9911796707
|
Home
Issues Involved:
1. Whether the income derived by the assessee-trust from business is exempt from tax under section 4(3)(i) of the Indian Income-tax Act for the assessment years 1952-53 to 1955-56? Issue-wise Detailed Analysis: 1. Exemption of Business Income under Section 4(3)(i): The primary issue was whether the income derived by the religious and charitable trust "Thiagesar Dharma Vanikam" from its business activities was exempt under section 4(3)(i) of the Indian Income-tax Act for the assessment years 1952-53 to 1955-56. The trust was established by Karumuthu Thiagarajan Chettiar with a nucleus fund of Rs. 61,000, which was used to start a business in cotton yarn and cloth. The trust also acquired a printing press and carried on business as printers. Income-tax Officer's View: The Income-tax Officer held that the business income of the trust was not exempt from taxation, as it fell within proviso (b) to section 4(3)(i) and did not fulfill the necessary conditions for exemption under the main provision. Appellate Assistant Commissioner's View: The Appellate Assistant Commissioner dismissed the appeals for the assessment years 1952-53 and 1953-54, stating that the business was carried on by the managing trustee on behalf of the trust, thus excluding the application of section 4(3)(i) by the operation of proviso (b). Income-tax Appellate Tribunal's View: The Tribunal dismissed the further appeals, agreeing that the business was carried on by the managing trustee on behalf of the trust and that the conditions prescribed under proviso (b) were not fulfilled. High Court's Analysis: The High Court examined the terms of the trust deed and the statutory provisions. The trust deed allowed the trust funds to be employed in any trade, industry, or business. The court noted that the managing trustee was central to the trust's operations. The court traced the history of section 4(3)(i) and its amendments, particularly the introduction of clause (ia) in 1939 and its subsequent re-enactment as proviso (b) in 1953. The court referred to various judicial pronouncements, including decisions from the Lahore, Allahabad, Bombay, and Kerala High Courts, which interpreted the scope of section 4(3)(i) and its provisos. Key Judicial Interpretations: - The Lahore High Court in Charitable Gadodia Swadeshi Stores v. Commissioner of Income-tax held that clause (ia) did not derogate from clause (i) but rather added to the list of exemptions. - The Allahabad High Court in Commissioner of Income-tax v. Radhaswami Satsang Sabha stated that clause (i) and clause (ia) did not necessarily overlap. - The Bombay High Court in J.K. Trust v. Commissioner of Income-tax and Dharma Vijaya Agency v. Commissioner of Income-tax held that proviso (b) did not restrict the exemption provided under section 4(3)(i) for businesses held in trust. - The Kerala High Court in Commissioner of Income-tax v. Krishna Varier and Dharmodayam Co. v. Commissioner of Income-tax agreed with the Bombay view, stating that proviso (b) applied only to businesses not held in trust. Conclusion: The High Court concluded that proviso (b) to section 4(3)(i) did not restrict the operation of the main provision. If a trust carries on a business and the business itself is held in trust, the income from such business is exempt from taxation under section 4(3)(i), provided it is applied or accumulated for application to the trust's religious or charitable purposes. The court held that the income derived by the assessee-trust from its business activities was exempt from tax for the relevant assessment years. Judgment: The question was answered in the affirmative and in favor of the assessee. The department was directed to pay the costs, with counsel's fee set at Rs. 250.
|
