High Court Of Madras
CIT vs. Nahata Charitable Trust
Sections 2(15), 11
Asst. Year 1974-75, 1975-76, 1976-77
R. Jayasimha Babu & Mrs. A. Subbulakshmy, JJ.
Tax Case Nos. 2115 to 2117 of 1984
27th July, 1998Â
Mrs. Chitra Venkatraman, for the Applicant : P.P.S. Janardhanaraja, for the Respondent
R. JAYASIMHA BABU, J. :
The questions referred to us at the instance of the Revenue are :
“(1) Whether, on the facts and in the circumstances of the case, and having regard to the provisions of s. 2(15) of the Act, the Tribunal was right in holding that the assessee is a charitable institution and that its income is exempt under s. 11 of the Act?
(2) Whether, on the facts and in the circumstances of the case, and having regard to the Trust deed, dt. 19th Sept., 1969, and the agreement dt. 1st July, 1970 with M/s Vijayalakshmi Pictures, the Tribunalâs view that the objects of the assessee-trust are charitable within the meaning of s. 2 (15) of the Act, is sustainable in law?
(3) Whether the Tribunalâs view that the predominant object of the assessee-trust was to promote relief of the poor, advancement of education and medical relief, is based on correct appreciation of the trust deed dt. 19th Sept., 1969 and a reasonable one to take, on the facts of the case?”
The correctness of the order of the Tribunal holding that the assessee-trust is entitled to exemption as a charitable institution notwithstanding the fact that it had carried on business for profit, namely exhibition of pictures, has been called into the question by the Revenue in this reference. It is relating to the asst. yrs. 1974-75 to 1976-77. The trust known as Nahata Charitable Trust was created under the deed dt. 19th Sept., 1969. A perusal of the object clause shows that the objects of the trust are to promote the relief of the poor, advancement of education, medical relief, spiritual and cultural advancement and other objects of general public utility. The provisions of the trust deed include a provision conferring powers on trustees to carry on business.
A charitable trust is not to be denied exemption under s. 11 of the IT Act solely on the ground that it carries on business. The Tribunal has rightly followed the decision of the Constitution Bench of the apex Court in the case of Addl. CIT vs. Surat Art Silk Cloth Manufacturersâ Association (1979) 13 CTR (SC) 378 : (1980) 121 ITR 1 (SC) : TC 23R.195. That decision of the Constitution Bench has been reiterated by the later decision by the apex Court, recently, in the case of Thiagarajar Charities vs. Addl. CIT & Anr. (1997) 140 CTR (SC) 295 : (1995) 225 ITR 1010 (SC). It is not the case of the Revenue that the objects of the trust are not charitable. The only ground on which the exemption was denied by the AO was that the trust had entered into an agreement with one Vijayalakshmi Pictures and that agreement resulted in the trust undertaking a business activity. As held by the apex Court in the case of Addl. CIT vs. Surat Art Silk Cotton Manufacturersâ Association (supra) and in the case of Thiagarajar Charities vs. Addl. CIT (supra), carrying on business by trust alone, would not render the trust ineligible for exemption under s. 11 of the Act. The questions referred to us, at the instance of the Revenue, are, therefore, answered in favour of the assessee and against the Revenue. The assessee shall be entitled to cost in the sum of Rs. 1,000.
[Citation : 246 ITR 450]