TaxTMI 
TaxTMI 
1962 (10) TMI 65
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....iness a net profit of ₹ 5,94,493 was earned and this was added to the capital account. In the next year, 1949-1950, a profit of ₹ 85,105 accrued and this was also capitalised. During the year ended June 30, 1951, the previous year for the assessment year 1952-53, the trust acquired a printing press and carried on business as printers. For the years ended June 30, 1951, to June 30, 1954, the previous years for the assessment years, 1952-53 to 1955-56 respectively, the assessee submitted returns to the department showing nil income. The income from the business carried on by the trust was not returned as the assessee claimed exemption under section 4(3)(i) of the Act. The Income-tax Officer, however, held that the business income of the trust was not exempt from taxation as claimed by the assessee and passed orders of assessment as per particulars given below: Assessment year Date of assessment by Income-tax Officer Income computed and taxed Rs. 1952-53 30-10-1954 5,15,634 1953-54 30-10-1954 21,349 1954-55 28-01-1958 2,19,430 1955-56 28-01-1958 75,062 (Business) The view of the Income-tax Officer was that the income from the business of the trust which w....
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....vation of places of worship and temples dedicated to Hindu religion and the establishment of institutions devoted to the propagation of Hindu religion. Karumuthu Thiagarajan Chettiar constituted himself as the first trustee of the trust. He made over and delivered to the trust a sum of ₹ 61,000 to form the nucleus of the trust funds (vide clause 3). The number of trustees was not to exceed 5 exclusive of the trustees appointed for their special knowledge or technical skill, whose number was not to exceed 2. Clause 6 is in these terms: "The said Karumuthu Thiagarajan Chettiar shall be the first managing trustee and he shall, subject to the provisions of clause 8 hereof, hold that office for life and upon his death the senior most male descendant of the members of his family according to the rule of primogeniture shall hold the office in succession for life...". The term of office of a trustee except that of the managing trustee shall be one year from the date of the appointment. All the trustees constituted the board of trustees and they are vested with full power of management of the trust properties. Clause 17, however, provides that the administration, direction a....
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....ation to the purposes of the trust. The legislature amended the Act in 1939 and clause (ia) was inserted. That clause is in the following terms: "Any income derived from business carried on on behalf of a religious or charitable institution when the income is applied solely to the purposes of the institution and-- (a) the business is carried on in the course of the carrying out of a primary purpose of the institution, or (b) the work in connection with the business is mainly carried on by beneficiaries of the institution." The exact scope of clause (ia) raised a controversy. The department contended that the object of this sub-section was to limit the scope of section 4(3)(i) in so far as it related to business held on trust and that the business income of a trust would be immune from taxation only if the conditions prescribed in clause (ia) were fulfilled. On the other hand it was contended for the assessee that section 4(3)(i) related to business held on trust, and that clause (ia) was introduced by the legislature to extend the exemption to the case of other businesses not held on trust, but the income of which was applied for the purposes of a religious or a c....
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....ought in the amendment to the section by Act XXV of 1953. This amendment took effect from April 1, 1952. The amended provision is in these terms: "Any income, profits or gains falling within the following classes shall not be included in the 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 income.......... (b) in the case of income derived from business carried on on behalf of a religious or charitable institution, unless the income is applied wholly for the purposes of the institution and either-- (i) the business is carried on in the course of the actual carrying out of a primary purpose of the institution, or (ii) the work....
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.... the proviso should be derived from its own terms without any predilection that the subject-matter of the proviso is already covered by the main provision and that its object is to exclude something out of that main provision. Bearing this principle of statutory interpretation in mind we have to find out whether proviso (b) to section 4(3)(i) covers an independent category not within the main provision or whether it is merely an exception to such provision. The word "property" in section 4(3)(i) includes business. Income from business held in trust for a religious or charitable purpose applied or earmarked for application for the purpose of the trust falls within the exemption provided for under section 4(3)(i). A business owned and carried on by the trust is of course held in trust. A trust is an institution which has no corporate personality. It is not a legal person. The word "trust" is a convenient and a compendious description of the trustees, the beneficiaries and the subject-matter of the trust. Sometimes the expression "trust" is used to denote the trustees. For example, when the trustees carry on a business, we generally say that the trust is....
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....it". The question was whether the income earned in the business in respect of the assessment years, 1951-52 to 54-55, was exempt from tax under section 4(3)(i). It was held by the Bombay High Court that the word "business" referred to in clause (b) of the proviso need not be business which is held for religious or charitable purpose and that there is nothing in that proviso which in any manner touches the case of a business which is held under trust for religious or charitable purposes. The income derived from the business was held exempt from tax under section 4(3)(i). At page 405 Shah J., as he then was, observes thus: "Mr. Joshi's argument is that if business is property within the meaning of section 4(3)(i), and that business is held on trust, the business in clause (b) of the proviso must also be held on trust, and if it is not so held on trust the income thereof will not be exempted as income derived from property held under a trust for religious or charitable purposes. But we do not think that there is any warrant for this submission on the plain language used by the legislature......The expression 'such income' in the proviso refers to the ....