust. The standing counsel appearing for the Revenue stated that the assessee was not entitled to benefit of s. 11 on the ground that it was hit by the provisions of s. 13(1)(bb) of the Act. Further, it was stated that the present issue is covered by a decision of Supreme Court in the case of Asstt. CIT vs. Thanthi Trust (2001) 165 CTR (SC) 681 : (2001) 247 ITR 785 (SC). The learned counsel for the assessee submitted that the business was carried on in the course of actually carrying on the primary purposes of the trust and the income derived from the business of the trust was utilised for carrying out the various objects of the charitable trust and therefore, the trust had no desire to carry on the business but for the fact that it was impressed with the trust property and the income derived from the business would help in the augmentation of funds for carrying on various objects of the trust, such as relief to the poor, education, medical relief, etc. We heard the learned counsel. The provision of s. 13(1)(bb) is clearly attracted. The scope of the said section was considered by the decision of the Supreme Court in the case of Asstt. CIT vs. Thanthi Trust (supra), at p. 794, as follows :
The requirement of s. 13(1)(bb) is that the exemption under s. 11 will not be available to such a trust that carries on any business unless the business is carried on ‘in the course of the actual carrying out of the primary purpose of the trust’, that is to say, unless the business is carried on in the course of actually accomplishing a primary purpose of the trust; the business must, therefore, be carried on in the course of the actual accomplishment of relief of the poor, education or medical relief. As an example, a public charitable trust for the relief of the poor, education and medical relief that carries on the business of weaving cloth and stitching clothing by employing indigent women carries on the business in the course of actually accomplishing its primary object of affording relief to the poor and it would qualify for the exemption under s. 11. The business that the trust carries on is that of running a newspaper. That business, though it is held by the trust as a part of its corpus, and, therefore, in trust, does not directly accomplish, wholly or in part, the trust’s objects of relief to the poor and education. Its income only feeds such activity. It cannot be held to be carried on in the course of the actual accomplishment of the trust’s objects of education and relief of the poor. It is, therefore, not possible to accept the argument on behalf of the trust that it is entitled to the exemption under s. 11.”
6. In the present case, the business is held by the trust as a part of the corpus and hence, the trust did not directly accomplish any object or did not carry on in the course of the actual accomplishment of its objects. By following the principles enunciated in the above Supreme Court judgment, we answer the questions of law in favour of the Revenue and against the assessee. No costs. Consequently, TCMP Nos. 1288 and 1289 of 2005 are closed.
[Citation : 284 ITR 404]
