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TMI Blog1998 (10) TMI 50X X X X Extracts X X X X X X X X Extracts X X X X ..... Division Bench of this court in the first of the assessee's cases relating to its entitlement to be treated as a charitable trust and its income derived from the newspaper business, being allowed exemption from tax in the case of CIT v. Thanthi Trust [1982] 137 ITR 735 (Mad) has considered the character of the petitioner's trust created under the trust deed dated March 1, 1954, and the subsequent supplementary trust deed dated July 9, 1957, as also the effect of the judgment of this court in C. S. No. 90 of 1961. The court held that the founder of the trust had created a public charitable trust ; the supplemental deed dated June 28, 1961, and the decision of this court in C. S. No. 90 of 1961, create a legal obligation on the trustees to spend the income derived from the trust after defraying the expenses of the newspaper business, for the purposes set out in the Schedule to the decree in C. S. No. 90 of 1961, and therefore, the trust property including the business itself should be taken to be held under a legal obligation for various charitable objects ; that those charitable objects fall under the relief to the poor and education referred to in section 2 (15) of the Act; and tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om April 1, 1992, reads thus : "(4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the trust or, as the case may be, institution, and separate books of account are maintained by such trust or institution in respect of such business." The Revenue, relying on the newly introduced provision under section 11(4A) sought to levy tax on the income derived from the newspaper business held in trust by the petitioner for the assessment years subsequent to April 1, 1984. The petitioner once again came before this court by way of writ petition challenging the action of the Revenue in denying the exemption under section 11 of the Act for the assessment years 1984-85 to 1991-92, The decision of this court on these petitions is reported as Thanthi Trust v. CBDT [1995] 213 ITR 639. The principal question examined in that case was as to whether after the introduction of sub-section (4A) of section 11 of the Act, the business carried on by the trust would be subject to that provision, or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (a) of sub-section (4A) deals with the income being profits and gains of business carried on by a trust created wholly for public religious purposes ; and clause (a) does not deal with the income derived from the business undertaking held under the trust for public charitable purposes. Similarly, clause (b) of section 11(4A) also will not apply to the petitioner, because clause (b) will apply only to the income being profits and gains of business carried on by an institution and not by a trust. The contention of learned senior counsel for the Revenue is that the exemption under section 11 (1) of the Act will be available to the petitioner only if it satisfies both the conditions prescribed in clauses (a) and (b) of section 11(4A), that the petitioner-trust is neither a trust created wholly for public religious purposes, nor it is an institution and thus it does not satisfy either of the conditions prescribed in clauses (a) and (b) of section 11(4A) of the Act and, consequently, the petitioner cannot claim exemption under section 11(1) of the Act. We are unable to accept the above contention of learned senior counsel for the Revenue. As already pointed out, according to section 11( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ness carried on by a trust wholly for public religious purposes or an institution, unless the conditions prescribed in clause (a) or (b) of sub-section (4A) of section 11 are satisfied.... Section 11(1)(a) of the Act grants exemption generally in respect of income derived from property held under trust wholly for charitable or religious purposes. Sub-section (4A) carves out only certain categories of income, namely, income being profits and gains of business carried on by a trust wholly for public religious purposes and institutions and denies exemption to such income being profits and gains of business unless the conditions prescribed in clause (a) or (b) of sub-section (4A) are satisfied, leaving the income derived from property held under trust for charitable purposes, to be taken care of by the provisions of section 11(1)(a) read with section 11(4) of the Act. In these circumstances, we are of the view that the provisions contained in section 11(1)(a), so far as they relate to income derived from property held under trust for charitable purposes, as in the present case, are concerned, they are not affected or touched by the amendment introduced to section 11 by the insertion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption are satisfied. If the construction of section 11(4A), as canvassed by learned senior counsel for the Revenue is accepted, no exemption can be granted under section 11(1)(a) in relation to any income derived from the property held under trust, unless the conditions prescribed under clause (a) or (b) of sub-section (4A) of section 11 are satisfied. The construction of sub-section (4A), contended for on behalf of the Revenue, would thus have the effect of rendering sub-section (4) of section 11 redundant, after the enactment of sub-section (4A). As pointed out by the apex court, in Addl. CIT v. Surat Art Silk Cloth Manufacturers' Association [1980] 121 ITR 1, we cannot accept such a construction which renders sub-section (4) of section 11 superfluous and meaningless. On the other hand, the construction which we are placing on sub-section (4A), 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) and, therefore, we must prefer that construction to the one submitted on behalf of the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cope of sections 2(15), 11(4) and 13(1)(bb) of the Act and the area of operation of section 11(4) of the Act, after the introduction of section 