No Acts & Articles mentioned in this case
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SOLE TRUSTEE LOKA SHIKSHANA TRUST
v.
COMMISSIONER OF INCOME TAX, MYSORE
August 28, 1975
(fl. R. KHANNA, M. H. BEG AND A. C. GUPTA, JJ.]
461
lncon1e Tax Act, 19'61, Section 2(15)-Definition of 'Charitable purpose'
"The advancement of anv other object of f?eneral public utility not invof\·ing the
carr;inR on of any activity for profit', n1eaning of-"Profit'' if confined onlv to
private vrofit.
lnco111e Tax Act, 1961. Sections 2(15) and 11-"Education". 111eani11g a/
Appellant trust engaged in the business of printing and publication of newspaper
and journals and making profits, if entitled to tax exe1nption.
Section 2(15) of the Income-tax Act provides that 'charitable purpose' in
cludes relief of the poor, education medical relief. and the advancement of any
other object of general public nti.lity.
The appellant is a sole trustee of the "1-0ka _shikshana ·Trust'', holding pro~
perties mentioned in a schedule attached to a deed of trust executed on 19-2-1962
by himself purporting to re-declare a trust of 15-7-1935. The total assets of the
earlier trust of 1935 consisted of a sum of Rs. 4308.10.9 only. Under the pro
visions the earlier trust. the trustee had carried on a lucrative business of pr~nt
ing at Bclgaum, and, thereafter, he started publishing a daily newspaper. The
value
of the redeclared trust of 1962 stood at, Rs. 2,97,658/-. Clause 2 of the trust deed provided that the object of the Trust shall h~ to educate the people of
India in general and of Karnatak in particular by
(a) establishing, conducting and helping directly or indirectly instiluiions
calculated to edncate the people by spread of knowledge on all
matters of general interest and welfare;
(b) founding and running reading rooms and libraries and keeping and
conducting printing houses and publishing
or aiding the
publicat'.ion
of books, booklets, leaflets, pamphlets, magazines etc., in Kannada
and other languages, all these activities being started, conducted and
carried on with the object of educating the people;
(c)
supplyi.ng the Kannada speaking people with an organ or organs of
educated public opinion and conducting journals
in Kannada and
other language for the dissemination of useful
news and information
and for the ventilation of public opinion on matters of general public
ntiEty; and
(d) helping directly
or indirectly societies and institutions which have all
or any of the aforesaid
objects in view.
The Income-tax Officer sent a communication to the trust on April 27, 1963 to
the effect that, s!.nce the only activity of the trust was printing. publication, and
sale of newspaper, weekly and monthly journal, the trust carried on an activity
for profit. The claim of the sole trustee was rejected, and, having been unsuccess
·,rut through ou~ the appellant has preferred thi5 appeal after certification of the
case under section
261 of the Income-tax Act.
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Dismissing the appeal,
H HELD: (Per H. R. Khanna and A. C. Gu9ta, JJ.)
(I) It is not correct to say that the word "profit" in section 2(15) of the Act
means private profit. The word used in the de:fin~tion provision is profit and not
private profit and it \-'Ould not be permissible to read in the definition the word
16-U39 Sup. C 1/75
4 62 SUPREME COURT REPORTS 11976] I S.C.R.
"private" as q~alifying profit even though su::h word is not the:·e. There is al-....l
no apparent justification or cogent reason for placing much a construct:on on the
word .. P ofit'". [47281
The words "general
pµrpose are very .. wide.
public utility" contained 1n 1he definition of charitaqle
These words exclede objects of p:-1vale gain. l472C]
A II India Sp/1111crs' Association v. Commissioner of I ncon1e·tax { 1944) 2
I.T.R. 482, relied on. '
lt.
is also not
correct to say that the newly added words "not involvincr the
car~y.1ng on .of any. activity for profit" merely qualify and affirm what \Va~ the
pos1tLon as It obtained under the _definition in the Act of .1922. Ji' the 1egis~
]ature intended that the concept of charitable purpose should be the·sam~ under
the Act of 196 l as it was in the Act of 1922, there was no necessitv for it
to add the new words in the definition. The earlier definition did not' involve
any ambiguity. and the position in law was clear and admitted
of no doubt
after the pronouncement of the Judicial
Committee in the Tribune case ( 1939)
7 ITR 415 ~lnd in the case of Aft J11dia Spinners' Association. If despite that
fact, the legislature added new words in th.e definition of charitable purpose, it
would be contrary to all rules of construc:t!on to ignore lhe impact of the newly
added words
and to so construe the
defintt1on as if 1he newly addeJ "'"ords were
either not th~re or \Vere intendeJ to be otiose a-nd redundant. [47CC-E}
(ii) The sense in which the V.'ord "education" has been used in section
2(15) is the ~ystematic instruction, schooling, or training given to the young
in preparation for the work of life. It also connotes the whole course of
scholastic instruction which a person has received.
