TaxTMI 
TaxTMI 
2006 (10) TMI 381
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....n 2(15) of the Income-tax Act, 1961 ? (2) Whether, the provisions of section 11(4A) introduced with effect from April 1, 1984, are applicable to the assessee' s case ? (3) Whether, the provisions of sub-section (4A) of section 11, as substituted by the Finance (No. 2) Act, 1991, with effect from April 1, 1992, are clarificatory in nature and are hence applicable to the assessment years involved in these appeals ? (4) If the answer to the first question is in the affirmative, does the earning of substantial profit by the assessee affect its status as a trust existing for an object of general public utility and consequently the claim for exemption under section 11, and if so, to what extent, in the light of the ....
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.... of substantial profit by the assessee affect its status as a trust existing for an object of general public utility and consequently the claim for exemption under section 11, and if so, to what extent, in the light of the judgment of the Supreme Court in the case of Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 ? 4. So far as these two questions are concerned, the material developments are like this. The assessee is a trust established in June, 1942. Right from the assessment year 1943-44, it is engaged in the activity of publication of newspapers and periodicals. The question whether this activity can be said to be of " general public utility", and, accordingly, covered by exemption under section 4(3)(i) ....
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....ns of business, unless such business is incidental to the attainment of the main objects and unless the separate books of account are maintained in respect of such business activity. In the assessment year 1984-85, in the light of the amendment in section 2(15) and the corresponding amendment in the scheme of the Act by insertion of section 11(4A), the issue as to whether the assessee-trust can be said to be eligible for exemption under section 11 was referred to the Special Bench. While the Special Bench held that the assessee was engaged in carrying on the activity for profit, and therefore, profits and gains from business and profession earned by the assessee will attract the disability clause set out in section 11(4A), the assessee'....
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....naik, the learned Departmental Representative, relies upon the stand of the Assessing Officer and submits that there is no change in the legal position because of amendment in section 2(15) with effect from April 1, 1984, because the expression "not involving the carrying on of any activity for profit" in sub- stance stands shifted from section 2(15) to section 11. While section 2(15) defines a charitable institution, section 11 deals with exemption of income in the hands of a charitable institution. Once section 11(4A) provides that the exemption under section 11 cannot be extended unless the business is such that it is incidental to the attainment of the main object, it amounts to the same thing as that the assessee is not entitled to exe....
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....of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the trust, or, as the case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business." 9. The disability clause set out in section 11(4A) clearly and unambiguously refers to the income which can be taxed as business income. Therefore, so far as income under other heads is concerned, the same will be eligible for exemption under section 11. The net effect of the amendments in section 2(15) and insertion of section 11(4A), with effect from April 1, 1984, thus is that even when a trust or institution is held to be carrying out an activity ....
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....the assessee thus continues to be eligible for exemption under section 11. As for the disability under section 11(4A), the same being confined to exemption of business income, the assessee will nevertheless be entitled to exemption in respect of other incomes, such as " income from house property", " capital gains" and " income from other sources" . 11. We, accordingly, answer the questions Nos. 1 and 4 as follows : Question No. (1) : Whether the object of the assessee-trust is an object of general public utility under section 2(15) of the Income-tax Act, 1961 ? Answer : Yes. In the light of the amendments in section with effect from April 1, 1984, the assessee trust is eligible for being treated as pursuing an object o....