TaxTMI 
TaxTMI 
1961 (10) TMI 74
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....ajagopal and Co. We shall presently refer to the objects of the trust. But in so far as the assessee, who made the donation to the trust is concerned, his claim to exemption from income-tax was negatived by the Income-tax Officer on the ground that the trust does not fulfill the conditions laid down under section 15B of the Act. The Appellate Assistant Commissioner to whom an appeal was taken held likewise. Apparently, before him the question whether the trust was one which complied with the conditions in proviso (b) to clause (i) of section 4(3) was more prominently argued. But, in any event, he held that since the trust itself was not entitled to the exemption contemplated under section 4(3)(i), the donor was likewise not eligible for exemption from tax on the amount of donation made to that trust. When the matter was taken up in further appeal to the Income-tax Appellate Tribunal, the Tribunal observed that in relation to the previous assessment year, it had held that the Agastyar Trust was a public trust and that any donation made to the said trust is an allowable deduction under section 15B. The matter was not further dealt with in greater detail regarding the scope of the ....
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....st complies with the requisites of this provision. There is no doubt that the property from which the income is derived is held under trust. The trust document makes this perfectly clear. The objects of the trust broadly stated are: (1) to establish, conduct and maintain schools, colleges, workshops and other institutions for imparting general, technical, professional, industrial or other kind of education and training for the utility and welfare of the general public; (2) to make pecuniary grants by way of scholarship, etc., for the benefit of students, scholars or others; (3) to establish, maintain and conduct hospitals, clinics, dispensaries, etc., for affording treatment, cure, rest and other reliefs; (4) to manufacture, buy, sell and distribute pharmaceutical, medicinal and chemical and other preparations and articles such as medicines, drugs, medical and surgical articles, preparations and restoratives or foods; (5) to establish choultries, rest houses, to provide food, clothes and medicines free or at concessional rates; to make money grants to the poor for celebration of marriages and to afford relief to people in distress; (6) to engage and condu....
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.... that source was assessable in the hands of the trust. The Appellate Tribunal, in holding in favour of the assessee in that case, observed: "Further, in our opinion, even if that income is kept apart, the other income earned by the trust on amounts donated to it and that which the trust got from the immoveable properties which it had owned belonged to entirely a different class which could never be assessable under the Income-tax Act. Since in this case the amount that was donated belonged to the latter group, it cannot be stated that the exemption contemplated by the Act under section 15B(2) was not available to the assessee." We are not quite clear about the scope of this discussion. But apparently, the Tribunal thought that the income of the trust could be placed under two difference categories, one which would not be assessable by reason of the use to which it was put, and the other realised by the association of the trust in a business which would be taxable. It is not necessary to pursue this line of reasoning any further as we consider it desirable to examine the question a....
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....ed under trust for the purpose of an business, viz., the manufacture, sale, etc., of medicinal, chemical and other preparations. The most important of the powers given to the trustees is contained in clause 5(i) which reads: "The trustees shall have power to apply the whole or any part of the trust property or fund whether capital or income in or towards payment of the expenses of the trust or for or towards all or any of the purposes of the trust provided any property or money held in special trust shall be applied only for that purpose and not otherwise." In the present case, there is no special trust, that is to say, no particular item of property has been burdened with the performance of any specific object of the trust. It follows, therefore, from the above clause that it is open to the trustees to utilise the income for any one of the objects of the trust to the exclusion of all others, that is to say, it would not be a violation of the trust if the trustees devoted the entire income to the carrying on of a business of manufacture, sale and distribution of pharmaceutic....
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....e assessee, cites Commissioner of Income- tax v. Breach Candy Swimming Bath Trust [1955] 27 I.T.R. 279. That was a case where a trust was administered under a scheme framed by the High Court. The object of the trust was the construction and maintenance of a salt water swimming bath at a certain place for the use and benefit of the European public of Bombay. Power was given to the trustees to make provision for the supply of refreshments including alcoholic liquors to those resorting to the bath at the bar and the restaurant which were already in existence. The question arose whether the income from the sale of tickets for admission to the bath and from the bar and the restaurant was exempt on the ground that the trust was a charitable trust. The Bombay High Court held that the object of the trust was the maintenance of a swimming bath for the benefit of the European public and it was object of general public utility. In dealing with the contention that the supply of refreshments to persons resorting to the bath cannot be said to be a charitable object, the learned judges observed: "Mr. Joshi would be perfec....
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.... the Agastyar Trust to utilise the whole of the income of the trust in their unfettered discretion to an object which is a non-charitable one, the property cannot be deemed to be held in trust wholly for charitable or religious purposes. The Agastyar Trust is thus ineligible to the exemption contemplated by section 4(3)(i). It should, therefore, follow that any donation made to the Agastyar Trust is also not entitled to the exemption from tax under section 15B of the Act. Learned counsel for the assessee contends that this is not the question that was examined by the department and the officers below and that this court is therefore prevented from considering the eligibility of the Agastyar Trust to exemption under section 4(3)(i) in its fuller scope, but that the question of law arising from the order of the Tribunal must be confined to the examination of such eligibility only under section 4(3)(i)(b). In putting forward this argument, reliance is apparently placed upon the limited consideration which the Tribunal gave to the matte. We have referred to the fact that in so far as the assessment year 1955-56 is concerned, the matter was not considered by the Tribunal at length. I....