1967 (4) TMI 2 - SC - Income Tax

Claim for exemption from tax u/s. 15B - Whether, on the facts and in the circumstances of the case, the assessee is entitled to claim deduction u/s. 15B in respect of the donation paid to the Agastyar Trust - Held, No

Summary

Issues Involved:
1. Eligibility for tax exemption under Section 15B of the Income-tax Act, 1922.
2. Interpretation of the trust deed to determine whether the trust is for wholly charitable or religious purposes.
3. Jurisdiction of the High Court in addressing the eligibility of the trust for tax exemption.

Issue-wise Detailed Analysis:

1. Eligibility for Tax Exemption under Section 15B of the Income-tax Act, 1922:

The assessee, East India Industries Limited, claimed tax exemption for a donation of Rs. 7,500 made to the Agastyar Trust under Section 15B of the Income-tax Act, 1922. The Income-tax Officer and the Appellate Assistant Commissioner rejected the claim on the grounds that the trust did not satisfy the conditions laid down under Section 15B. The Income-tax Appellate Tribunal initially allowed the claim, referencing a previous assessment year where it had recognized the Agastyar Trust as a public trust eligible for deductions under Section 15B. The High Court, however, answered the question against the assessee, leading to the present appeal.

2. Interpretation of the Trust Deed to Determine Whether the Trust is for Wholly Charitable or Religious Purposes:

The primary question was whether the property from which the Agastyar Trust derived its income was held under trust or other legal obligation wholly for religious or charitable purposes as per Section 4(3)(i) of the Act. The trust deed listed several objects, including educational, medical, and religious purposes. However, one object, specifically item 4, involved the manufacture and sale of pharmaceutical and medicinal preparations, which was deemed neither charitable nor religious. The court held that if any object of the trust is non-charitable, the conditions of Section 4(3)(i) are not met, and the exemption under Section 15B cannot be applied. The trust deed allowed trustees to utilize the income for any of the trust's objects, including non-charitable ones, thus failing to meet the criteria for tax exemption.

3. Jurisdiction of the High Court in Addressing the Eligibility of the Trust for Tax Exemption:

The appellant argued that the High Court exceeded its jurisdiction by addressing whether the trust was constituted for wholly religious or charitable purposes under Section 4(3)(i). They contended that the Tribunal had not examined this specific question in detail. However, the court noted that the Tribunal had referenced an earlier case and had not thoroughly examined the question of law. The Assistant Commissioner had specifically addressed whether the trust's income was exempt under Section 4(3)(i). The High Court was within its jurisdiction to examine this question as it was integral to determining the applicability of Section 15B. The court cited the principle from Commissioner of Income-tax v. Scindia Steam Navigation Co. Ltd., affirming that the High Court could address questions arising from the Tribunal's order.

Conclusion:

The court concluded that the Agastyar Trust did not meet the conditions for tax exemption under Section 4(3)(i) due to the inclusion of non-charitable objects in its trust deed. Consequently, the donation made by the assessee to the Agastyar Trust could not be exempted under Section 15B of the Act. The High Court's decision to address the eligibility of the trust for tax exemption was upheld, and the appeal was dismissed with costs.