Charitable trust land sale treated as incidental realisation, not business income; exemption upheld and section 2(15) proviso held inapplicable.

A trust's phased sale of unutilised land acquired for charitable objects was treated as an incidental realisation of surplus property, not a separate profit-making business. The proceeds were applied to the trust's educational activities, so the transaction was found aligned with the predominant charitable purpose. On those facts, the profit was not assessable as business income, and the exemption claim was upheld. The proviso to section 2(15) was held inapplicable because the trust's dominant object remained education and there was no diversion of profits to non-charitable purposes.

---

---

Issues: Whether the profit arising from sale of the trust's unutilized land was taxable as business income or remained exempt as income applied towards the charitable objects of the trust, and whether the proviso to section 2(15) applied to deny exemption.

Analysis: The trust had purchased the land for its charitable objects and later found it unnecessary for those objects. The land was sold in a phased manner to realise maximum value, and the proceeds were utilized for the trust's educational activities. The sale was treated as a realization of surplus property to augment resources for the trust's main charitable purpose. On these facts, the transaction was held to be incidental to the trust's main objects and not a separate profit-making business. Since the predominant object remained education and no diversion of profits to non-charitable purposes was found, the proviso to section 2(15) was held inapplicable.

Conclusion: The profit from sale of land was not liable to be assessed as business income and the exemption claimed by the trust was upheld.

---