1997 (1) TMI 69 - HC - Income Tax

Summary

Issues:
Interpretation of section 11(4A) of the Income-tax Act for exemption under section 11(1) for a charitable institution engaged in kury business.

Analysis:
The case involved a charitable institution claiming exemption under section 11(1) of the Income-tax Act for income from its kury business. The assessing authority denied the exemption citing the introduction of section 11(4A). The Commissioner of Income-tax (Appeals) upheld the assessment order, but the Tribunal ruled in favor of the assessee, stating that the kury business was held in trust for charitable purposes. The Revenue contended that section 11(4A) applied to the assessee's case, while the assessee argued that the business being held under trust exempted it from the provisions of section 11(4A).

The High Court referred to previous judgments, including CIT v. Dharmodayam Co. [1977] 109 ITR 527, which held that a business held under trust for charitable purposes could be exempt under section 11(1). The court analyzed the changes in the definition of "charitable purpose" under section 2(15) of the Income-tax Act, noting the deletion of the clause "not involving the carrying on of any activity for profit." The introduction of sub-section (4A) under section 11 by the Finance Act of 1983 was also considered, which specified conditions for exemption of business income for charitable trusts.

The court concluded that if the kury business was held in trust, it would not be governed by sub-section (4A) as per the precedent set by the Supreme Court in CIT v. Dharmodayam Co. [1977] 109 ITR 527. The court found similarities between the provisions of the 1922 Act and the 1961 Act, affirming the assessee's entitlement to claim exemption under section 11(1) for its income from the kury business. The judgment favored the assessee, ruling in their favor against the Revenue's contentions.

In summary, the High Court upheld the Tribunal's decision, affirming the assessee's right to exemption under section 11(1) for income from the kury business held in trust for charitable purposes, despite the introduction of section 11(4A) and changes in the definition of "charitable purpose" under the Income-tax Act.