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TMI Blog1981 (7) TMI 134X X X X Extracts X X X X X X X X Extracts X X X X ..... of the objects of the trust with Shri Pinto continuing to manage the business, but as the sole trustee. Clause 4A of the trust deed relates to the objects, which are as under : 1. To aid and assist in the development, and maintenance of Shri Aurobindo International Centre for Education and Shri Aurobindo Ashram or any other public trust for charitable purpose and to establish and/or take over and/or purchase and/or otherwise acquire and run and manage services and industries required for the purpose of Shri Aurobindo International Centre for Education and/or Shri Aurobindo Ashram and/or departments connected therewith or any other public trust for charitable purpose. 2. To organise, encourage, promote, spread and impart all kinds of educations and/or aid and/or assist in imparting and/or contribute to Shri Aurobindo Ashram and/or Shri Aurobindo International Centre for Education for commercial, industrial and other educations, both theoretical and practical, based on the ideals of Shri Aurobindo and the Mother. 3. To carry on practical research, experiments, works, etc., for the solution of labour problems and solve them and demonstrate the solution in actual practice and for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Indian Chamber of Commerce v. CIT [1975] 101 ITR 796 justified the assessment of business income on the ground that it was an activity for profit and that the profit from such activities was clearly taxable. It was in this view that the ITO considered that the assessee was no longer eligible for relief under section 11. The assessee's income for this year was Rs. 1,43,820. Though the ITO held that the assessee was not eligible for exemption under section 11, he gave relief of an amount of Rs. 1,23,917 under section 10(21) as income of a scientific research association, apparently on the assumption that the dedication of this income for Shri Aurobindo International Centre for Education to the extent of actual payment of the amount of Rs. 1,23,917 made it the income of the trust. According to him, only Rs. 1,23,917 was applied for the trust. It was the assessee's case that the assessee-trust was eligible for benefit of section 11 and that the entire income had been applied. The assessee went in appeal with these pleas. The AAC agreed with the assessee on both the counts. She took the view that the contributions were made for Shri Aurobindo International Centre for Education ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to tax. According to him, it is well settled that where a business itself is the subject-matter of the trust, the question of any independent activity for profit by the trustees does not arise as long as the settled business is carried on and there is no other independent business. He took us over the preamble and the schedule to suggest that Shri Pinto had settled a running business along with machinery, which were again the subject-matter of further liability towards instalments, etc., as is evident from the schedule itself. The majority view of the Supreme Court in the case of Addl. CIT v. Surat Art Silk Manufacturers' Association reiterated its earlier stand in CIT v. Dharmodayam Co. [1977] 109 ITR 527, wherein the Supreme Court observed that where the business itself is held under trust, the last concluding words in clause (15) of section 2 would have no application. He, therefore, contended that there cannot he any doubt that the assessee continues to enjoy benefit of exemption already granted by the department in this and other similar cases of this group for past many years. As for the question of application, he claimed that there has been a lot of misunderstanding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------------- He pointed out that the decision of the Madras High Court in the case of Nachimuthu Industrial Association could not support the departmental view because there was only advance in that account and the profits were not adjusted against advance in this manner, but were taken to donation fund account, which was the assessee's own account and not that of a third party. Mere advance, it was held, would not amount to application merely on the strength of a resolution passed subsequent to the year of account. It is not so in the assessee's case. 5. We have carefully considered the records as well as the arguments. We would assume that the departmental appeal questions the right of the assessee to exemption under section 11 also, though the grounds of appeal are not very clear on this point. We do find that it is a case where the business itself has been subject-matter of settlement by way of trust. We find that the objects reproduced earlier do not indicate that the object of the trust was to make profit or to run the business, as sought to be suggested by the learned departmental representative. The o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions to a larger extent than warranted by the profits. It is for this reason that on the last day of the accounting year 31-12-1974, relevant for the assessment year under consideration, there was still an outstanding balance recoverable from the Ashram at Rs. 72,182.76. In other words, the assessee had advanced over the course of the years moneys to a larger extent than the entire profits which have been credited to the Ashram. Under these circumstances, there was hardly any scope for any doubt as to the non-application of any part of the profits. We have no difficulty in accepting the argument of the learned departmental representative that a mere advance does not amount to application, even as held by the Madras High Court in Nachimuthu Industrial Association. The facts in assessee's case are entirely different. The entire profits have been credited to the advance account and the advances made in the past and during the year have been fully adjusted to the extent of the entire profits of Rs. 1,42,812.67. Since the entire current profits have been applied by way of adjustment to the accounts, we do not find any difficulty in accepting the assessee's case. The ITO may have legiti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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