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TMI Blog1995 (8) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... e income of the assessee-trust is entitled to exemption under section 11 of the Act, despite what is contained in section 13(1)(bb) of the Act. The assessee is a society, registered under the Societies Registration Act and its objects as found in its memorandum of association are as follows : "....to run the Virudhunagar Hindu Nadars' Abivirudhi Panjukadai Mahamai and to develop it and thereby, (i) to provide relief of the poor, education and medical relief ; (ii) to establish and maintain educational institutions . . . . to give aid to educational institutions ; . ... (x) to establish and run income earning industries to achieve the three main objects of our society, viz., to provide relief of the poor, education and medical relief." The society is in existence for the past 150 years or so. Clauses 3 and 4 of the Rules and Regulations of the society run as follows : " 3. The funds of the society shall comprise its income from the Mahamai contributed by its members as fixed by the general body from time to time, the rent and other incomes from the properties owned by the society, the cooly receipts of the cotton ginning machinery owned by the society and donations. 4. Maha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is carried on in the course of the actual carrying out of a primary purpose of the trust or institution." The first two authorities in relation to the case in Tax Case No. 648 of 1985 held that the abovesaid business of ginning and decorticating were not " carried on in the course of the actual carrying out of primary purpose of the trust or institution " and hence, was not exempt. The first authority in relation to the case in Tax Case No. 451 of 1986 also held so, though the first appellate authority therein differed, favouring the assessee. While dealing with this question, the Tribunal, in its order dated June 24, 1983 (in relation to the first of the two cases), inter alia, observed as follows : " Obviously, the business carried on by the assessee is not in the course of the actual carrying out of the primary objects of the trust. If we ignore the provisions of section 11(4), it would appear that the assessee is hit by section 13(1)(bb). However, looking to the facts of the case, it appears that the object of the trust is charity and the business itself is held under trust for purposes of charity. . . . It is thus clear that the assessee is entitled to exemption under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urposes of the institution and either the business was carried on in the course of the actual carrying out of a primary purpose of the institution or the work in connection with the business was mainly carried on by the beneficiaries of the institution, In CIT v. Dharmodayam Co. [1977] 109 ITR 527 (SC), which only affirmed the decision in CIT v. Dharmodayam Co. [1974] 94 ITR 113 (Ker), the assessee derived income from the business of kuries (chits), apart from interest on security and income from property. In that context, the Supreme Court held taking into account what is contained in proviso (b) to the said section 4(3)(i), that the said kuries business itself was held under a trust for religious or charitable purposes and hence, the said business activity cannot be taken as undertaken by, or on behalf of the assessee and so the income derived by the assessee from the said kuries was exempt from taxation. In Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1 (SC), which arose under the present Act, the Supreme Court held that the dominant or primary purpose of the assessee therein was to promote commerce and trade in art silk yarn, etc., and that the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that judicial decisions had, held the restrictive clause in section 2(15) to control the fourth head only, and not also the first three heads in the definition, Parliament attempted to secure its original, intent by enacting clause (bb) in section 13(1). (emphasis supplied.) The two provisions represent the mode of finding finance for working out the purpose of the trust or institution, by deriving income from the corpus of the trust property and also from an activity carried on in the course of the actual carrying out of the purpose of the trust or institution." In the light of the abovesaid observation of the Supreme Court, we see great force in the argument of learned counsel for the Revenue. No doubt in CIT v. Thanthi Trust, [1982] 137 ITR 735 (Mad), this court found on the facts of the said case thus : " 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 . . . . the primary purpose is to carry out the charitable objects and the business is carried on as a means in the course of the actual carrying out of that primary purpose and not as an end in itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and medical relief, but the Tribunal itself observes that the abovesaid clause 10 remains dormant. Further, in the initial portion of the abovereferred to objects of the assessee's society, as found in its memorandum of association, it is as follows : "to run the Virudhunagar Hindu Nadar's Abivirudhi Panjakadai Mahamai and to develop it and thereby, (1) to provide relief of the poor, education and medical relief. ..." From this it appears that the primary object of the abovesaid trust is to run the abovesaid Panjakadai Mahamai and to develop it, and that thereby only, relief of the poor, education or medical relief are to be provided. Thus, it may be said that providing relief of the poor, education and medical relief are not primary objects but secondary. But, however, in the abovesaid clause 10, these three are mentioned as " three main objects of our society ". From this it may appear that these three are also main objects of the society. Thus, even assuming that the abovesaid three objects, viz., providing relief to the poor, education and medical relief are the primary objects of the assessee, there is no material in the present case to hold that the abovesaid decorticating ..... X X X X Extracts X X X X X X X X Extracts X X X X
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