Charitable trust income from a swimming bath may remain exempt despite fees, where public utility and no private gain are shown.

A trust established to maintain a swimming bath can qualify as charitable where its dominant object is public health or general public utility, and the levy of user charges does not by itself destroy that character if there is no private gain. Income from tickets, season tickets, and incidental bar or restaurant receipts was treated as arising from property held under trust for charitable purposes and therefore within the provision governing charitable trust property, rather than the provision dealing with a separate business carried on for a charitable institution. The discussion also notes that the appellate tribunal may permit a new ground to be raised where the other side has had a fair opportunity to meet it.

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Issues: (i) Whether the Appellate Tribunal could permit the assessee to raise a new ground not urged before the income-tax authorities or in the original grounds of appeal; (ii) Whether the income derived from running the swimming bath, including receipts from tickets, season tickets, bar and restaurant activities, was exempt as income of a charitable trust, and whether the case fell under section 4(3)(i) rather than section 4(3)(ia).

Issue (i): Whether the Appellate Tribunal could permit the assessee to raise a new ground not urged before the income-tax authorities or in the original grounds of appeal.

Analysis: Rule 12 of the Appellate Tribunal Rules, 1946 authorised the Tribunal to permit a new point to be raised if the opposite party had sufficient opportunity of being heard. The departmental representative did not seek an adjournment when the point was raised, and the matter was argued without any denial of opportunity.

Conclusion: The Tribunal was competent to permit the new ground to be raised, and the objection failed.

Issue (ii): Whether the income derived from running the swimming bath, including receipts from tickets, season tickets, bar and restaurant activities, was exempt as income of a charitable trust, and whether the case fell under section 4(3)(i) rather than section 4(3)(ia).

Analysis: The dominant object of the trust was the maintenance of a swimming bath, which served public health and therefore answered the description of an object of general public utility. The power to provide refreshments was incidental and not the object of the trust. The fact that charges were levied did not destroy the charitable character, since an eleemosynary element is not essential and absence of private gain is the controlling consideration. On the statutory scheme, section 4(3)(i) applied to property held under trust wholly for charitable purposes, including a business that was itself part of the trust property, whereas section 4(3)(ia) dealt with a separate business carried on on behalf of a charitable institution and required application of its income solely to the institution. The income in question arose from an activity integral to the trust itself and was therefore covered by section 4(3)(i).

Conclusion: The income was exempt from tax as income derived from property held under trust wholly for a charitable purpose, and the assessee succeeded on the substantive tax issue.

Final Conclusion: The reference was answered by upholding the charitable character of the trust's income and rejecting the Revenue's challenge on the new-ground objection.

Ratio Decidendi: A trust whose dominant object is the advancement of public health or other general public utility remains charitable even if it charges reasonable fees and earns surplus, so long as there is no private gain and the income is derived from property held under trust for that charitable purpose.

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