1975 (8) TMI 1 - SC - Income Tax

Whether the income of the Loka Shikshana Trust was entitled to exemption under section 11 of the Income-tax Act, 1961, read with section 2(15) - object was not education within the meaning of section 2(15) but an object of general public utility- trust was therefore not exempt from tax

Issues Involved:
1. Whether the income of the Loka Shikshana Trust was entitled to exemption under section 11 of the Income-tax Act, 1961, read with section 2(15) of the same Act, for the assessment year 1962-63.

Issue-wise Detailed Analysis:

1. Object of the Trust:
The central issue was whether the Loka Shikshana Trust's income qualified for exemption under Section 11 of the Income-tax Act, 1961, read with Section 2(15). The definition of "charitable purpose" under Section 2(15) includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit. The appellant argued that the trust's primary objective was education, while the revenue contended it was the advancement of any other object of general public utility.

2. Interpretation of "Charitable Purpose":
The court examined whether the words "not involving the carrying on of any activity for profit" qualified only the fourth category of "advancement of any other object of general public utility" or also the first three categories (relief of the poor, education, and medical relief). The court found it unnecessary to decide this because it concluded that the trust's object was not education but the advancement of any other object of general public utility.

3. Activities of the Trust:
The trust's activities included publishing newspapers and journals, which were deemed to be a business activity. The court noted that the trust's income came primarily from the sale of newspapers, advertisements, and job printing, indicating a profit-oriented activity. The trust deed allowed the trustee to utilize funds in a manner that could yield profits, demonstrating that the trust's purpose involved profit-making activities.

4. Judicial Precedents:
The court referred to the Judicial Committee's decision in the case of In re Trustees of the Tribune, where it was held that the object of supplying an organ of educated public opinion was an object of general public utility and not education. The court applied this precedent to the present case, concluding that the trust's object was the advancement of any other object of general public utility.

5. Legislative Intent and Interpretation:
The court considered the legislative intent behind the amendment to Section 2(15) of the Income-tax Act, 1961. The Finance Minister's speech indicated that the amendment aimed to prevent misuse of the definition of "charitable purpose" by commercial concerns. The court held that the words "not involving the carrying on of any activity for profit" were added to ensure that trusts with profit-making activities did not qualify as charitable purposes.

6. Profit-Making Activities:
The court analyzed the trust's financial statements, which showed significant profits from its activities. The trust's assets had increased manifold, and the profits were used to expand its business. The court concluded that the trust's activities involved profit-making, which disqualified it from being considered a charitable purpose under Section 2(15).

7. Conclusion:
The court held that the Loka Shikshana Trust's object was the advancement of any other object of general public utility and not education. Since the trust's activities involved profit-making, it did not qualify for exemption under Section 11 of the Income-tax Act, 1961. The appeals were dismissed without costs.

Judgment by BEG J.:
Justice Beg delivered a separate judgment, concurring with the majority's conclusion. He emphasized that the trust's activities were profit-oriented and did not serve a purely educational or charitable purpose. He noted that the trust deed allowed for profit-making activities and that the trust had made substantial profits. The judgment affirmed the Mysore High Court's decision, and the appeal was dismissed with each party bearing its own costs.

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