TaxTMI 
TaxTMI 
1978 (7) TMI 2
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.... the business of the company and for the advancement of the purpose mentioned above in so far as is appropriate, to construct buildings or to purchase or take on lease or for hire movable or immovable properties. (d) To encourage others to form other institution with the purpose of acting in accordance with the objects of the company. (e) To do all such things as are conducive to the fulfilment of the above objects. (f) To lend money on interest to one or more solvent persons individually or severally on the security of ornaments, landed properties or other forms of security fixed by the directors and to borrow money to meet the needs of the company and to run other industries." Article 58 of the articles of association read : " The profit of the company shall not be divided among the members. The profit left after meeting the expenses of the company will be utilised for promoting education, industry, social welfare and such other purposes of common good as are resolved by the general meeting." During the assessment years 1962-63 to 1965-66, the appellant derived income from property, money-lending and business in kuries or chit funds. The assessee claimed exemption from tax ....
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....ome derived from property held under trust wholly for charitable purposes. It is well settled that business is " property " with the meaning of section 11(1)(a) : Commissioner of Income-tax v. Krishna Warriar [1964] 53 ITR 176 (SC). That is also evident from the provisions of section 11(4), and reference may be made also to section 13(1)(bb). Further, it is apparent from the terms of the memorandum of association and the articles of association that the business of conducting kuries and of money-lending is held under trust. The question is : Is the business held under trust for charitable purposes ? There can be little doubt that when sub-clause (a) of clause 3 of the memorandum says : " To raise funds by conducting kuries, with company as foreman, receiving donations and subscriptions by lending money on interest and by such other means as the company deem fit ", it refers to powers conferred on the appellant to raise money in aid of, and for the purpose of accomplishing, the objects mentioned in sub-clause (b) of clause 3 of the memorandum. Up to June 6, 1965, sub-clause (b) read : " To do the needful for the promotion of charity, education, industries, etc., and public good. "....
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.............. Ordinarily, profit motive is a normal incident of business activity and if the activity of a trust consists of carrying on of a business and there are no restrictions on its making profit, the court would be well justified in assuming in the absence of some indication to the contrary that the object of the trust involves the carrying of an activity for profit." Beg J., in the same case, observed : " The deed puts no condition upon the conduct of the newspaper and publishing business from which we could infer that it was to be on ' no profit and no loss ' basis ...... That character (i.e., of the deed) is determined far more certainly and convincingly by the absence of terms which could eliminate or prevent profit making from becoming the real or dominant purpose of the trust. It is what the provisions of the trust make possible or permit coupled with what had been actually done without any illegality in the way of profit making, in the case before us, under the cover of the provisions of the deed, which enable us to decipher the meaning and determine the predominantly profit-making character of the trust." In a subsequent case, Commissioner of Income-tax v. Cochin Cha....
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....y, the object still falls under the residual general head mentioned in section 2(15). The same consideration apply, and the same conclusion follows, as under the original provisions of the memorandum and articles of association. Great reliance has been placed on behalf of the appellant on Commissioner of Income-tax v. Dharmodayam Co. [1977] 109 ITR 527 (SC) and it has been seriously urged that the decision of this court in that case concludes the point raised in these appeals. We find it not possible to accept this. In that case, the income derived by the assessee from kuries was held by this court to be exempt under section 11(1)(a) of the Act, but the decision proceeded almost entirely on the assumption that the Kerala High Court had found in Dharmodayam Co. v. Commissioner of Income-tax [1962] 45 ITR 478 (Ker), in a case between the same parties, that the kuries business was itself held under trust for charitable purpose and from that the court inferred that the business activity was not undertaken by the assessee in order to advance any object of general public utility. No such finding has been rendered by any High Court in a case to which the appellant is a party. It will be ....