Predominant charitable purpose remains intact despite ancillary business investment or lending powers in a trust deed.

A trust does not lose its charitable character under section 12(g) of the Karnataka Agricultural Income-tax Act, 1957 merely because its deed permits ancillary investment in industry, trade or business or lending of funds to businessmen. The controlling test is whether the predominant purpose remains charitable, such as medical relief, education, aid to the poor, relief in distress and support of allied public welfare institutions. Where profit-making is only a means of augmenting the corpus and not the real object, the institution continues to qualify as charitable. On that basis, withdrawal of approval on the assumption that any business-related lending destroys charity was unsustainable.

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Issues: Whether the trust, despite clauses enabling investment of trust funds in industry, trade or business and the lending of funds to businessmen, retained its character as an institution established for charitable purposes within section 12(g) of the Karnataka Agricultural Income-tax Act, 1957.

Analysis: The trust deed disclosed primary objects of medical relief, education, aid to the poor, relief in distress and support of allied public welfare institutions. The power to invest or employ funds in business was not the dominant object but only a means of augmenting the trust corpus. A trust does not lose its charitable character merely because it is empowered to carry on an ancillary activity or because its funds are used in a manner that may yield profit, so long as the predominant purpose remains charitable and the profit-making element is not the real object. The Government proceeded on the erroneous premise that the trust as a whole must itself be established for business-free charitable activity and that any lending to businessmen destroyed the charitable nature of the institution.

Conclusion: The trust remained one established for charitable purposes under section 12(g) of the Act, and the impugned withdrawal of approval was unsustainable.

Ratio Decidendi: A trust with dominant charitable objects does not cease to be charitable merely because its deed permits ancillary investment or business activity to raise funds, unless profit-making is the real and substantive object of the trust.

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