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Issues involved:
The issues involved in this case are: 1. Whether the trust is entitled to exemption from tax u/s 11 of the Income-tax Act, 1961 based on the deed of trust and accounts of the trust. 2. Whether letting out of house property by the trust constitutes an activity for profit. Judgment Details: Issue 1: The trust claimed exemption under section 11 of the Income-tax Act, 1961 as a charitable trust. The trust deed aimed to commemorate martyrs by constructing buildings and institutions for public benefit. The Tribunal initially denied the exemption, stating the trust's purpose did not align with the definition of "charitable purpose." However, the High Court found that the trust's primary objective was of general public utility, making it charitable under section 2(15) of the Act. The Court emphasized that the income generated was utilized for public welfare, thus qualifying for the exemption under section 11. Issue 2: Regarding the second issue, the Court clarified that earning rental income from letting out properties did not disqualify the trust from being considered for charitable purposes under section 2(15). The Court cited a Supreme Court ruling that profit-generating activities must be integral to the trust's purpose to affect its charitable character. In this case, the trust's main objective was public utility, and any profits earned were directed towards fulfilling this objective. Therefore, the trust's income from property rentals did not negate its eligibility for exemption under section 11. In conclusion, the High Court ruled in favor of the trust on both issues, affirming its entitlement to tax exemption under section 11 and confirming that letting out house property did not compromise its charitable status under section 2(15).
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