The word ''education''
has
not been used in that wide and extended sense. according to which every
acquisition
of further knowledge
cono;;titutes education. According to thi-s wide
and extended sense. travelling is education. because as a result of travelling
you acquire fresh knOwledge. Likewise. if you read newspapers and magazines,
see pictures. visit
art galleries, museums and zoos, you thereby add to your
knowledge.
Ag:iin. when you grow up and have dealings with other people,
some of
whon1 are not straight. you learn by experience and
thu..:; adJ to your
,knowledge of the ways
of the world. lf
)'OU are not careful. your wallet
is liable to be stolen or you are liable to be cheated by some unscrupulous
person.
The thief who removes your wallet and the swindler \Vho
che~ts you
teach you a le'.'6on and in the process make you wiser though poorer. If
you visit a night club. you get acquainted with and add to your knowledge
about some of the not much revealed realities and mysteries of life. All
this in a way is education in the great school of life. But. that i.;. not the
sense in which the word "education'' is used in clause ( 15) of section 2. \Vhat
education connotes in that clause
is the process of
training and deve1oping the
knowledge. skill. mind. and chara:ter of students by formal schooling. [469C-F]
(iii) The fact that the appellant trust is engaged in the busincs<:: of printing
and publication of newspaper and journals and the further fact that the afore~
said activity vields or is one likely to yield profit and there are no re~trictions
on the aotY."llant-trust earning profits in the course of its busin..:ss ·would go
to show that the purpose of the appellant-trust does not satisfy the requirement
that it should be one "not involving the carrying on of any activity for profit."
[471C·D]
Jn re The Trnstees of the 'Tribune (1939)7 ITR 415, State of· Gujorat v.
M/s. Raipu.-Mff?. Co., [19671 1 S.C.R. 618, and Co111missioner of lrico1ne-tax
v. Lahore Electric Supply Co. Ltd., [1966] 60 I.T.R. I, referred to.
Per M.H. Beg, J. (Concurring)
(i) It has been declared repeatedly by the Courts. even before the addition,
-Of the words "not involving the carrying on of any activity for profit" to the
definition of "charitable purpose'', that acthities motivated by private profit
making fell outsi'de the concept of charity a1together. It is n1ore reasonable
to infer that the words used clearly imposed a new qualification on publtc
utilities entitled
to exemotion. It was obvious that, unless such a limitation
was introduced, the fourth and last category would become too wide to
prevent
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L-OKA SHIKSHANA TRUST v. C.I.T. (Khanna, J.) 463
its abuse. Wicle words so used could have been limited in score by judicial
interpretations
ejusdem generis so as to confine the
last category to objects
similar to those
in the previous categories and also subject to a dominant
ccncept of
charity which must govern all the four categories. But, the
declaration
of law by the Privy Council, in the
Tribune case had barred this
method of limiting an obviously wide category of profitable activities
of general public utility found entitled to exemption. Hence, the only other
way of cutting down the wide sweep of objects of ''general public utility" entitled
to exemption was by legislation. This, therefore, was the method Parliament
adopted as is clear from the speech of the Finance Minister who introduced the
amendment in Parliament. r482F-Hl
lncon;e Tax Co1111nissioners v. Pe111se/, [1891] A.C. 531, 583; A1orice v.
Bishop of Durhan1. (1805) 10 Ves. 522: All Jndia Spinners' Association v.
Co1n1nfasioner of J11co111e Tax, Bon1bay, 1944(1:2) ITR 482, 486; Con1missioner
of Jncon1e-Tax, Madras v. Andhra Chanzber of Conunerce, 1965(55) I.T.R.
722, 732; /11 re Gro11e-Gredy [l929J 1 Ch. 557, 582; Cape Brandy Syndicate v.
