TaxTMI 
TaxTMI 
1961 (12) TMI 85
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....e: (a) To raise funds by conducting kuries with the company as the foreman; receiving donations and subscriptions; and by such other means as the company deems fit. (b) To do the needful for the promotion of charity, education and industry. (c) For carrying on the business and activities of the company, for utilising the funds of the company profitably, and for the advancement of charity, education and industry in so far as is appropriate, to purchase, take on lease or for hire, to sell, to let on lease or for hire movable or immovable properties, to construct buildings, to purchase or assign shares, debentures, bonds and such other rights and securities and security bonds, to join in the kuries conducted by other institutions, to lend the company's funds and its kuri amounts on the security of immovable properties and movable properties such as kuri pass books, etc., to borrow for the requirements of the company on the security of the company's properties, to invest funds of the company in banks or securities, to accept as security for future subscriptions from prized subscribers movable or immovable properties, shares, bonds, debentures, etc. or specific or perso....
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....on 4(3)(i) of the Act; that the proviso to the section did not apply as the business was not carried " on behalf of (any) religious or charitable institution," referred to therein, but by the assessee itself. 11. For the purpose of a convenient reference, the relevant portion of the section with the proviso as amended by the Income-tax (Amendment Act, 1953), is reproduced below: "4(3) Any income, profits or gains falling within the following classes shall not be included in total income of the person receiving them: (i) Subject to the provisions of clause (c) of sub-section (1) of section 16, any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, in so far as such income is applied or accumulated for application to such religious or charitable purposes as relate to anything done within the taxable territories, and in the case of property so held in part only for such purposes, the income applied or finally set apart for application thereto: Provided that such income shall be included in the total i....
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....g will be a beneficiary of every charitable institution not restricted to any particular sect or community all such institutions will get automatic exemption. Clearly this cannot be the intention of the legislature and I do not think that such an interpretation of the provisions of the Act is possible, viewed from their proper context. In my view under the constitution of the assessee company. a person becomes a beneficiary only when the general body of the company decides to confer some particular benefit on him. As the work in connection with the business of the company is not being carried on by such people, I would find that neither the business of the company is carried on in the course of the actual carrying out of a primary purpose of the institution, nor the work in connection with its business carried on mainly by the beneficiaries of the institution, Therefore, its income from business does not get the exemption contemplated under section 4(3)(1)". 13. On appeal to the Appellate Assistant Commissioner, it was contended that: (a) the company is a public charitable trust, its properties are trust properties, investments whether in the shape of immovable property or mo....
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....te Assistant Commissioner should have found that the exemptions provided by section 4(3)(i) and 4(3)(i)(b) of the Act would apply to the appellant company. The Appellate Assistant Commissioner has gone wrong in holding that the investments are not of trust properties. The investments are of savings, not needed for the running of the business and the interest accumulating, automatically, become trust properties. The Appellate Assistant Commissioner has gone wrong in finding that the inclusion of the commission in kuries in profits was proper." 15. For the reasons given in its consolidated order in all the appeals, copy whereof is annexed hereto as annexure "B" and forms part of the case, the Tribunal rejected the assessee's contentions and upheld the order of the departmental officers. 16. On the above facts, the question of law that arises is: "Whether the income derived by the assessee trust from business in kuries is exempt from tax under the provisions of section 4(3)(i) of the Act as amended by Act 25 of 1953 for the five years 1952-53 to 1956-57?" 17. The departmental representative agrees to the statement. Learned counsel for the assessee, while agreeing....
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.... view that the assessee company was not only a trust but a charitable trust as well. If the company is a charitable trust, the only question that arises for consideration is whether the proviso to section 4(3)(i) of the Indian Income-tax Act, 1922, is attracted as contended by the department or not. Section 4 deals with the application of the Act. Sub-section (3) thereof directs that any income, profits or gains falling within the classes specified therein shall not be included in the total income of the person receiving them. The class of income specified in clause (i) of sub- section (3) is: "...any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, in so far as such income is applied or accumulated for application to such religious or charitable purposes as relate to anything done within the taxable territories, and in the case of property so held in part only for such purposes, the income applied or finally set apart for application thereto." The exclusion is subject to clause (c) of sub-section (1) of section 16. ....