13(1)(bb) of the Act, held as follows : 'Moreover, another consequence of the construction canvassed on behalf of the Revenue would be that section 11, sub-section (4), would be rendered wholly superfluous and meaningless. Section 11, sub-section (4), declares that for the purpose of section 11 "property held under trust" shall include a business undertaking and, therefore, a business can also be held under trust for a charitable purpose and where it is so held, its income would be exempt from tax, provided, of course, the other requisite conditions for exemption are satisfied. It may be pointed out that section 11, sub-section (4), where it provides that a business may also be property held under trust, does not bring about any change in the law because even prior to the enactment of that provision, it was held by the judicial Committee of the Privy Council in the Tribune's case [1939] 7 ITR 415, that property in the corresponding section 4(3)(i) of the Act of 1922 included business and this principle was affirmed by the pronouncements o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of section 13(1)(bb) and we must, therefore, in any event, prefer that construction to the one submitted on behalf of the Revenue." The Division Bench after so discussing the matter, considered the arguments that were advanced and concluded thus : "For all the reasons stated above, we have no hesitation in holding that sub-section (4A) of section 11 will have no application to income derived from property held under trust which includes business for charitable purposes, as in the present case, and that the second respondent is not correct in denying exemption to the petitioner under section 11 for the assessment years 1984-85 to 1991-92, in view of sub-section (4A) of section 11 of the Act and, therefore, the impugned orders are liable to be quashed." Sub-section (4A) of section 11 was amended by the Finance (No. 2) Act, 1991, with effect from April 1, 1992. That section after amendment reads thus : "(4A) Sub-section (1) or sub-section (2) or sub-section (3) or sub-section (3A) shall not apply in relation to any income of a trust or an institution, being profits and gains of business, unless the business is incidental to the attainment of the objectives of the trust, or, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to bring to tax the income derived from the very business of newspaper which business is held in trust by the petitioner, is patently illegal and without jurisdiction. It was submitted that in the back-ground of these facts and the law that had already been laid down by this court in the cases to which the Revenue itself was a party, the petitioner should not be driven to the statutory appeals and references and that the matter should be decided by this court in these proceedings, there being no dispute about the relevant material facts and the dispute is only regarding the interpretation of the provisions of the Act which exercise has also bee n carried out by this court in the decision of the court reported in Thanthi Trust v. CBDT [1995] 213 ITR 639. Learned senior counsel for the Revenue, Mr. S. V. Subramanian, submitted that in view of the amendment effected to sub-section (4A) with effect from April 1, 1992, the Revenue was entitled to bring to tax the assessee's income from the newspaper business notwithstanding the fact that the business was held in trust, as the business carried on by it cannot be regarded as a business which is incidental to the attainment of the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts are not in dispute, and the area of controversy is such that it is more convenient and appropriate that it should be settled by this court. There is no impediment whatsoever to this court to proceeding to consider the case of the petitioner and grant such relief as is appropriate. Having regard to the history of the recurring battles between the petitioner and the Revenue on the question of taxability of the income derived by it from its newspaper business, which business is held in trust, and the decisions already rendered by this court in respect of earlier assessment years, wherein the petitioner's status has been elaborately examined and determined and the question now agitated in these petitions is one which had been considered by this court and decided in favour of the assessee, in the decisions already rendered by this court, it is appropriate that these writ petitions be decided on the merits, which I proceed to do. The substantive point in issue is a very short one. The only question is as to whether sub-section (4A) of section 11 excludes from its purview "business" held in trust which is "property" of the charitable trust by applying the definition provided in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the relative scope of sections 11(1), 11(4) and 11(4A) of the Act. If the business held in trust, as held by this court, is outside the purview of sub-section (4A) before its amendment in 1992, it would continue to be outside the purview of that provision, even after the amendment as the amendment has not excluded the business held in trust from the purview of sections 11(1) and 11(4). As to whether the decision of the Division Bench is the correct decision or not is not for me to say. I am bound by that judgment and must follow the same. Counsel for the Revenue submitted that the Supreme Court had granted leave to the Revenue to appeal against that judgment and the appeals are now pending before the Supreme Court in C. A. Nos. 26611 to 26615 and 27163 to 27170 of 1995. The declaration of law to be made by the apex court in those appeals as regards the scope of section 11(1) and (4) would govern these assessment years as well. Before I conclude, it is necessary to notice one other submission that was made by learned senior counsel for the petitioner that it has already been held by this court that the business carried on by the petitioner was only incidental to the attainme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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