I.R.C, [1921] 1 K.B. 64, 71; Rt. Hon'ble Jerald Lord Strickfand v. Carn1elo
Mifud Bonnici, A.J.R. 1935 P.C. 34; The Englislunan Ltd. v. Laipat Rai,
l.L.R. 37 Cal. 760; Anandji Hasidas & Co. P1·t. Ltd. v. E11gineeri11R Afa;.donr
Sangh &: A.nr., A.LR. 1975 S.C. p. 946 @ 949; Co111111issio11er of lnconw-1ax
Gujarat v. Vadi!al Lallubhai, 1972 (86) I.T.R. p. 2; Connnissioner of l11con1e
tax v. Sadora Devi, 1957 (32) I.T.R. 615 @-627 [1958] I. S.C.R. I and In re the
Tribune, (19319) 7 J.T.R. 415, referred to.
(ii) If the profits must ne::essarily feed a charitable purpose, under the
terms
of the trust, the mere fact that the ac ivities of the trust yield profit
will not alter the charitable character
of the trust. The
'.est is the genuineness
of the purpose tested by the obligation created to spend the money exclusively
or essentially on ·:charity", If that obligation is there. the income beC'omes
entitled lo exemption. That is the most reliable test. The governine idea of
charity must qualify purpose of every category enumerated in :-;ectiOn 2(15)
of the Act of 1961. [483-C-D]
(iii) Although the term 'education', as used in section 2(15) of the Act,
seem'> wider and more comprehensive than education through educational
institu\.ions. such as Universitie-s, whose income is given an exemption fron1
income tax separately :under section 10(22) of the Act, provided the educa:ional
institution concerned does not exist "for purposes of profit", ye the edu:ational
effects cf a newspaper or publishing business are only indirect, proble'matica1.
and quite incidental so that, without imposing any condition or qualification
upon the nature
of information to be disseminated or
ma-terial to be published,
the mere pr;blication of news or views cannot be said. to serve a purely or even
predon1inantly educational purpose in its ordinary
and
l!&ual sense. Judging
from the facts set out in the trust deed itself, the sole trustee had managed
to mak~ the satisfaction of the needs mentioned in clause 2(c) a hi2hly prOfit
able business. The deed puts no condition upon the
0::onduct of the -newspaper
and publishing business from which one could infer that it v.'as to be on "no
profit~and no lq..;;s" basis. The High Court was right in coming to the conclu
sion that the appellant
is not entitled to
claim exemption from income-tax.
[485-E-G, 486-D]
EaSJ India
!nduMrie$ (Madras) Pvt. Ltd. v. Comniissioner of l11con1e.tax,
!vludra<>, 1967 (65) I.T.R. 611; Commissioner of Income-tax, Madras v. Andhra
C!wnzber of Commerce, 1965 (55) I.T.R. 722; Md. I(Jrahim Rizo v. Co1n1nis
sioner of Income-tax, Nagpur, (1930) L.R. 57 I.A. 260 and Co1nnd.uionet of
lncon1e-1ax, West Bengal II v. Indian Chamber of Commerce, 1971 (81) r.T.R.
147.
t!RGUMENTS
for the appellant
( 1) Tue objects clause of the Trust is so worded as to make it clear that
1he whole and sole object of the Trust is education of the people of India
464 SUPREME COURT REPORTS [1976] 1 S.C.R.
in general and of Karnatak in particular by the four means or modes set out
in that clause. Those four means or modes are not separate objects of the
Trust but are merely the instrumentalities prescribed by the Settler for achiev
ing the specified object of education. Even assuming for the purpose of argu
ment that sub-clauses (a) to (d) of clause 4 of the Trust Deed are separate
and distinct objects
of the Trust, clause ( c) which covers a newspaper or a
journal
is itself an object falling within the category of
"education".
(2) The words added in the 1961 Act "not involving the carrying on of
any activity for profit" go only with the last head viz. ''any other object of
general public utility" and not with the first three heads. This is put beyond
doubt by the comma which appears after each of the first three heads, there
being no comma after the fourth head.
(3) The present case falls within the second head of
"charitable purpose",
1:;z. education. The rulin.g of the Privy Council in the Tribune case 1939
J.T.R. 415 does not apply to the facts of the present case.
(
4) Assuming that the case does not fall within the
categol_ry of "education'"'
it falls within the last head "any other object of general public utility, and
the qualifying words "not involving the carrying on of any activity for profit''
are satisfied. First the word "profit" means private gain, and the qualifying
words merely say expressly wha.t v:.·as implicit in the 1922 Act (1939 I.T.R.
