Commissioner of Income Tax vs Krishna Tent House

Gokal Chand Mital, J.—Krishna Tent House, Bhiwani, the assessee, is a public charitable trust and it has several objects but we are concerned, for the decision of this reference, only with the following two objects :

"(i) To carry on the business of the present Krishna Tent House at Bhiwani and to open, start and carry on any other variety of business, the profit whereof shall be wholly and solely applied for the purposes of the trust.

(j) To do all such acts and things as may be conducive to the attainment or furtherance of all or any of the objects of the trust."

The assessment was framed by the Income Tax Officer and exemption was granted u/s 11 of the Income Tax Act, 1961 (for short "the Act"). Later on, the assessments were reopened for the assessment years 1972-73 to 1975-76 u/s 147(b) of the Act in regard to the income earned by the public charitable trust from the business of Krishna Tent House, in view of the Supreme Court decisions in Indian Chamber of Commerce Vs. Commissioner of Income Tax , West Bengal II, Calcutta, and The Sole Trustee, Lok Shikshana Trust Vs. The Commissioner of Income Tax, Mysore, . In the reassessments, the Income Tax Officer held that exemption was not permissible and brought to tax the income derived from Krishna Tent House. The Appellate Assistant Commissioner upheld the order of the Income Tax Officer, but on further appeal to the Income Tax Appellate Tribunal, Delhi, relief was granted to the assessee exempting the income of the firm, following the later decision of the Supreme Court in Dharmadeepti, Alwaye, Kerala Vs. Commissioner of Income Tax, Kerala, , that the purposes of the trust in Clauses (i) and (j) reproduced above are the purposes of relief of the poor and education and exemption was allowable for such purposes even if an activity for profit is carried on in the course of the actual carrying out of the primary purpose of the trust or institution. It also relied upon the later decision of the Supreme Court in Additional Commissioner of Income Tax, Gujarat Vs. Surat Art Silk Cloth Manufacturers Association, .

On the aforesaid facts, the Tribunal has referred the following common question for the assessment years referred to above, for the opinion of this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was entitled to exemption of its income u/s 11 of the Income Tax Act, 1961 ?"

The narration of the facts stated above shows that the matter was reopened in view of Indian Chamber of Commerce Vs. Commissioner of Income Tax , West Bengal II, Calcutta, and The Sole Trustee, Lok Shikshana Trust Vs. The Commissioner of Income Tax, Mysore, , but later on, in Dharmadeepti, Alwaye, Kerala Vs. Commissioner of Income Tax, Kerala, , a contrary view was taken. The Constitution Bench in Additional Commissioner of Income Tax, Gujarat Vs. Surat Art Silk Cloth Manufacturers Association, , considered all the earlier judgments and followed the decision rendered in Dharmadeepti, Alwaye, Kerala Vs. Commissioner of Income Tax, Kerala, , and overruled Indian Chamber of Commerce Vs. Commissioner of Income Tax , West Bengal II, Calcutta, and disapproved The Sole Trustee, Lok Shikshana Trust Vs. The Commissioner of Income Tax, Mysore, . The Constitution Bench decision was followed in Commissioner of Income Tax, Bombay Vs. Bar Council of Maharashtra, and Commissioner of Income Tax, A.P. Vs. Andhra Pradesh State Road Transport Corporation, . The crux of the decision of the Constitution Bench is that if the dominant or primary purpose of the assessee is to achieve the object of public utility for promotion of commerce and trade, not involving the carrying on of such activity for profit within the meaning of Section 2(15) of the Act, the asses-see would be entitled to exemption u/s 11(1)(a) of the Act. Some of the relevant observations areas follows (headnote of Additional Commissioner of Income Tax, Gujarat Vs. Surat Art Silk Cloth Manufacturers Association, ) :

"Where, therefore, the purpose of a trust or institution is relief of the poor, education or medical relief, the requirement of the definition of ''charitable purpose'' would be fully satisfied, even if an activity for profit is carried on in the course of the actual carrying out of the primary purpose of the trust or institution."

Relying on the aforesaid view of the Constitution Bench, Clauses (i) and (j) clearly go to show that the business of the tent house was carried on wholly and solely for purposes of the trust and the main purpose of the trust was to provide education to the public in general without any distinction of caste, creed and colour and to provide assistance, aid and financial aid to orphans, widows, destitutes and other poor and deserving persons including the running and managing of orphanages, widows'' homes and other institutions of like nature. To achieve the object of the aforesaid purpose, if any business is done, the matter would still be covered by Section 11(1)(a) of the Act. Since the business was carried on solely for applying the receipts for charitable purposes for education and bringing up of poor by giving financial help and opening orphanages, widows'' homes and such like institutions, the Tribunal was right in allowing the exemption and we answer the question in favour of the assessee, that is, in the affirmative, with no order as to costs.