9911796707
TMI Blog1996 (7) TMI 184X X X X Extracts X X X X X X X X Extracts X X X X ..... as executed on the basis of the will of late Shri S.R. Bhargava on 18-5-1976, whereby the entire business which was running in the name of "Taxation" was transferred as a running concern with all its assets, goodwill, registration No., etc., along with the liabilities, if any, to the Sarla Bhargava Memorial Trust. The Assessing Officer also observed that the main object of the Trust was to establish hospital, dispensaries and clinics or to arrange for medical aid in association with any person or institution or individually by trust, to grant scholarship or provide financial aid to students for studies in educational, technical or research institution in India or abroad, to provide medical aid and relief to the poor and the needy persons, to establish educational institutions and libraries and to provide financial assistance and other facilities for such institutions or poor persons and to public or give financial aid in the publication of any literature on social welfare or positive thinking and run taxation with other publication as the business demands. The Assessing Officer also observed that the trust was registered under section 12A of the Income-tax Act. He also observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al before the learned CIT(A), the AR of the assessee submitted that the Assessing Officer was not justified in denying the benefit under section 11 by invoking the provisions of section 13(1)(bb) of the Income-tax Act. He further submitted that it had been brought to the notice of the Assessing Officer that as per will executed on 18-5-1976, Shri S.R. Bhargava had created the Trust for charitable purposes and that according to the said will, the business carried on in respect of Taxation Magazine was to be held under Trust for charitable purposes which had been specified as per Trust Deed Executed on 23-11-1982 by the Trustees in accordance with the said will. He, therefore, urged that the business was carried on in respect of the Taxation Magazine by the assessee-trust only towards the primary charitable purposes of the trust. He further urged that the Assessing Officer was not justified in rejecting the claim for benefit under section 11 on the ground that the profits were never applied for charitable purposes. In this connection he mentioned that under the provisions of section 11(2), a charitable institution was entitled in law to accumulate its income for a specified period an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n up with the same aims and objects as was desired by the deceased. He further invited our attention to the aims and objects of Sarla Bhargava Memorial Trust, the main objects whereof have already been mentioned by the Assessing Officer in the assessment order. In view of the foregoing the learned counsel submitted that the claim of the assessee for exemption under section 11 has to be considered mainly in the light of the provisions of section 11(1)(a), which are basic provisions, read with the provisions of section 11(4). He mentioned that whereas under section 11(1)(a), income derived from property held under trust [Emphasis supplied] wholly for charitable or religious purposes is exempt to the extent to which such income is applied to charitable purposes in India and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of 25 per cent of the income from such property under section 11(4), it is specified that "property held under Trust" includes a business undertaking so held [Emphasis supplied]. The learned counsel submitted that in view of the said provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (Mad.) related to the years before the introduction of section 13(1)(bb), the second decision reported in Thanthi Trust v. Asstt. CIT [1995] 213 ITR 626 (Mad.) dealt directly with the provisions of section 13(1)(bb). The third decision reported in Thanthi Trust v. CBDT [1995] 213 ITR 639 (Mad.) dealt with the provisions of section 11(4A) which were introduced simultaneously with the omission of the provisions of section 13(1)(bb). The learned counsel further submitted that in the first decision reported in CIT v. Thanthi Trust [1982] 137 ITR 735 (Mad.), the question considered was as to whether the Trust created, to which the business of newspaper was transferred as a going concern, was entitled to exemption under section 11 of the Income-tax Act. He submitted that it was held in that case that "the property held under Trust or under legal obligation" was the business itself and the entire income from the business had to be utilised for the various charitable objects set out in the Schedule to the decree of the High Court and merely because the Trust was carrying on an activity for profit for the purpose of carrying on the charitable objects referred to in the Schedule to the decr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the settled position of law that in the case of Fiscal statutes that impose pecuniary burden, if a reasonable doubt exists, the construction most beneficial to the subject must be adopted. Moreover, the construction, namely, that section 11(4A) will have no application to income derived from property held under trust for charitable purposes, leaves a certain area to section 11(4) of the Act, for its operation, notwithstanding the enactment of sub-section (4A)". In view of the foregoing decisions, the learned counsel urged that the benefit of exemption under section 11 may be granted to the assessee-trust, as the provisions of section 13(1)(bb) are not attracted in the case of the assessee-trust. He further submitted that the assessee-trust had already applied to the Assessing Officer in Form No. 10 for accumulation of income of Rs. 1,97,370 in accordance with the provisions of section 11(2) and that the assessee had not flouted any relevant provisions of law, which may entail disallowance of exemption under section 11. 3.1 With reference to applicability of maximum marginal rate as applied by the Assessing Officer, the learned counsel invited our attention to the orders of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g observations made at page 635 of the decision of the Hon'ble Madras High Court in the case of Thanthi Trust v. Asstt. CIT [1995] 213 ITR 626, namely :--- "In the case on hand the property held under trust is the business itself and the business is carried on only, and exclusively, for carrying out the charitable objects set out in the schedule to the decree in C.S. No. 90 of 1961. As pointed out by the Supreme Court, if the contention of the Revenue that once a trust carries on a business activity it loses the benefit of section 11 is accepted, no trust can carry on any business even for the fulfilment of the charitable objects, such as, relief of the poor, education and medical relief and, therefore, such a contention cannot be accepted. If the intention of the Legislature were to prohibit a trust or institution established for a charitable purpose or for the promotion of an object of general public utility from carrying on any activity for profit, it would have provided in the clearest terms that no such trust or institution should carry on any activity for profit. On the other hand, the Legislature by enacting section 11(4) under which the business may also be the property h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, as the business held under trust is being carried on to achieve the primary purposes of the trust. 7. Ground No. 4 urged by the assessee relates to exemption of interest income earned on fixed deposits, which was also denied by the learned CIT(A) in view of the rejection of the claim of the assessee for exemption under section 11. 7.1 In view of our decision on the main grounds relating to exemption under section 11, we feel that the claim of the assessee for exemption of interest income earned on fixed deposits should be considered. Accordingly the Assessing Officer is directed to consider the claim of the assessee with reference to this income under the provisions of section 11 in accordance with law. 8. Ground No. 5 urged by the assessee relates to applicability of the maximum marginal rate of tax. This matter was restored by the learned CIT(A) to the Assessing Officer with the direction to give fresh finding in this regard after allowing due opportunity to the assessee. In view of above facts we see no reason to interfere with the orders of the learned CIT(A). This ground is, therefore, rejected. 9. In the result, the appeal is allowed in part - - TaxTMI - TMI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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