415
at 423, and 1944
l.'f.R. 482 at 488). Even assuming the word "profit"
covers prdfit for the Trust, involving no private gain, the qualifying words are
still satisfied. They require that the object of the Trust should
not involve,
i.e.
entail, that the trustees should carry on the activity for profit. No su::h
condition about making profit
is imposed by the trust deed. That profit may
result from the activities
of the
Trust in a particular year is wholly irrelevant.
Profit making is not the motive of the Trust.
(5) Provisions of section 11 of the Act clearly reveal that it is implicit in
the very scheme
of the Act that a business undertaking can be held in trust
for an object of general public utility.
For the respondent
(i) The decision of the Privy Council in the
Tribune r.:ase squarely applies
to
1
the facts of the present case; (ii) For ascertaining that true meaning of the
expression
"not involving the carrying on of an activity for profit" it was not
only permissible but only proper for the Courts to refer to parliamentary
debates and other proceedings
of the legislature; (iii) Where a business undertaking is held as property of the Trust and income resulting therefrom is
wholly applied for charitable purposes such as education, medical relief of
the poor, or for any other object Qf. general public utility but with which object
the production of income i~ not linked it would be still exempt. But it that
income is utilised only for the purposes of advancing the very object from the
advancement of which it
is derived it would cease to be exempt. The means
and processes adopted by the Trustee for the advancement
of the object were
such
as rendered the object itself as non-charitable; (iv) The expression·
"activity for profit" was much wider in scope than merely a business activity.
The legislature had intentionally used the expression "activity" instead of
business because in some cases the income produced from the activity may
not
be 1ega11y assessable under the provisions of the Income-tax Act, 1961
under the head
"Income, profits and gains of business'• (Section 28). The
expression 'activity for profit" in the context meant activity for profit making;
(v) Since the advancement of .e~ucation was being achieved by ~eans invo!v
ing the carrying on of an activity for profit, the Trust would still be denred
exemption. In other words, the qualifying words a-dded to the definition at the
end did not govern merely the last category
of charity i.e. the object of
general public utility but equally
governed the earlier three well known cate
gories namely n1edical relief, relief of the poor, and• education. The effect of
the qualifying words "not involving the carrying on an activity for profit" w_as
to deny exemption to trusts which carried On a profit-making activity for
advancing the object of general public utility.
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LOKA SH!KSHANA TRUST V, C.J.T. (Khann{l, J.) 465
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2130 and
2131
of 1970.
From the Judgment and
Order dated the .12th February, 1970
of the Mysore High Court in I.T.R.C. Nos. 5 and 6 of 1968.
N. A. Palkhivala, and Vi~et Kumar, for the appellant.
G. S. Sharma and S. P. Nayar for the respondent.
N. A. Palkhivala, S. T. Desai, A. G. Meneses, Mrs. A. K. Venna,
P. N. Monga, J. B. Dadachanji for the Intervener-Tribunal Trust
Chandigarh.
C V. S. Desai and J. Ramamurthi for Intervener-Saiurashtra Trust,
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Bombay.
The Judgment of H. R. Khanna
and A. C. Gupta, JJ, was delivered
by Khanna,
J. M. H. Beg, J. gave
a separate Opinion.
KHANNA, J.-The detailed facts of this case have been given in
the judgment of our learned brother Beg J. and. need not be repeated.
The question of law which
was referred to the High Court and which
has been answered
in, the negative against the assessee appellant i~ as
follows :
"Whether on the facts and in the circumstances of the
case, the income lo! the Lok Shikshana Trust was entitled to
exemption under section
11 of the Income-tax Act, 1961,
read with section
2(15) of the same Act, for the
assessment
year 1962-63-?"
"Charitable purpose" was defined in section 4 ( 3) of the Indian In
come-tax Act, 1922 was as under :
"In this sub-section 'charitable purpose' includes relief of
the poor, education, medical relief, -and the •acfvanceme>,1t of
any other object of general public utility." ·
The definition of "charitable purpose" as given in section 2(15) oi the
Income-tax Act, 1961 (hereinafter referred to
as the Act) with which
we are concerned reads as under :
·
"(15) 'Charitable purpose' includes relief of the poor,
education, medical relief, and the
advanceme11t of any other
object of general public utility not involving the carrying on
of any activity for profit."
