1970 (11) TMI 29 - HC - Income Tax

Trust - Whether,the objects of the Arya Vaidya Sala constitute a charitable purpose within the meaning of section 2(1) of the Income-tax Act, 1961 - Whether,the assessee is entitled to exemption on the 25% of the profits devoted to the development of Arya Vaidya Sala

Summary

Issues:
1. Whether the objects of Arya Vaidya Sala constitute a charitable purpose under the Income-tax Act, 1961?
2. Whether the assessee is entitled to exemption on profits devoted to the development of Arya Vaidya Sala?
3. Whether the Tribunal was correct in deleting certain additions made in the assessment years 1962-63 and 1963-64?

Analysis:

Issue 1:
The judgment concerns the charitable purpose of Arya Vaidya Sala under the Income-tax Act, 1961. The will of the founder, Shri. P. S. Warrier, outlined the objectives of the institution, including the preparation and sale of Ayurvedic medicines, treatment of patients, and research in Arya Vaidyam. The Tribunal viewed these activities as interconnected, primarily aiming at medical relief to the public. The court analyzed the definition of "charitable purpose" under the Act, emphasizing that an activity for profit does not disqualify an object from being charitable if it serves a general public utility. However, the court found that the predominant activity of Arya Vaidya Sala was the commercial sale of medicines, with patient treatment being incidental. Therefore, the institution did not fall under the definition of a charitable purpose, leading to a negative answer to question 1.

Issue 2:
Regarding the exemption on profits for the development of Arya Vaidya Sala, the court noted that the funds for various activities, including the hospital and educational purposes, were to be sourced from the profits of Arya Vaidya Sala. The judgment highlighted the mixed charitable and non-charitable objectives of the trust. As the institution's income was primarily generated through commercial activities, the court concluded that it did not qualify for exemption under the Act. Consequently, the answer to question 2 was also negative.

Issue 3:
The Tribunal's deletion of certain additions made in the assessment years 1962-63 and 1963-64 was contingent on the answers to the first two questions. Since the court ruled against the charitable classification of Arya Vaidya Sala's activities, the additions made by the Tribunal were upheld. The court answered question 3 in the negative, aligning with the department's stance. No costs were awarded in the case, and the judgment was to be communicated to the Appellate Tribunal as per statutory requirements.

In conclusion, the High Court's judgment in this case centered on the interpretation of Arya Vaidya Sala's activities in relation to the Income-tax Act, ultimately determining its eligibility for charitable status and exemption on profits.