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TMI Blog1985 (7) TMI 137X X X X Extracts X X X X X X X X Extracts X X X X ..... e was carrying on cinema business in the years under appeal and such business was not carried on in the course of the actual carrying out of a primary purpose of the trust. Hence, these appeals before the Tribunal. 2. The learned counsel for the assessee has pointed out that the assessee is a public charitable trust created under a properly drawn out deed and that it carries out a charitable purpose cannot be disputed. The deed of trust does not authorise the trustees to carry on any business or any activity in the nature of a business even though there was no negative clause as regards this matter. After the receipt of the theatre as a donation, the assessee has not carried on any business of running the theatre. The theatre itself did not function as such up to 1977. It was not run by the owner from whom the donor had purchased the theatre or the donor himself or even the assessee-trust. It was given on lease to others. Referring to the several clauses of the lease agreement, the learned counsel has pointed out that the provisions made it clear that the lease was a purely part time hiring out of certain assets. The hiring out was done on a play time basis. The assessee having g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he hands of the assessee, the theatre could not be called a commercial asset in the sense it is understood commercially or even by the judicial decisions. Reference is made in this connection to the decision in the cases of Seth Banarsi Das Gupta v. CIT [1977] 106 ITR 559 (All.), Narain Swadeshi Wvg. Mills v. CIT [1954] 26 ITR 765 (SC), Nalinikant Ambalal Mody v. CIT [1966] 61 ITR 428 (SC), and New Savan Sugar Gur Refining Co. Ltd. v. CIT [1969] 74 ITR 7 (SC). In the last case stress was laid on the fact that there was no nexus between the production of the factory and the royalty received by the assessee. These decisions and also the decision in the case of Sultan Bros. (P.) Ltd. v. CIT [1964] 51 ITR 353 (SC) clearly pointed out to the intention of the assessee as an important factory in coming to a decision as to whether a business is carried on or not. The decision in the case of CIT v. D.L. Kanhere [1973] 92 ITR 535 is a clear case of a lease of a cinema house considered in a binding decision of the Bombay High Court. Reference is made also to the decisions in the cases of East India Housing Land Development Trust Ltd. v. CIT [1961] 42 ITR 49 (SC), Karanpura Development Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing to the conclusion that the provisions of section 13(1)(bb) cannot be applied to the case. The first arises from the nature and attributes of a trust and the second from the nature of the source the income derived from which is taxed. 6. The assessee is a public charitable trust created by a deed dated 30-7-1960 and recognised as such by the Charity Commissioner and other authorities including the Income-tax Department, which granted exemption under section 11 from year to year. The law relating to the trusts clearly prohibits any alteration or modification of the nature and the objects of a trust from what the author of the trust intended and clearly specified them to be except under directions from the Court and in special circumstances. If, therefore, any modification of the nature of the trust, onerous or otherwise, and inconsistent with the original object is attributed to the trust, the presumption is that it cannot be accepted. In the present case the trust had certain assets and certain objects. The assets did not involve carrying on of a business as a property or investment. If, therefore, section 13(1)(bb) was in the statute book at the time the trust was created, ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity cannot be accepted by them through the medium of a new donation. The fact that such donation was made by the original settlor makes no difference. The moment the original settlement is completed, the settlor has nothing to do with the trust and any donation given by him would stand in the same position as a donation by a stranger. Prima facie, therefore, the trustees could not have, whatever be the provisions of the deed of a donation, accepted responsibility for running a business. 8. Secondly, if the trustee was not subject to the provisions of section 13(1)(bb) it cannot accept a donation, on account of which it comes under that section 13(1)(bb) and deprives the trust of exemption from tax to which it was earlier entitled and which the settlor perhaps expected it to have. If, therefore, the result of the donation is attraction of the provision of section 13(1)(bb) with the consequent chance of the trust property being eroded, not only on account of the fluctuation of the fortunes after business but also by the levy of tax, such a donation also cannot be accepted by the trustees. From very point of view, therefore, we have no hesitation in holding that if the result of tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the present case, the assessee has only leased out the asset at stipulated rent to others. A scrutiny of the agreement in this regard made by the assessee and other exhibitors of films does not lead to any conclusion that the assessee is itself exhibiting the films. An argument was raised on behalf of the department to support its case of a business carried on by the assessee relying on the fact that employees were appointed by the assessee for running the theatre, licence was taken by them, etc. In our view, these do not prove that the assessee itself did the business. If a cinema theatre is to be run on lease, certainly it must have a licence for exhibition of films. The licence is generally given to the owner of the premises. It would be imprudent on the contrary for the owner of a cinema theatre not to have a permanent licence for himself but to depend on any temporary licence for exhibition of films owned by a person who wants to let out his theatre. In fact we are not sure that the licence would be even issued to persons who do not own premises or have taken on lease premises for exhibition of films. This point, therefore, does not go against the assessee's claim. The evi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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