It would appear from the above that in the definition of
"charitable
purpose" as given in the Act the words "not involving the carryrag
on of any activity for profit" have been -added at the end of the defini
tion
as given in the Act of 1922. We shall see as to what is the
effect
of the above addition.
466 SUPREME COURT REPORTS [1976] 1 S.C.R.
In order to see as to whether the appellant-trust is for a charitable
purpose, we may first go into the question as to what
is the object of
the
apipellant-trust. According to Mr. Palkhivala, learned counsel
for the appellant, the object of the appellant-trust
is education,
while
the· staud of Mr. Sharma on behalf of the revenue is that not education
but the last mentioned category in section
2(15), viz., the advance
ment of any other object of general public utility,
is
the object of the
appelJoant-trust. The reason for the above divcrge·acc in the stands
of Mr. Palkhivala and Mr. Sharma is that according to Mr. Palkhivala,
the concluding words of the definition in section 2(15) of the Act
"not involving the carrying on of any activity for profit" do not qualify
the first three categories of relief of the poor, education, or medical
relief but qualify only the fourth category of "advancement of any
other object of general public utility". Once the object of the appellant
trust
is
held to be education, the word trust would, according to Mr.
Palkhivala,
be held to be for a public purpose as defined in section
2(15) of the Act. In such an event, it would be immaterial whether
the object of the trust involves or does not involve the carrying on of
any activity for profit. As against that, Mr.
Sh>arma has co>,1troverted
the submission that the concluding words of the definition, viz., "not
involving the carrying on of any activity for profit" qualify only the
fourth category of "advancement of any other object of general public
utility". According to Mr. Sharma, the cd,1cluding words qualify the
first three categories of relief of
the poor, education and medical relief
also.
In any case, submits Mr. Sharma, the object of tbe appellant
trust falls in the fourth category of the definition, namely.
"any other
object of general public utility." It is, in my opinion, not necessary
to express opinion i>,1 this case on the question as to whether the words
"not involving the carrying on of any activity for profit" qualify the
fourth object, viz., the advancement of any other object of general
public utility, or whether they also qualify the other three objects of
relief of the poor, education and medical re lief, because we are of the
view that the object of the appellant-trust was not education
but any
other object of general public utility. Clauses 2, 6,
10, ·14, 16 and
18 of the trust deed of the appellant read as under :
"2. The object of the Trust shall be to educate the people
of
India in general and of
Karnal'ak in particular by
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(a) establishing, conducting aud helping directly or indi
rectly institutions calculated to educate the people
by
spread of knowledge ou all matters of
ge+,1eral interest G
and welfare :
( b) founding
and running reading rooms
-and libraries and
keeping
and conducting printing houses and
publish
ing or aiding the publication of books, booklets, leaf
lets, pamphlets, magazines etc., /,, Kannada and other
languages, all these activities being started, conducted
and carried
on with the object of educating the
people:
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LOKA SHIKSHANA TRUST V, C.I.T. (Khanna., /.) 467
(c) supplying the Kannada speaking people with an organ
or organs of educated public opinicu and conduct
ing journals ill' Kannada and other language for the
dissemination of useful
news and information and for
the ventilation of public
opinicia on matters of general
public utility; and
(d) helping directly or indirectly societies
and institutions
which have all or any of the aforesaid objects in
view."
6. The Original Trustee shall have power and authority
to spend and utilise the money and the property of the Trust
for any of
th~ purposes of this Trust in such manner as to him
may appear proper. The Original Trustee shall
be entitled
to operate
all the Banking accounts of the Trust.
10. The Original Trustee shall have full power to, take
over on such terms
as he may deem fit such concern or con
cerns, or undertakings
as, in his opinion, are congenial or
conducive to
any of the purposes of the Trust.
14. The Original Trustee shall be entitled to appoint a
Manager or Managers of institutions of the Trust, Editor or
Editors
and other subordinates for the purposes of carrying
out the printing and p,ublication of any newspaper or news
papers,
weeklies, monthlies, magazines, books or other publi
cations, and shall have power from
time to time to delegate
to any
one or more persons by
Power of Attorney or other
wise any one or more of the following powers.
(a) To open one or more banking accounts, to operate the
same and to deposit and withdraw
mo;,1eys from the
same;
(b) To give receipts or discharges for money or property
received by them or any one of them in the course of
business carried on by the Trust;
( c) To buy or sell paper,
irik, machines, books and mate
rials required for the purposes of the business of the
Trust;
( d) To enter into contracts With agents, dealers and others
in the course of the business of the Trust; .
