1980 (1) TMI 51 - HC - Income Tax

Summary

Issues:
1. Whether the assessee was a charitable trust and entitled to exemption under section 11?
2. Whether the Tribunal was right in upholding the Appellate Assistant Commissioner's order deleting the addition of Rs. 40,290 made by the Income-tax Officer?

Analysis:

Issue 1:
The case involved two Income-tax References where the Tribunal referred questions regarding the charitable status of the assessee trust. The trust, known as Smt. Guryani Brij Ballabh Kaur Trust, Kartarpur, was initially assessed as an association of persons due to the Income Tax Officer's denial of its charitable trust status. However, the Appellate Tribunal reversed this decision, emphasizing the trust's objective to establish educational institutions, provide relief to the poor, and advance general public utility. The lower authorities' focus on specific objects, like maintaining samadhs and holding melas, was deemed erroneous by the Appellate Tribunal. The dominant intention of the trust's creator, as reflected in the memorandum of association, was found to be charitable in nature. The trust's paramount purpose was to establish educational institutions and aid the underprivileged, outweighing other mentioned objects. The trust's income utilization for non-religious purposes did not affect its charitable status, as the primary intent of the trust was deemed charitable.

Issue 2:
The revenue challenged the Tribunal's decision, arguing that maintaining samadhs and holding melas were non-religious and secular purposes, thus making the trust non-charitable. However, the Court disagreed, stating that if the public revered the samadhs and attended the melas, these activities served a public, religious purpose. Even if considered secular, these activities did not alter the trust's charitable nature, as the dominant intention of the trust was charitable. The absence of specific directions on income utilization for various objects did not affect the trust's charitable status. Citing precedents, the Court emphasized that the trust's primary charitable purpose determined its classification, not isolated objects. Therefore, both questions were answered in favor of the assessee, affirming its charitable status and entitlement to exemption under section 11.