Definition of charitable trust u/s 2(15). - Income Tax - 1321/CBDT

INSTRUCTION NO. 1321/CBDT Dated: March 20, 1980 The Board had under circular letter No.180/222/77-IT(AI) dated 17th October, 1977 directed that all assessments of charitable trusts should be over unless time barring assessments were involved, pending a final decision on the issues arising out of the judgments of the Supreme Court in the cases of Lok Shikshana Trust Vs. CIT (101 ITR 234) and Indian Chamber of Commerce (101 ITR 796). 2. The Supreme Court have in their recent judgment in Surat Art Silk Cloth Manufacturers Association's case, examined the definition of 'charitable purpose' contained in section 2(15) of the Income-tax Act, 1961 with special reference to the purport of the phrase "the advancement of any other object of general public utility not involving the carrying on of activity for profit". In brief, the Supreme Court have held that the words" "Not involving the carrying on any activity for profit" relate to the object of general public utility and not to its advancement. Therefore, if a trust carries ,on an activity for profit with a view to advancing its objects, it will not cease to be charitable. It ceases to be charitable only when its objects themselves involve the carrying on of an activity for profit. The earlier decisions in the cases of Lok Shikshana Trust and Indian Chamber of Commerce have been reversed in this regard by the Supreme Court. 3. Having regard to the Supreme Court's latest decision, the Board withdraws the instructions contained in letter dated 17th October, 1977. All the pending assessments may now be completed in the light of the legal position enunciated by the Supreme Court and explained in the preceding paragraph.