TaxTMI 
TaxTMI 
1995 (8) TMI 20
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....assessee-trust is entitled to exemption under section 11 of the Act, despite what is contained in section 13(1)(bb) of the Act. The assessee is a society, registered under the Societies Registration Act and its objects as found in its memorandum of association are as follows : "....to run the Virudhunagar Hindu Nadars' Abivirudhi Panjukadai Mahamai and to develop it and thereby, (i) to provide relief of the poor, education and medical relief ; (ii) to establish and maintain educational institutions . . . . to give aid to educational institutions ; . ... (x) to establish and run income earning industries to achieve the three main objects of our society, viz., to provide relief of the poor, education and medical relief." The society is in existence for the past 150 years or so. Clauses 3 and 4 of the Rules and Regulations of the society run as follows : " 3. The funds of the society shall comprise its income from the Mahamai contributed by its members as fixed by the general body from time to time, the rent and other incomes from the properties owned by the society, the cooly receipts of the cotton ginning machinery owned by the society and donations. 4. Mahamai shall be col....
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....; -------- -------- Total income + 2,870 + 1,18,116 -------- -------- Thus, while in 1979-80, the total income being below the taxable limit, there was no tax, in 1980-81, the total levy including surcharge was Rs. 58,886 (together with Rs. 23,520 by way of interest under section 217(1)(a) of the Act). Thus, virtually the question is whether the abovesaid business income from decortica....
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.... section 13(1)(bb) of the Act. But, learned counsel for the assessee argues that since the Tribunal has also held that the abovesaid " business (of the assessee) itself is held under trust for purposes of charity," it should be held that section 13(1)(bb) is satisfied, in view of the Supreme Court decisions in CIT v. Dharmodayam Co. [1977] 109 ITR 527 and Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1. In this connection, he also relies on CIT v. Dharmodayam Co. [1974] 94 ITR 113 (Ker) ; CIT v. Thanthi Trust [1982] 137 ITR 735 (Mad) and. Thanthi Trust v. Asst. CIT [1995] 213 ITR 626 (Mad). In this connection, learned counsel for the Revenue points out that those decisions will not help the assessee since there is no material in the present case to hold that the abovesaid business of decorticating and ginning is carried on " as a means in the course of the actual carrying out of a primary purpose " of the abovesaid trust. We have considered the rival submissions. CIT v. Dharmodayam Co. [1977] 109 ITR 527 (SC) arose under section 4(3)(i) of the Indian Income-tax Act, 1922, which no doubt corresponds to section 11 of the present Act of 1961. Further, it ....
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.... (1) relief of the poor ; (2) education and (3) medical relief and that where, therefore, the purpose of a trust is relief of the poor, education or medical relief, the requirement of the definition of " charitable purpose " would be fully satisfied, even if an activity for profit is carried in the course of the actual carrying out of a primary purpose of the trust. What learned counsel for the Revenue submits in the present case is that since admittedly the present case would not fall under the abovesaid last head of charitable purpose, but would only fall under the preceding three heads, the assessee will not get exemption since obviously in the present case, the abovesaid business activity in ginning and decortication is not in the course of the actual carrying out of the primary purpose of the trust, viz., to run the Virudhunagar Hindu Nadars' Abivirudhi Panjukadai Mahamai or even to provide, relief of the poor, education or medical relief. In this connection, the following passage in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC), we also find, is significant : " A business activity carried on not with a view to carrying out the charitable....
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....not possible to accept the case of the Revenue that the trust in this case cannot claim the benefit of exemption under section 11 merely because it carries on a commercial activity for profit." In CIT v. Thanthi Trust [1982] 137 ITR 735 (Mad), the assessee was one Thanthi Trust and in Thanthi Trust v. Asst. CIT [1995] 213 ITR 626 (Mad) also, the same Thanthi Trust was the assessee and in that latter case also it was held that in view of the categorical finding in CIT v. Thanthi Trust [1982] 137 ITR 735 (Mad) that the primary purpose of the assessee trust was to carry out the charitable objects and that the business was carried on as a means in the course of actual carrying out of a primary purpose of the trust, the requirement of the last portion of section 13(1)(bb) was satisfied by it. Therefore, in Thanthi Trust v. Asst. CIT [1995] 213 ITR 626 (Mad) also it was held that section 13(1)(bb) could not stand in the way of the assessee therein claiming the benefit of the exemption under section 11(1) of the Act. But, in the present case, there is no material at all to show that the abovesaid ginning and decorticating businesses are carried on as a means in the course of the actual ....