TaxTMI 
TaxTMI 
1981 (7) TMI 134
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.... the business as a running business for the purposes of the objects of the trust with Shri Pinto continuing to manage the business, but as the sole trustee. Clause 4A of the trust deed relates to the objects, which are as under : 1. To aid and assist in the development, and maintenance of Shri Aurobindo International Centre for Education and Shri Aurobindo Ashram or any other public trust for charitable purpose and to establish and/or take over and/or purchase and/or otherwise acquire and run and manage services and industries required for the purpose of Shri Aurobindo International Centre for Education and/or Shri Aurobindo Ashram and/or departments connected therewith or any other public trust for charitable purpose. 2. To organise, encourage, promote, spread and impart all kinds of educations and/or aid and/or assist in imparting and/or contribute to Shri Aurobindo Ashram and/or Shri Aurobindo International Centre for Education for commercial, industrial and other educations, both theoretical and practical, based on the ideals of Shri Aurobindo and the Mother. 3. To carry on practical research, experiments, works, etc., for the solution of labour problems and solve them....
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....he ITO thought that the decision of the Supreme Court in the case of Indian Chamber of Commerce v. CIT [1975] 101 ITR 796 justified the assessment of business income on the ground that it was an activity for profit and that the profit from such activities was clearly taxable. It was in this view that the ITO considered that the assessee was no longer eligible for relief under section 11. The assessee's income for this year was Rs. 1,43,820. Though the ITO held that the assessee was not eligible for exemption under section 11, he gave relief of an amount of Rs. 1,23,917 under section 10(21) as income of a scientific research association, apparently on the assumption that the dedication of this income for Shri Aurobindo International Centre for Education to the extent of actual payment of the amount of Rs. 1,23,917 made it the income of the trust. According to him, only Rs. 1,23,917 was applied for the trust. It was the assessee's case that the assessee-trust was eligible for benefit of section 11 and that the entire income had been applied. The assessee went in appeal with these pleas. The AAC agreed with the assessee on both the counts. She took the view that the contributions were....
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....t for educational purposes, the assessee will still be not liable to tax. According to him, it is well settled that where a business itself is the subject-matter of the trust, the question of any independent activity for profit by the trustees does not arise as long as the settled business is carried on and there is no other independent business. He took us over the preamble and the schedule to suggest that Shri Pinto had settled a running business along with machinery, which were again the subject-matter of further liability towards instalments, etc., as is evident from the schedule itself. The majority view of the Supreme Court in the case of Addl. CIT v. Surat Art Silk Manufacturers' Association reiterated its earlier stand in CIT v. Dharmodayam & Co. [1977] 109 ITR 527, wherein the Supreme Court observed that where the business itself is held under trust, the last concluding words in clause (15) of section 2 would have no application. He, therefore, contended that there cannot he any doubt that the assessee continues to enjoy benefit of exemption already granted by the department in this and other similar cases of this group for past many years. As for the question of applic....
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....bsp; 81,669.54 --- Wood working 42,921.89 ------------------- &nbs....
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....nbsp; Outstanding advance recoverable from Ashram as on 31-12-1974 72,182.76 ---------------------- He pointed out that the decision of the Madras High Court in the case of Nachimuthu Industrial Association could not support the departmental view because there was only advance in that account and the profits were not adjusted against advance in this manner, but were taken to donation fund account, which was the assessee's own account and ....
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....stion of application of the income, the ITO is not right in construing only the cash payments made during the year as income applied for that year. The assessee keeps accounts on mercantile basis. The income is determined at the end of the year. However, the assessee goes on contributing cash from time to time over the entire accounting year. At the end of the year the entire profits are transferred by suitable entries by debiting in profit and loss appropriation account to the credit of Shri Aurobindo Ashram to whom the advances have been initially made. Since it is very difficult to anticipate the exact profits at the end of the year, the payment may be either larger or smaller than the actual profits. In the assessee's case, the assessee has been making contributions to a larger extent than warranted by the profits. It is for this reason that on the last day of the accounting year 31-12-1974, relevant for the assessment year under consideration, there was still an outstanding balance recoverable from the Ashram at Rs. 72,182.76. In other words, the assessee had advanced over the course of the years moneys to a larger extent than the entire profits which have been credited to the....