1970 (2) TMI 6 - HC - Income Tax

Trust - conducted a printing press - printed and published a daily paper and weekly paper and also published certain books, pamphlets and other literature - claim for exemption under section 11 of the IT Act, 1961, r/w s. 2(15)

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.
2. Validity of the trust deed dated April 10, 1947, in light of the earlier trust deed dated July 15, 1935.
3. Whether the object of the trust was political or charitable.
4. Interpretation of the term "charitable purpose" under section 2(15) of the Income-tax Act, 1961.
5. Whether the object of the trust falls under the category of "education" or "general public utility."

Issue-wise Detailed Analysis:

1. Exemption under Section 11 of the Income-tax Act, 1961:
The primary issue was whether the income of the Loka Shikshana Trust for the assessment year 1962-63 was exempt under section 11 of the Income-tax Act, 1961, read with section 2(15). The Income-tax Officer held that the income of the trust was taxable since its purpose was not charitable because it involved the carrying on of an activity for profit. The Appellate Assistant Commissioner upheld the assessee's contention, stating that the restriction regarding the carrying on of an activity for profit applied to all heads of charitable purposes and that "profit" meant "private profit." However, the Tribunal held that the restrictive words "not involving the carrying on of any activity for profit" applied only to the last head of charitable objects and that the main object of the trust did not fall under "education."

2. Validity of the Trust Deed Dated April 10, 1947:
The Commissioner argued that the first deed dated July 15, 1935, creating the National Literature Publication Trust, was irrevocable, making the trust deed dated April 10, 1947, void. The court noted that the department did not raise this issue before the Appellate Assistant Commissioner or the Tribunal. The High Court, exercising its advisory jurisdiction, stated that it could not call for further information on this matter since it was not within the scope of the question of law referred.

3. Object of the Trust: Political or Charitable:
The Commissioner contended that the object of the trust was political and not charitable. However, the court observed that the department did not raise this contention at any stage before the lower authorities. The High Court noted that the Appellate Assistant Commissioner and the Tribunal proceeded on the basis that the trust was created by the deed dated April 10, 1947, and that the object of the trust was charitable under the Indian Income-tax Act, 1922, until the addition of the clause "not involving the carrying on of any activity for profit" in section 2(15) of the 1961 Act.

4. Interpretation of "Charitable Purpose" under Section 2(15):
The definition of "charitable purpose" under section 2(15) of the 1961 Act 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 court held that the restrictive words "not involving the carrying on of any activity for profit" qualified the words "advancement of any other object of general public utility" and not the first three heads of charitable purposes. The court emphasized that a business undertaking involves an activity for profit, and if a trust's object involves carrying on such an activity, it ceases to be a charitable purpose under the Act.

5. Object of the Trust: Education or General Public Utility:
The assessee contended that the object of the trust was "education" as stated in clause 2 of the trust deed. However, the court referred to the Judicial Committee of the Privy Council's decision in In re The Trustees of the Tribune, which held that the object of supplying an organ of educated public opinion does not fall under "education." The court concluded that the trust's object of running a newspaper, although having an educative value, does not directly result in the advancement of education and therefore falls under "general public utility" involving an activity for profit.

Conclusion:
The High Court answered the question of law referred in the negative, holding that the income of the Loka Shikshana Trust was not entitled to exemption under section 11 of the Income-tax Act, 1961, for the assessment year 1962-63. The court emphasized that the trust's activities involved carrying on a commercial activity for profit, which disqualified it from being considered a charitable purpose under the Act.

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