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TMI Blog1979 (12) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the reasons were recorded reopening the assessments in terms of s. 147(b) and in the notices under s. 148 the section is simply not mentioned as to whether reassessments were proposed to be under s. 147(A) or under s. 147(B) of the Act. On the facts before us, we consider that the mentioning of s. 147(A) in the reassessments orders is through an oversight and that the assessments came to be came to be reopened under s. 147(B) and the consequent reassessments are therefore, considered as under s. 143(3) r/w s. 147(B) only. 4. The reasons recorded by the ITO for all the four years on 18th Dec., 1976 are in identical terms as follows: " The assessee in this case was running the business of M/s. Krishna Tent House under the proprietaryship—M/s. Krishna Tent House Public Charitable Trust. The trust deed mentioned that income of this trust would be applied for the promotion of education, help of poor and moral social and cultural uplift of the society in general. The Supreme Court has held in the Case of Indian Chamber of Commerce vs. CIT West Bengal (101 ITR 797) as under: "Ordinarily, profit motive s a normal incident of business activity and if the activity of a trust is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al; The objects of the trust shall be:— (a) To provide facilities for education and training of all education kinds to the public in general without any distinction of caste, creed and colour. (b) To give aid and assistance to Sh. Sanatan Dharam jagdish Puttri Pathshala at Bhiwani and Krishan Kumar Ram Lila Sabha Bhiwani specially and to acquire, establish, start, aid, run, maintain or manage other educational and cultural institutions of such kind. (c) To promote physique and culture and to assist and promote the arrangements of sports games and akharas and generally to do all acts for the general health and physical development of the people. (d) To acquire, promote establish, organise start, maintain, manage and run social, cultural educational and other institutions for the propagation of knowledge. (e) To propagate education of all kinds including moral religious and spiritual. (f) To award scholar ship stipends and help to the students to assist and aid such educational institutions and organisations as the Trustees may think fit from time to time. (g) To provide assistance give aid, help financially or otherwise to orphans, widows, destitute and other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and education as the present case is, the requirements of the definition 'charitable purpose' under sub-s. (15) of s. 2 of the Act would be fully satisfied, even if an activity for profit is carried on in the course of actual carrying out of the primary purpose of therefore, trust or institution. The present case involves no difficult at all that the only objects of the trust are relief of the poor and to promote education and cl.(i) and (j) of the deed are ancillary clauses conferring powers on the trust to achieve the said two objects. We like to reproduce the following extracts from the 'News from the Supreme Court' reported as (1979) 120 ITR 13-19 Statute):- "Charitable purposes: 'Not involving any activity for profit' In a direct ref. Under s. 257 of the IT Act, 1961, a Bench of five judges of the Supreme Court had occasion to reconsider certain earlier judgements of the Court on the question of the scope and interpretation of s. 2(15) defining 'charitable purposes' and especially of the expression 'the advancement of any other object of a general public utility not involving the carrying on of any activity for profit'. Judgement was delivered on 19th Nov.,1979. The m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s but the entire income of the trust or institution for whatsoever source derived would lose the tax exemption. The result would be that no trust or institution established for promotion of an object of general public utility would be able to engage in business for fear that it might lose the tax exemption altogether and a major source of income for promoting objects of general public utility would be dried up. It is difficult to believe that the legislature could have intended to bring about a result so drastic in its consequence... On the construction contended for an behalf of the Revenue s. 11(4) would have no applicability in cases of charitable trust or institution falling under the head of charitable purpose (because according to the contention of the Revenue even if a business is held under trust or institution for promotion of an object of general public utility, income from such business would not be exempt since the purpose would case to be charitable...We do not think we can accept such a construction which renders a provision of the Act superfluous and reduces in to silence." "Their Lordships then referred to the earlier decision of the S.C. in Indian Chamber of Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in advancement of the charitable purposes of the trust or institution. Where an activity is carried on as a matter of advancement of the charitable purpose or for the purpose of carrying out a charitable purpose, it would not be incorrect to say as a matter of plain English grammar that the charitable purpose involves the carrying on of such activity, but the predominant object of such activity must be to sub serve the charitable purpose and not to earn profit. The charitable purpose should not be submerged by the profit-making motive, the latter should not masquerade in the guise of the former. The test which has therefore, now to be applied is whether the predominant object of the activity-involving any carrying on of an object of general public utility is to sub-serve the charitable purpose or to earn profit. Where profit-making is the predominant object of the activity, the purpose though an object of general public utility, would cease to be charitable object. But where the predominant activity is to carry out a charitable purpose and not to earn profit, it would not loose its character as a charitable purpose merely because some profit arises from the activity.' Their Lor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of commerce or trade in raw and art silk etc. Which was clearly an object of general public utility and profit was merely a by-product which resulted incidentally in the process of carrying out the charitable purpose. The profit of the assessee could be utilised in the feeding of the charitable purpose and dominant and real object of the assessee being the advancement of the charitable purpose, the mere fact that the activity yielded profit did not alter the charitable character of the assessee. In a judgement concurring in the result Pathak J said : 'For a purpose to fall under the fourth head of charitable purpose it must constitute the advancement of an object of general public utility in which the activity of advancement must not involve a profit making activity. The requirement of s. 2(15) is satisfied where there is either a total absence of purpose of profit making or it is so insignificant compared to the purpose of advancement of the object of general public utility that the dominant role of the latter renders the former unworthy of account. If the profit-making purpose holds a dominant role or even constitutes an equal combination with the object of general public uti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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