1986 (2) TMI 15 - HC - Income Tax

Summary

Issues Involved:
1. Applicability of the amended Section 4 of the Agricultural Income-tax Act, 1950, for the assessment year 1973-74.
2. Entitlement of the trust to exemption from tax under the amended Section 4.
3. Allowability of expenses incurred within the state in furtherance of the trust's objects.
4. Justification of the Tribunal's finding regarding the trust's objective being solely for propagation of a particular religion and service to its followers.

Issue-wise Detailed Analysis:

1. Applicability of the Amended Section 4 of the Agricultural Income-tax Act:
The court addressed whether the amended Section 4 of Act 22 of 1950, as revised by Act 9 of 1974, applies to the assessment year 1973-74. The counsel for the assessee conceded that the amended Act is applicable to the assessment proceedings in the present case. Therefore, the court answered this question in favor of the Revenue, citing the Supreme Court decision in *Karimtharuvi Tea Estate Ltd. v. State of Kerala* [1966] 60 ITR 262.

2. Entitlement to Exemption from Tax under the Amended Section 4:
The court examined whether the trust, which aims to propagate Jain religion and serve its followers, qualifies for tax exemption under the amended Section 4. The relevant provisions of Section 4(1)(b) and (c) of the Act exclude agricultural income derived from property held under trust wholly or partly for charitable or religious purposes, provided such income is applied to such purposes within the State. However, Section 4(3)(b) excludes trusts established for the benefit of any particular religious community or caste from exemption. The Tribunal had denied the exemption on the grounds that the trust was a private family trust primarily aimed at propagating a particular religion. The court, however, analyzed the trust deed and concluded that the trust serves both religious and charitable purposes, benefiting the public, and is not confined to any particular religious community or caste. Therefore, the trust is entitled to the exemption under Section 4(1)(b).

3. Allowability of Expenses Incurred within the State:
The court considered whether the expenses incurred within the state in furtherance of the trust's objects are allowable. The Tribunal had disallowed these expenses, but the court found that the trust's activities, including educational support, medical aid, and charitable works, benefit the public and are not restricted to a particular religious community. Hence, these expenses should be allowable.

4. Justification of the Tribunal's Finding on the Trust's Objective:
The Tribunal had inferred that the trust's primary objective was to propagate a particular religion and serve its followers, thus categorizing it as a private trust. The court disagreed, noting that the trust's deed includes various charitable activities benefiting the public, such as education, medical aid, and support for the poor, which are not confined to Jain followers. The court cited legal precedents distinguishing between private and public trusts, emphasizing that public trusts benefit the general public or a class thereof, while private trusts benefit specific individuals. Applying these principles, the court concluded that the trust qualifies as a public charitable and religious trust.

Conclusion:
The court answered:
- Question No. 1 in favor of the Revenue, confirming the applicability of the amended Act.
- Questions Nos. 2, 3, and 4 in favor of the assessee, recognizing the trust as a public charitable and religious trust entitled to tax exemption under Section 4(1)(b) of the Act.

A copy of the judgment will be forwarded to the Agricultural Income-tax and Sales Tax Appellate Tribunal, Kozhikode.