TaxTMI 
TaxTMI 
2015 (2) TMI 727
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.... Finance Act, 1983, by inserting sub-section (4A). Before the insertion of the said provision, the exemption from tax in relation to income of a charitable institution or trust was unqualified. Through sub-section (4A) of section 11 of the Act, two conditions are stipulated. The first is that if the assessee is a trust, it must be only for public religious purposes ; and its business consists of printing or publication of books ; or is of a kind, notified in the Gazette by the Central Government in this behalf. The second restriction is that if it is an institution, it must be (a) wholly for charitable purposes ; and (b) its work is mainly carried on by its beneficiaries. In the light of this amendment, the assessing authority refused to extend the benefit of the exemption under section 11(4A) of the Act to the corporation, for the assessment years in question mainly on the ground that its work is not carried on by the beneficiaries. An order of assessment to this effect was passed on January 25,1995. Aggrieved by that, the corporation preferred an appeal before the Commissioner (Appeals). Through his order dated August 21, 1995, the Commissioner refused to interfere with the orde....
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....uestion in favour of the corporation and against the Revenue. Sri A. V. Krishna Kowndinya, learned senior counsel for the corporation, submits that the view taken by the assessing authority, the Commissioner and the Tribunal, as regards the eligibility of the corporation to claim the benefit under section 11 of the Act cannot be sustained in law. He submits that as an institution covered by section 11 of the Act, the corporation was enjoying the benefit of exemption year after year and that there was no basis to deny that benefit by invoking section 11(4A)(b) of the Act. He submits that the restriction placed through clause (b) of section 11(4A) of the Act is very limited in nature and it would apply only when the activities of an otherwise charitable institution are carried out by an agency or body of persons, totally unconnected with the beneficiaries of the institution. He submits that the corporation is a creature under the Road Transport Corporations Act, 1950, and ever since its inception, its activities are being carried out by the employees of the corporation, who are none other than the representatives or the authorised persons of the beneficiaries, i.e., the ultimate pub....
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....stitutions, if it is in the form of profits and gains of the business. However, in the ultimate analysis, such a far-reaching proposal was dropped and sub-section (4A) was inserted, which reads : "(4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub- section (3A) shall not apply in relation to any income, being profits and gains of business, unless- (a) the business is carried on by a trust wholly for public religious purposes and the business consists of printing and publication of books or publication of books or its of a kind notified by the Central Government in this behalf in the Official Gazette ; or (b) the business is carried on by an institution wholly for charitable purposes and the work in connection with the business is mainly carried on by the beneficiaries of the institution." From a perusal of this, it becomes clear that the provision is intended to narrow the scope of the applicability of section 11 of the Act. In the light of sub-section (4A), the benefit under section....
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....ritable and religious trusts to divest their shareholdings and other investment in business concerns by November 30, 1983. However, trusts will be allowed to keep shares in companies, which formed part of the original corpus as on June 1, 1973, and bonus shares received up to that date. Some trusts carry on business on commercial lines and derive income therefrom. There is no reason why such business income should not be brought to tax. I, therefore, propose that business income of all charitable and religious trusts including those which have hitherto been exempted by notification will be brought to tax with effect from the assessment year 1984-85. Trusts having business income will also be required to conform to the new investment pattern if they wish to seek tax exemption in respect of their other income." From this, it is clear that the emphasis or the objective was to ensure that the profits earned through business of the charitable and religious trusts are invested in a particular manner. Nowhere in the speech, it is mentioned that the State intends to withdraw the facility of exemption granted in favour of charitable trusts and institutions, altogether. The proposal under t....
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.... the Act ; can it be treated that the business activities carried on in the manner provided in the trust deed are being carried on by the beneficiaries of the trust. In order to deal with the question, it would be necessary to examine the operation of sub-section (4A)(b) and of section 11 of the Act, application thereof to various types of trusts. Let us consider the case of a trust in which the beneficiaries are handicapped or blind persons or a trust wherein the beneficiaries are the minors. If sub-section (4A)(b) is to be implemented in its literal sense, then the question is how such beneficiaries of such institution or trust themselves can be expected to carry on the business activities of the trust. The trust wherein beneficiaries are general public in such a case the beneficiaries themselves because of their peculiarity are not expected to carry on business activities of the trust. The activities of the trust meant for the benefit of handicapped or blind persons cannot be carried on by them personally because of their physical incapacity. The trust wherein minors are beneficiaries, minors cannot carry on business of the trust because of their legal infirmity. No activities o....