Political objects are not charitable, and property income loses exemption when governing documents permit non-charitable application.

A registered society may be treated as a separate taxable person, and income from property received by it can fall within the charging provisions where it is assessed as owner-recipient. Political purpose is not charitable, and where the constitution read as a whole shows a dominant aim of establishing a Hindu State by constitutional means, the objects are characterised as political rather than charitable. Exemption for property income under sections 11 and 12 is available only when the income is under a legal obligation to be applied wholly or partly to charitable purposes; if the governing instrument permits application to political or other non-charitable objects, partial exemption cannot be carved out on estimate.

---

---

Issues: (i) whether the assessee-society was a person or association of persons chargeable to tax under the Income-tax Act, 1961; (ii) whether the assessee's objects were predominantly charitable or political; (iii) whether any part of the income from the property was exempt under sections 11 and 12 of the Income-tax Act, 1961.

Issue (i): whether the assessee-society was a person or association of persons chargeable to tax under the Income-tax Act, 1961.

Analysis: A registered society has a separate legal personality and, in any event, an association formed by persons with a common purpose of holding property and applying its income for the objects of the society falls within the charging provisions. The assessment was on the society as owner-recipient of the property income, not on the beneficiaries.

Conclusion: The assessee was a person within the meaning of the Act and was chargeable to tax; this issue was decided against the assessee.

Issue (ii): whether the assessee's objects were predominantly charitable or political.

Analysis: A political purpose is not a charitable purpose within the meaning of the residuary head of charitable purpose. Reading the constitution as a whole, the dominant aim was to establish a Hindu State by constitutional means, and the listed objects were treated as steps in aid of that political objective. The charitable character claimed for some objects did not displace the political predominance.

Conclusion: The assessee's objects were predominantly political and not charitable; this issue was decided against the assessee.

Issue (iii): whether any part of the income from the property was exempt under sections 11 and 12 of the Income-tax Act, 1961.

Analysis: Exemption required a legal obligation to apply the income wholly or in part for charitable purposes. On the constitution and the evidence, the income could be applied for political as well as non-charitable purposes, and there was no basis to carve out an exempt percentage on estimate. Where the trust is not wholly charitable and the income is not compulsorily earmarked for charitable objects, partial exemption is not available.

Conclusion: Neither the whole nor any part of the income was exempt under sections 11 and 12; this issue was decided against the assessee.

Final Conclusion: The reference was answered in favour of the Revenue and the assessee's claim to tax exemption failed in full.

Ratio Decidendi: A political object is not a charitable purpose, and exemption for property income is available only where the income is under a legal obligation to be applied wholly or in part to charitable purposes; if the governing instrument permits application to political and non-charitable objects, no exemption can be granted.

---