1989 (9) TMI 166 - AT - Income Tax

Summary

Issues:
- Whether the assessee is entitled to exemption under section 11 of the Income Tax Act as a charitable institution.
- Whether the activities of the assessee, including running a newspaper and a foundry, are considered commercial activities for profit.

Detailed Analysis:

Issue 1: The main issue in this case is whether the assessee is entitled to exemption under section 11 of the Income Tax Act as a charitable institution. The Revenue contended that the assessee is not a charitable institution due to its political nature. The assessee, a trust society established for national advancement, argued that its activities are charitable. The objects of the society include educational, cultural, social, economic, and political advancement. The Income Tax Officer (ITO) held the income of the assessee as not exempt from tax, excluding only agricultural income and some expenses. The Commissioner of Income Tax (Appeals) accepted the assessee's claim of exemption under section 11. The Tribunal analyzed the objects of the society and concluded that the political advancement mentioned in the objects clause is charitable in nature, falling under the definition of charitable purpose in section 2(15) of the Act.

Issue 2: Another issue raised was whether the activities of the assessee, such as running a newspaper and a foundry, are commercial activities for profit. The Tribunal examined the publication of the newspaper "Samaj" and found that it was not a direct part of the society's objects. The newspaper was bequeathed to the assessee for social, educational, moral, and political uplift. The Tribunal held that the publication of the newspaper was not an object according to the constitution of the assessee. The Tribunal also discussed the amendment to section 2(15) and section 13(1)(bb) of the Act, emphasizing that income from business activities would be exempt if carried out in the actual carrying out of the primary purpose of the trust or institution. The Tribunal found that the activities of the assessee were in line with its charitable objects and therefore qualified for exemption under section 11.

In conclusion, the Tribunal dismissed the Revenue's appeals, holding that the assessee is a charitable institution as defined in the Income Tax Act. The Tribunal emphasized that the political advancement mentioned in the objects clause is charitable in nature and that the activities of the assessee, including running a newspaper and a foundry, were aligned with its charitable objectives. The Tribunal's decision affirmed the assessee's entitlement to exemption under section 11 of the Act.