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Issues Involved:
1. Competence of the Tribunal in permitting a new ground at the appeal stage. 2. Whether the income of the Breach Candy Swimming Bath Trust is exempt from tax as a charitable institution. Issue-wise Detailed Analysis: 1. Competence of the Tribunal in Permitting a New Ground at the Appeal Stage: The first issue pertains to the Tribunal's competence to allow an assessee to raise a new ground during the appeal hearing, which was not raised before the Income-tax Officer, the Appellate Assistant Commissioner, or in the grounds of appeal before the Appellate Tribunal. According to Rule 12 of the Appellate Tribunal Rules, 1946, the Tribunal is authorized to permit a new point to be raised, provided the affected party is given sufficient opportunity to be heard on this point. The Tribunal noted that the Department's representative did not request an adjournment to consider the new point, indicating that the Department was not denied a sufficient opportunity to be heard. Consequently, this question was answered against the Commissioner, affirming the Tribunal's competence. 2. Exemption of Income as a Charitable Institution: The primary issue is whether the income derived by the Breach Candy Swimming Bath Trust from activities such as selling season tickets, daily admission tickets, and operating a bar and restaurant is exempt from tax as a charitable institution. Historical Context and Trust Deed: The trust was established by a deed executed on February 3, 1876, between the Secretary of State for India in Council and the Municipal Corporation of Bombay. The trust's objective was to construct and maintain a saltwater swimming bath for the European public of Bombay. A scheme was framed by the High Court in 1935, which transferred the administration from the Municipality to named trustees and included the provision for supplying refreshments, including alcoholic liquors. Charitable Nature of the Trust: The court emphasized the distinction between the trust's object and the powers conferred upon the trustees. The sole object of the trust is the maintenance and construction of a saltwater swimming bath, while the provision for refreshments is an incidental power. The court held that the maintenance of a swimming bath is a charitable object under the Indian Income-tax Act, which defines "charitable purposes" broadly to include "relief to the poor, education, medical relief, and the advancement of any other object of general public utility." Public Utility and Health Promotion: The court considered whether setting up a swimming bath is an object of general public utility. It concluded that a swimming bath accessible to the public promotes health, which is an object of general public utility. The court distinguished this case from the English case In re Nottage, where the trust was for the sport of yacht-racing, benefiting a limited class of yacht-owners. Here, the swimming bath benefits a defined section of the public, namely the European public in Bombay. Commercial Aspect and Charitable Nature: The court addressed the argument that charging for admission makes the trust a commercial entity rather than a charitable one. It clarified that the eleemosynary element (providing services for free) is not essential for a charitable trust. As long as the profits are used for the trust's charitable purposes and not for private gain, the trust remains charitable. This principle was supported by the Privy Council cases of the Tribune and All India Spinners' Association, which held that charging for services does not negate the charitable nature if the income is used for public utility. Section 4(3)(ia) vs. Section 4(3)(i): The court examined whether the income falls under Section 4(3)(ia) or Section 4(3)(i) of the Indian Income-tax Act. Section 4(3)(ia) applies to income from business carried on behalf of a charitable institution, provided the income is applied solely to the institution's purposes. However, the court found that the business of the trust (selling tickets and operating a bar) is an integral part of the trust itself, not a separate activity. Therefore, the income should be considered under Section 4(3)(i), which exempts income derived from property held under trust for charitable purposes. Conclusion: The court concluded that the income derived from the trust's activities is exempt from tax under Section 4(3)(i) of the Indian Income-tax Act, as it is derived from property held under trust wholly for charitable purposes. The question was answered in the affirmative, affirming the tax exemption for the trust's income.
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