COMMISSIONER OF INCOME-TAX v. NAHATA CHARITABLE TRUST.
Tax Case Nos. 2115 to 2117 of 1984, decided on July 27, 1998.
HIGH COURT OF MADRAS
Mrs. Chitra Venkatraman, for the Applicant : P. P. section Janardhanaraja, for the Respondent
R. JAYASIMHA BABU, J. :
The questions referred to us at the instance of the Revenue are :
“(1) Whether, on the facts and in the circumstances of the case, and having regard to the provisions of section 2(15) of the Act, the Tribunal was right in holding that the assessee is a charitable institution and that its income is exempt under section 11 of the Act ?
(2) Whether, on the facts and in the circumstances of the case, and having regard to the Trust deed, dt. 19th September, 1969, and the agreement dt. 1st July, 1970 with M/s Vijayalakshmi Pictures, the Tribunal’s view that the objects of the assessee-trust are charitable within the meaning of section 2(15) of the Act, is sustainable in law ?
(3) Whether the Tribunal’s view that the predominant object of the assessee-trust was to promote relief of the poor, advancement of education and medical relief, is based on correct appreciation of the trust deed dt. 19th September, 1969 and a reasonable one to take, on the facts of the case ?”
2. The correctness of the order of the Tribunal holding that the assessee-trust is entitled to exemption as a charitable institution notwithstanding the fact that it had carried on business for profit, namely exhibition of pictures, has been called into the question by the Revenue in this reference. It is relating to the asst. yrs. 1974-75 to 1976-77.
3. The trust known as Nahata Charitable Trust was created under the deed dt. 19th September, 1969. A perusal of the object clause shows that the objects of the trust are to promote the relief of the poor, advancement of education, medical relief, spiritual and cultural advancement and other objects of general public utility. The provisions of the trust deed include a provision conferring powers on trustees to carry on business.
4. A charitable trust is not to be denied exemption under section 11 of the IT Act solely on the ground that it carries 2y on business. The Tribunal has rightly followed the decision of the Constitution Bench of the apex Court in the case of Addl. CIT vs. Surat Art Silk Cloth Manufacturers’ Association (1979) 13 CTR (SC) 378 : (1980) 121 ITR 1 (SC) : TC 23R.195. That decision of the Constitution Bench has been reiterated by the later decision by the apex Court, recently, in the case of Thiagarajar Charities vs. Addl. CIT & Anr. (1997) 140 CTR (SC) 295 : (1995) 225 ITR 1010 (SC). It is not the case of the Revenue that the objects of the trust are not charitable. The only ground on which the exemption was denied by the AO was that the trust had entered into an agreement with one Vijayalakshmi Pictures and that agreement resulted in the trust undertaking a business activity. As held by the apex Court in the case of Addl. CIT vs. Surat Art Silk Cotton Manufacturers’ Association (supra) and in the case of Thiagarajar Charities vs. Addl. CIT (supra), carrying on business by trust alone, would not render the trust ineligible for exemption under section 11 of the Act.
5. The questions referred to us, at the instance of the Revenue, are, therefore, answered in favour of the assessee and against the Revenue. The assessee shall be entitled to cost in the sum of Rs. 1,000.