1984 (2) TMI 180 - AT - Income Tax

Summary

Issues Involved:
1. Eligibility for exemption under section 11 of the Income-tax Act, 1961.
2. Classification of income as business income under section 13(1)(bb) of the Act.
3. Definition and scope of 'property held under trust.'

Issue-wise Detailed Analysis:

1. Eligibility for exemption under section 11 of the Income-tax Act, 1961:

The assessee, a trust, claimed exemption under section 11 of the Income-tax Act, 1961. The ITO denied this exemption, arguing that the income was from business activities and not from property held under trust. The first appellate authority, however, found that the objects of the trust were of general public utility, qualifying it for exemption under section 11. The Tribunal upheld the first appellate authority's finding that the trust's objects, including promotion of education, medical aid, relief of the poor, and promotion of sports and games, were charitable and fell within the definition of section 2(15) of the Act.

2. Classification of income as business income under section 13(1)(bb) of the Act:

The ITO argued that the income from conducting races and inter-venue betting was business income, thus falling under section 13(1)(bb) and disqualifying it from exemption. The first appellate authority agreed, stating that the income from these activities could not be considered as income from property held under trust. The Tribunal, however, disagreed, noting that the trust did not engage in business activities in the traditional sense, as it did not have significant capital at risk, nor did it have an organization or staff for conducting races. The Tribunal concluded that the income was not from business but from property held under trust or voluntary contributions, thus not subject to section 13(1)(bb).

3. Definition and scope of 'property held under trust':

The Tribunal examined whether the income from race meets and inter-venue betting could be considered as income from property held under trust. It noted that 'property' has a wide definition, including business in certain contexts. The Tribunal cited several cases, including CIT v. P. Krishna Warriar and CIT v. Hamdard Dawakhana, to support the broad interpretation of 'property.' The Tribunal found that the permission to conduct races and betting, granted by the Hyderabad Race Club and the Andhra Pradesh Government, constituted property held under trust. The income from these activities was thus considered as income from property held under trust, qualifying for exemption under section 11.

Conclusion:

The Tribunal concluded that the assessee trust qualified for exemption under section 11, as its objects were charitable and the income was from property held under trust or voluntary contributions. The assessments were set aside, and the appeals were allowed. The Tribunal did not find it necessary to address the applicability of section 13(1)(bb) further, as the income was not considered business income.