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TMI Blog2015 (2) TMI 727X X X X Extracts X X X X X X X X Extracts X X X X ..... d emerge as a result of that. Obviously realising this, Parliament has chosen to employ the word "mainly". The ultimate test is to see as to whether the persons, who are in actual management of the institution, are the persons working for and on behalf of the beneficiaries or whether they have an independent and personal interest of their own. Viewed from that angle, the employees of the corporation ; in the ultimate analysis are none other than the public employees working for and on behalf of the beneficiaries. The role played by the Government is nothing but a systematic activity, through which the will of the public is transmitted or is translated. It hardly needs any mention that where two views are possible while interpreting a provision of taxation law, the one that helps the assessee or beneficiary must be chosen. In the instant case, the assessee is a corporation serving the needs of the travelling public in the State and was enjoying the benefit for the past several decades. Further, sub-section (4A) ceased to be in force on its being deleted in the year 1991. - Decided in favour of assessee. - R.C.No.141 of 2000 - - - Dated:- 16-7-2014 - SRI L.NARASIMHA REDDY AND SRI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 294/Hyd/97, with a request to frame four questions and to refer them to this court, for answer. After hearing the matter at length, the Tribunal passed the order, referring the following questions : 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the applicant was not entitled to deduction under section 11 of the Income-tax Act, 1961, on the ground that the applicant-corporation carried on the work of the applicant, ignoring the fact that by statute the employees of the corporation are regarded as a class of beneficiaries of the applicant ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the salaried employees were not beneficiaries in the teeth of section 30 of the Road Transport Act, 1950 ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in not considering the distinction between an organisation carrying on business and an organisation carrying on the activities on business principles brought out by the hon'ble Supreme Court in the applicant's own case as r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sub- section (4A) was made by Parliament, with an avowed object of curtailing the misuse of the facility created under section 11 of the Act. He contends that after reviewing the situation pertaining to the exemption granted in favour of public trusts and institutions, Parliament decided to restrict the benefit only to agencies covered by sub-section (4A). He contends that whether one goes by the undisputed facts or the general purport of the activity of the corporation, the view taken by the Tribunal cannot be found fault with. As is too well-known that section 11 occurs in Chapter III of the Act, which deals with the list of incomes, which do not form part of the total income. The determination of the total income is one of the important steps in the process of levying Income-tax and that has to be done by taking into account section 5 of the Act. In the process of determination of the total income, incomes of certain descriptions are excluded from the purview. Section 11 of the Act, in so far as it is relevant for the purpose of this case, reads : 11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n'ble Supreme Court in APSRTC's case (supra). Even in the assessment under examination, the Income-tax Officer himself was satisfied that the corporation answered the description of institution, being run for charitable purposes. The basis, on which he denied the benefit of exemption is that it does not satisfy the test under sub-section (4A)(b) of section 11 of the Act. This view was affirmed by the appellate Commissioner as well as the Tribunal. All of them proceeded on the assumption that the corporation is being run by the paid employees and not the beneficiaries ; and thereby, it cannot claim the benefit under section 11 of the Act. One of the best methods of understanding the purport of a provision of law, which is in the form of amendment, is to take note of the law which existed before it, and to identify the purpose, which the law-making authority intended to achieve, through the amendment. Learned senior counsel has made available to this court, the Budget Speech of the Finance Minister for the financial year 1983-84. He summarised his speech covering this aspect as under (see [1983] 140 ITR (St.) 25, 33) : I have since considered the matter c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r is that Parliament intended to narrow the scope of section 11 of the Act in its application to trusts on the one hand, and institutions on the other hand. That the corporation does not answer the description of a trust and it is an institution covered by section 11 of the Act is beyond any pale of doubt. It is equally clear that the activities carried out by it are purely charitable in nature. The only controversy is as to whether its business is mainly carried out by the beneficiaries. This in turn involves examination of two aspects. The first is as to who are the beneficiaries of the corporation, and the second is as to who mainly carry on the business of the corporation. Even on the first aspect, the matter is settled with the judgment of the hon'ble Supreme Court and it is only the public at large, that is beneficiary of the corporation. The second requirement under clause (b) of sub-section (4A) of section 11 of the Act is that the work in connection with the business must be mainly carried out by the beneficiaries. The Bombay High Court placed a fairly liberal construction on this part of the provision. It has demonstrated as to what absurdities, would the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y them. The Bombay High Court took the view that though the trust activities and maintenance are undertaken by the paid employees, the work is for and on behalf of the beneficiaries and thereby the requirement under clause (b) of sub-section (4A) of section 11 of the Act is fulfilled. Reverting to the facts of the case, the beneficiaries of the corporation can be said to be the entire public. They use the facilities created by the corporation for travelling and other allied activities. If the provision is to be understood in such a way that the work in connection with the business must be carried out by the beneficiaries, it must result in a situation, where every passenger must have a say in the administration and business. It is not difficult to imagine chaotic condition that would emerge as a result of that. Obviously realising this, Parliament has chosen to employ the word mainly . The ultimate test is to see as to whether the persons, who are in actual management of the institution, are the persons working for and on behalf of the beneficiaries or whether they have an independent and personal interest of their own. Viewed from that angle, the employees of the corporation ; ..... X X X X Extracts X X X X X X X X Extracts X X X X
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