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TMI Blog1998 (4) TMI 81X X X X Extracts X X X X X X X X Extracts X X X X ..... ips to poor students. To help the poor people, if necessary, in performing auspicious and other rites. Constructing a kalyana mandapam attached to the temple at Annoor. The Income-tax Officer for the three assessment years in question held that the assessee was not entitled to exemption under section 11 of the Act as the trust was running a chit fund business involving an activity for profit. He also held that the provisions of section 13(1)(c) of the Act had been offended since the funds of the trust -were applied for the benefits of one of the trustees, viz., T. Ponniah Chettiar. He also held that under the provisions of section 13(1)(bb) of the Act, the assessee was not entitled to exemption for the assessment year 1979-80. The assessee preferred an appeal before the Appellate Assistant Commissioner who held that the trust was established for charitable objects and the funds had been utilised for charitable objects and the trust was exempt under section 11 of the Act. The Appellate Assistant Commissioner also held that the funds of the trust were not diverted for any non-charitable purpose. He also held that the Income-tax Officer was not justified in treating the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ows that the objects of the trust involve business activity for profit. He also submitted that there was a violation of the provisions of section 13(1)(c) of the Act. The further submission of learned counsel for the Revenue was that the provisions of section 13(1)(bb) of the Act are attracted for the assessment year, viz., 1979-80, and since the business was not carried on in furtherance of the objects of the trust, the assessee was not entitled to exemption under section 11 of the Act for the assessment year 1979-80. We have already set out the objects of the trust. The objects of the trust, in our opinion, are charitable in nature. The objects provide for promotion of education, patriotism, establishment of educational institutions and library, to render help to poor students for the purpose of education and to render help to the poor for the relief from poverty. The objects of the trust clearly show that the trust was established for laudable charitable purposes. The objects of the trust also provide for establishment of marriage hall attached to the temple in Annoor Learned counsel for the Revenue submitted that the marriage hall can be utilised for commercial use and, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on business. In other words, to generate funds to meet the objects of the trust, the trustees have been empowered to carry on business, and, therefore, we are of the opinion that the clause is only a clause conferring powers on the trustees to carry on the business. The next clause also clearly shows that the trustees have been empowered to exchange information with other trusts for the purpose of achieving the objects of the trust and the trustees have also been empowered to do all incidental and other ancillary acts in connection with or to achieve the objects of the trust. A reading of various clauses clearly shows that the clause empowering the trust to carry on the business cannot be regarded as an object clause and it is only a power conferred on the trustees to carry on the business and once it is not an object of the trust, it could not be stated that the trust was carrying on business activities for profit. In other words, the business activity is only a means to achieve the objects of the trust or a media through which the trust sought to accomplish the objects of the trust and, therefore, the clause empowering the trustees to carry on business has to be read as a power ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctivity must be carried on in such a manner that it does not result in any profit. It would indeed be difficult for persons in charge of a trust or institution to so carry on the activity, that the expenditure balances the income and there is no resulting profit. That would not only be difficult of practical realisation, but would also reflect unsound principles of management. If the profits must necessarily feed a charitable purpose under the terms of the trust, the mere fact that the activities of the trust yield profit, will not alter the charitable character of the trust. The test now is, more clearly than in the past, the genuineness of the purpose, tested by the obligation created to spend the money exclusively or essentially on charity. The restrictive condition that the purpose should not involve the carrying on of any activity for profit would be satisfied, if profit-making is not the real object." The objects of the trust in the instant case clearly show that the predominant object of the trust is to render help to the poor and for education and therefore, when the predominant object is to carry out the charitable purposes, it would not cease to be a charitable trust me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the one for which the trust was formed. In so far as the amount drawn on November, 1, 1973, is concerned, the firm made chit contributions to an extent of Rs. 10,600 and the firm was the successful bidder, and the firm drew a sum of Rs. 18,400. It is, therefore, clear that the chit amount drawn by the firm cannot be held to be the property of the assessee-trust as the amount was drawn in the normal course of chit transaction, and it is not the case of the Revenue that the assessee manipulated the chit transactions. Similarly, in so far as the amount drawn on April 29, 1974, is concerned, it was found that no amount was drawn. As already held, the firm was declared as a successful bidder and the amount was not actually paid, but a sum of Rs. 10,000 was adjusted against the loan taken by the firm on March 30, 1974, and the balance amount was adjusted month after month against future chit subscription. Therefore, in so far as the said two transactions are concerned, it is clear that the property of the trust was not diverted for any non-charitable purposes. As regards the sum of Rs. 10,000, that amount was granted by way of loan by the assessee-trust to the firm. According to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Commissioner held that the chit business has been done for raising funds to fulfil one of the objects of the assessee-trust and, therefore, there was no violation of the provisions of section 13(1)(bb) of the Act. Though the Appellate Tribunal has not discussed about the applicability of the provisions of section 13(1)(bb) of the Act, the question raised before us encompasses within itself the de termination of the question whether there was any violation of section 13(1)(bb) of the Act. It is relevant to notice that the Tribunal on the appeal preferred by the Revenue, held that the assessee was not entitled to exemption under section 11 of the Act and that there was a violation of the provisions of sections 13(1)(c), 13(2)(a) and 13(3) of the Act. Since the second question referred to us relates to the claim for exemption under section 11 of the Act, we are of the opinion that the question whether the assessee is entitled to exemption under section 11 of the Act has to be decided applying the provisions of section 15(1)(bb) of the Act. Section 13(1)(bb) of the Act provides that in the case of a charitable trust for the relief of the poor, education or medical relief, which car ..... X X X X Extracts X X X X X X X X Extracts X X X X
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