Incidental trust property income remains exempt when tied to education and relief objects and used for charitable purposes.

Receipts from letting a trust's hall and auditorium were treated as incidental to its charitable objects, not as business income, because the trust was engaged predominantly in education and relief-oriented activities and the income was applied to charitable purposes. The quantum of such receipts alone was held insufficient to establish a commercial activity or an independent profit motive. The Revenue's reliance on the proviso to section 2(15) was rejected because the trust fell within the primary charitable limbs rather than the residuary category of general public utility. On that basis, section 11(4A) and the proviso to section 2(15) were held inapplicable and exemption under section 11 was allowed.

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Issues: Whether the receipts from letting out the hall and auditorium constituted business income so as to deny exemption under section 11 of the Income-tax Act, 1961 by invoking section 11(4A) and the proviso to section 2(15).

Analysis: The assessee-trust was found to be engaged predominantly in education and relief-oriented charitable activities, including structured educational programmes, scholarships, library and research work, welfare initiatives and other public-benefit programmes. The hall and auditorium formed part of property held under trust and the receipts from letting them out were applied for charitable purposes. The quantum of hall receipts, by itself, was held to be insufficient to treat the trust as carrying on a commercial activity. The activity of letting out the hall was treated as incidental and ancillary to the charitable objects, and the Revenue's reliance on the proviso to section 2(15) was rejected because the trust fell within the primary charitable limbs and not the residuary category of general public utility. The consistent view taken in earlier years was also followed.

Conclusion: The receipts from hall and auditorium letting were not business income, section 11(4A) and the proviso to section 2(15) were held inapplicable, and exemption under section 11 was allowed to the assessee.

Ratio Decidendi: Where a charitable trust's dominant objects are education and relief to the poor, income from incidental use of trust property does not lose exemption merely because it is substantial, so long as the income is applied to charitable purposes and there is no independent profit motive.

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