2003 (12) TMI 20 - HC - Wealth-tax

Exemption under section 5(1)(i) trust object of the trust - whether the Tribunal is right in holding that the assessee-trust is not entitled to exemption under section 5(1)(i) of the Wealth-tax Act, 1957. - Clause 4B of the trust deed makes it amply clear that the corpus of the trust was only to be utilised and/or accumulated for contributing to the Aurobindo International Centre of Education and other institutions which are charitable institutions - The carrying on of an activity for profit in the course of actually carrying out the primary purpose of the trust would not disqualify the trust from being regarded as a charitable trust - The view taken by the Tribunal that the properties held by this trust are not held for charitable purpose is erroneous. The appeal is allowed. The question set out earlier is answered in favour of the assessee and against the Revenue.

Summary

Issues:
1. Interpretation of section 5(1)(i) of the Wealth-tax Act regarding exemption for charitable trusts.

Analysis:
The High Court of Madras addressed the issue of whether the assessee trust is entitled to exemption under section 5(1)(i) of the Wealth-tax Act, 1957. The trust's objects, as outlined in the trust deed, encompass various charitable purposes such as education, research, labour welfare, and integral society development. The trust deed mandates the trustees to utilize income and corpus solely for charitable activities related to Sri Aurobindo International Centre of Education and Sri Aurobindo Ashram. The court noted the absence of a specific definition of "charitable" in the Wealth-tax Act but referred to the Income Tax Act's inclusive definition of "charitable purpose."

The court cited precedents to support its interpretation. In the case of CWT v. Gangabai Charities, it was established that the trust deed's interpretation for income tax purposes is relevant for determining wealth tax exemption. Additionally, the court referenced the case of CIT v. Andhra Chamber of Commerce, emphasizing that the receipt of incidental benefits does not disqualify an institution from being charitable. The court also cited the case of Addl. CIT v. Surat Art Silk Cloth Manufacturers Association, which highlighted that a trust remains charitable even if a non-charitable object is incidental to its primary charitable purpose.

The court further analyzed the case of Director of Income-tax v. Bharat Diamond Bourse, where a diamond bourse was considered charitable due to its general public utility objectives. Applying these principles to the present case, the court concluded that the trust's objects qualified as charitable, entitling it to exemption under the Wealth-tax Act. The court rejected the Revenue's argument and allowed the appeal in favor of the assessee, emphasizing that the trust's properties were held for charitable purposes, as per the trust deed's provisions.

Moreover, the court distinguished a previous case involving a trust benefiting Aurobindo Ashram financially, emphasizing that the present trust's objects extended beyond financial benefits and included general public utility objectives. The court highlighted that the trustees' powers in managing the trust's business did not detract from its charitable nature, as all activities were directed towards fulfilling the trust's charitable objects. The court emphasized that the trust's business activities and property holdings for business purposes did not disqualify it from being considered charitable under the Wealth-tax Act.

In conclusion, the High Court of Madras ruled in favor of the assessee trust, affirming its entitlement to exemption under section 5(1)(i) of the Wealth-tax Act. The court's decision was based on the trust's charitable objects, as outlined in the trust deed, and its compliance with the criteria for charitable trusts established through legal precedents.