Case: Yogiraj Charity Trust Vs. Commissioner of Income Tax, New Delhi

recent decision of this Court in Sole Trustee Loka Shikshana Trust v. Commissioner of Income Tax, Mysore(2). The Loka Shikshana Trust was engaged in the business of printing and publication of newspaper and journals and the further fact that the activity yielded profit and there were no restrictions on the trust earning profits in the course of its business went to show that the purpose of the trust did not satisfy the requirement that it was one not involving the carrying on of any activity for profit. This Court relied on the decision in All India Spinners Association v. Commissioner of Income Tax( 3) namely, that the charitable purposes exclude objects of private gain.11. The appellant contended that there was no bar on the trust to carry on business under the Act provided the profits of business were utilized only for charitable purpose. The appellant relied on the decision of this Court in C.I.T. v. Krishna Warriar(4) In Krishna Warriars case the trustees were directed to apply 60 per cent of the income of the business vested in the trustees to charitable purposes an d 40 per cent for the benefit of the family. The question was whether 60 per cent of the income was liable to tax under proviso (b) to section 4(3) (i) of the Act on the ground that the entire income was not applied for charitable purposes. The question that arose in that case dealt with the meaning of the expression "part" as used in section 4(3) (i) of the Act that "in the case of profit so held in part only for such purposes the income applied or finally set apart for application there to shall not be included in the total income of the person receiving. Krishna Warriars (supra) case does not deal with the effect of a deed which has charitable as well as non-charitable objects and the trustees have been given the pow er to apply the whole of the trust fund for non-charitable objects excluding charitable objects.The decision in C.I.T. v. Bengal Home Industries Association (1) Hyderabad Stock Exchange Ltd. v. C.I.T.(2) C.I.T. v. Radhaswami Satsang Sabha(3) on which the appellant relied are all applications of the ruling in All India Spinners Association (supra) case that what has to be found out is whether the object clause has any non-charitable object. In the Bengal Home Industries (supra) case, the object was to promote and develop home industries, arts and crafts. The income of the Association was to be applied solely towards the promotion of and carrying out of its objects. No portion of the income could be paid or transferred directly or indirectly by way of dividends to the members. In the case of winding up the surplus could not be distributed to the members but were to be transferred to the institution.12. In the Hyderabad Stock Exchange (supra) case, the aims and objects were not only to further the interests of brokars and dealers but also to assist, regulate and control the trade in securities, to maintain high standards of commercial honour and integrity, to discharge and suppress mal-practices to settle disputes and decide all question of usage, custom or courtesy in the conduct of trade or business. The objects were found beneficial to a section of the public and of general public utility. The profit were not to be distributed to the members but were to be utilized for the promotion of the objects of the Exchange. Therefore, the object was charitable and the income was applied wholly for charitable purposes.13. In Radhaswami Satsang Sabha (supra), case several industrial and commercial concerns were started for the benefit of the Satsanghis. Those were not run for individual profits nor were the profits distributed among the members. The concerns were started in furtherance of its objects of religious and charitable nature.In the present case, the Income Tax Authorities found that the various industrial and commercial concerns were not started by Ram Krishna Dalmia in furtherance of the objects of the trusts. The concerns were started for the purpose of earning profits which were to be distributed to the share-holders who had invested share money in those concerns14. This Court in East India Industries (Madras) Private Limited v. C.I.T.(1) found that one of the objects of the t rust was not for charitable or religious purposes. The object was to manufacture, buy, sell and distribute a pharmaceutical medicinal, chemical and other preparations. The other objects were charitable in nature. The Trust Deed in East India Industries (Madras) Pvt. Limited (supra) case conferred power on the trustees to apply the whole or any part of the trust property or fund for all or any other purposes of the trust. This Court found that there was no special trust and no particular item of property had been burdened with the performance of any specific object of the trust. It was open to the trustees to utilize the income for any one of the objects of the trust to the exclusion of all other objects. It would not be a violation of the trust if the trustees devoted the entire income to the carrying on of a business of manufacture, sale and distribution of pharmaceutical, medicinal and other preparations. This Court held that the trust property could not be said to be wholly for religious or charitable purposes within the meaning of section 4(3) (i) of the Act. The present appeals are all of the type of East India Industries (Madras) Private Limited (supra) case and fall within the ruling in that case.15. The test is that if one of the objects of the trust deed is not of a religious or charitable nature and the trust deed confers full discretion on the trustees to spend the trust funds for an object other than of a religious or charitable nature, the exemption under section 4(3) (i) of the Act is not available to the assessee. (See Lakshmi Narain Nath Trust v. Commissioner of Income Tax(2).

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]This Court in East India Industries (Madras) Private Limited v. C.I.T.(1) found that one of the objects of the t rust was not for charitable or religious purposes. The object was to manufacture, buy, sell and distribute a pharmaceutical medicinal, chemical and other preparations. The other objects were charitable in nature. The Trust Deed in East India Industries (Madras) Pvt. Limited (supra) case conferred power on the trustees to apply the whole or any part of the trust property or fund for all or any other purposes of the trust. This Court found that there was no special trust and no particular item of property had been burdened with the performance of any specific object of the trust. It was open to the trustees to utilize the income for any one of the objects of the trust to the exclusion of all other objects. It would not be a violation of the trust if the trustees devoted the entire income to the carrying on of a business of manufacture, sale and distribution of pharmaceutical, medicinal and other preparations. This Court held that the trust property could not be said to be wholly for religious or charitable purposes within the meaning of section 4(3) (i) of the Act. The present appeals are all of the type of East India Industries (Madras) Private Limited (supra) case and fall within the ruling in thattest is that if one of the objects of the trust deed is not of a religious or charitable nature and the trust deed confers full discretion on the trustees to spend the trust funds for an object other than of a religious or charitable nature, the exemption under section 4(3) (i) of the Act is not available to the assessee. (See Lakshmi Narain Nath Trust v. Commissioner of Income Tax(2).