Trust Granted Tax Exemption Despite Business Activities; Fresh Assessment Ordered

The court allowed the writ petitions, quashed the impugned orders denying exemption to the petitioner-trust under section 11 of the Income-tax Act, 1961, for the assessment years 1979-80 to 1983-84, and remitted the matters to the respondent for fresh assessment. The court held that the trust qualified for exemption under section 11 despite the introduction of section 13(1)(bb) as the business activities were incidental to fulfilling the trust's charitable purposes. The court also found the writ petitions maintainable despite the availability of alternative remedies due to the prolonged pendency and the need for prompt resolution.

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Issues Involved:
1. Denial of exemption to the petitioner-trust u/s 11 of the Income-tax Act, 1961, for the assessment years 1979-80 to 1983-84 in view of section 13(1)(bb) of the Act.
2. Maintainability of the writ petitions due to the availability of alternative remedies.

Summary:

Issue 1: Denial of Exemption u/s 11
The primary issue was whether the petitioner-trust was entitled to exemption u/s 11 of the Income-tax Act, 1961, for the assessment years 1979-80 to 1983-84, considering the introduction of section 13(1)(bb). The petitioner-trust was created to establish the Tamil daily "Daily Thanthi" and later directed to use surplus income for charitable purposes such as education and relief of the poor. The Division Bench had previously held in CIT v. Thanthi Trust [1982] 137 ITR 735 (Mad) that the trust's business activities were carried out in the course of fulfilling its primary charitable purposes, thus qualifying for exemption u/s 11.

The respondent contended that section 13(1)(bb) disqualified the trust from exemption since the business was not carried on in the course of the actual carrying out of the primary purpose of the trust. However, the court found that the Division Bench's findings, which had become final, were binding on the Revenue. The court reiterated that the primary purpose of the trust was charitable, and the business was incidental to achieving these purposes. Therefore, section 13(1)(bb) did not preclude the trust from claiming exemption u/s 11.

Issue 2: Maintainability of Writ Petitions
The respondent argued that the petitioner should have exhausted alternative remedies through appeals before the appellate authority and the Tribunal. However, the court noted that the writ petitions had been pending for nearly five years and were admitted without objection. Given the prolonged pendency and the need for early resolution of the issue, the court decided not to dismiss the writ petitions on the ground of non-exhaustion of alternative remedies.

Conclusion:
The court allowed the writ petitions, quashed the impugned orders, and remitted the matters to the respondent for fresh assessment in accordance with the law and the court's findings regarding the petitioner's claim for exemption u/s 11 of the Act. No order as to costs was made.

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