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TMI Blog1980 (7) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of the case, holding of agricultural and industrial exhibitions and cattle fair involved an activity for profit within the meaning of section 2(45) of the Act ?" This reference had come up before us for hearing on an earlier occasion and answer was given to the question, referred at the instance of the department. The questions referred at the instance of the assessee were returned unanswered since nobody had put in appearance on its behalf. Subsequently, on an application given by the assessee that decision was recalled by an order made on April 5, 1979, and that is how the reference has come up again for hearing. The reference relates to the assessment years 1963-64, 1964-65 and 1965-66. The assessee is M/s. Etawah District Exhibition and Cattle Fair Association. For all these three years, assessments were made on it in the status of an association, of persons. The assessee had claimed that its income was exempt from tax under s. 11(1)(a) of the I.T. Act, 1961, hereafter " the Act ". The ITO repelled that submission and brought the entire income to tax. The main reasons given by the ITO are contained in his order, given for the assessment year 1963-64, and they were:-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possessed of about Rs. 50,000. It constructed some shops on the exhibition ground. In 1954 it adopted a written constitution. According to the constitution the objects of the association are: (a) to promote cultural, social and educational developments; (b) to encourage development of art, agriculture, horticulture and industry of the district; (c) to improve the breeding of cattle, sheep, goat, horse and poultry, etc., in the district; and (d) to promote physical culture, public health, maternity and child welfare. In para. 3 of the constitution it was provided that an agricultural and industrial exhibition and cattle fair will be held annually at Etawah and all necessary and suitable steps will be taken to achieve the aforesaid objects. For the years under consideration the income of the assessee consisted of rents from shops, Tahbazari, cattle registration fees, wrestling matches, music sammelans, etc. The Tribunal found that the holding of the agricultural and industrial exhibition and cattle fair was not the dominant object of the assessee and in fact no particular object of the association could be treated as a dominant object. It also, held that the obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of twenty-five per cent. of the income from the property held under trust in part. " (Clause (c) and the Explanation to this sub-section are not necessary for the present purpose). In order to support a claim for exemption of income under the aforesaid provisions the following main conditions must be satisfied: (a) the property from which the income is derived should be held in trust or other legal obligation; (b) the property should be so held for charitable or religious purposes which enure for the benefit of the public ; and (c) the exemption is confined to only such portion of the trust income as is applied to charitable or religious purposes or is accumulated for application to such purposes within the limits of accumulation provided in sub-ss. (1) and (2) of s. 11. In the present case the Tribunal has, on a review of the material on record, found that the assessee had constructed shops from its own funds and that the income from these shops could be utilised only for the carrying out of the objects of the association. It c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject. It is not necessary that the accomplishment of the object or the means to carry out the object should not involve an activity for profit. That is not the mandate of the newly added words. What these words require is that the object should not involve the carrying on of any activity for profit. The emphasis is on the object of general public utility and not on its accomplishment or attainment. The decisions of the Kerala and Andhra Pradesh High Courts in CIT v. Cochin Chamber of Commerce and Industry [1973] 87 ITR 83 and Andhra Pradesh State Road Transport Corporation v. CIT [1975] 100 ITR 392, in our opinion, lay down the correct interpretation of the last ten words in s. 2, cl. (15). The true meaning of these last ten words is that when the purpose of a trust or institution is the advancement of an object of general public utility, it is that object of general public utility and not its accomplishment or carrying out which must not involve the carrying on of any activity for profit." It is thus now established that the expression " not involving the carrying on of any activity for profit " qualifies or governs the fourth category of charitable purposes mentioned in this de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the objects of the assessee-association could be treated as a dominant object. In other words, all the objects of the assessee-association stand on the same footing and since the trustees or the managers of the assessee-association in their discretion can apply the income or property to any of those objects, the assessee-association cannot be regarded as charitable and no part of its income would be exempt from tax. In Dharmaposhanam Co. v. CIT [1978] 114 ITR 463 (SC) the objects of " industries " and " common good " were treated as beyond the scope of charitable purposes. In that case it was found that since the objects clause contained some objects which were charitable and some which were non-charitable and all the objects enjoyed an equal status, the entire claim to exemption must fail and it could not be said that any part of the income was exempt from tax. In the present case also cl. (b) of the objects clause of the assessee-association provides for encouragement or development of art, agriculture, horticulture and industry of the district. In cl. (c) also there is a provision for improvement of the breeding of cattle, sheep, goats, horse and poultry in the district. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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