( e) To employ or remove subordinates and workers neces-·
sary for the work;
(f) and generally to do all things necessary and expedient
in carrying out the business entrusted to him or them.
16. The Original Trustee or Trustees shall not take any
remuneration for discharging his or their duties
as a Trustee
or Trustees provided that this provision shall not preclude a
468 SUPREME COURT REPORTS [1976] 1 s.c.B.,
Trustee or .Trustees from being paid out of the Trust fund
such remuneration
as may be deemed proper for carrying out
any work and duty in connection
with the conduct or manage
ment of institutions
of the Trust, or with the business of
printing, publishing or other activities carried on by the Trust.
A Trustee shall
be entitled to be paid all expenses that may be
incurred by him in connection with
his duties as a Trustee
including trave!Jing and other expenses.
18. The Original Trustee or other Trustees shall not be
responsible for any loss occasioned to the Trust in respect
of
any business or dealings carried on on behalf of-the Trust
unless the sal)le
is due to his own fraud or misappropriatioB
or breach of trust and every trustee shall be indemnified by
and out
of the funds and moneys of the Trust against any loss
or damage which the Trustee might
suffer in regard to any act,
deed,
or omission of his in
the performance of his duties as a
Trustee, including any
fines or penalities imposed under the
Factory Act or
any Labour Legislation or
Press Act or any
other similar enactment."
The income-tax officer sent a communication to the trust on April 27,
1963 to the effect that since the only activity
of the
trust was printing,
publication and sale of newspaper,
weekly and monthly journal, the
trust carried on an activity for profit and
was not entitled to exemption.
In reply to that notice the
Sole Trustee stated that the above mentioned
activities
of the trust were covered by clause (c) of the objects clause
of the trust deed.
It was added that the above object did not involve
the carrying
on of any activity for profit. In a further
communication
dated June 26, 1964 the Sole Trustee wrote :
"The Trust has four objects in its objects clause one of
which
is to supply the Kannada speaking people with an
organ or organs
of educated public opinion etc. (clause 2(c)
of Trust Deed). Under this clause we conduct the publication
of newspapers. This has not been agreed upon by
yol11'
honour as a Charitable purpose and we have accordingly pre
ferred appeals for relief.
The main object
of the Trust is education and this
mzy
be achieved by conducting and helping educational institu
tions having the similar objects
as of our Trust. These are all
charitable objects.
In case the Trust bas a surplus income it
cannot
be spent on any object other than the objects of
the
Trust. For the present we have been educating the Kannada
speaking people through newspapers and journals and
we shall
be taking up
the other ways and means of education as noted
in our trust deed
as and when it is possible for Trust. We
have no option at
al! except to spend our income on the ob
jects of our Trust which are
all charitable without
any doubt
or ambiguity."
We have set out above the relevant clauses of the trust deed and the
material part of the communications sen~ by the Sole Trustee. It would
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LOKA SHIKSHANA TRUST v. C.J.T., (Khanna, J.) 469
appear therefrom that though a number of objects, including the setting
up of educational institutions, were mentioned in the trust deed as the
objects
ot the trust, supplying the Kannada
speakin!l people with an
organ of educated public gpinion was al§O one of those objects. The
communication sent
by the
Sole Trustee to the income-tax officer shows
that the trust at present is carrying out only the last mentioned object
of the trust, namely, supplying the Kannada speaking people with an
organ or organs of educated public opinion. The concentration so far
of the activities of the trust only on that object
is in pursuance of clause
e
6 of the trust deed, according to which original trustee shalf have power
and authority to spend and utilise the money and the property of the
trust for any of th"'-purposes of the trust in such manner as to him may
appear proper.
The sense in which the word "education" has been used in section
2( 15) is the systematic instruction, schooling or training given to the
young in preparation for the work of life.
It
alw connotes the whole
course of scholastic. instruction which a person has received. The word
"education" has not been used in that wide and extended sense, accord
ing to which every acquisition of fnrther knowledge constitutes educa
tion.
Accord.ing to this wide and extended sense, travelling is educa
tion, because
as a result of travelling you acquire fresh kuowledge. Like
wise, if you read newspapers and magazines, see pictures, visit art
gal
leries, museums and zoos, you thereby add to your knowledge. Again,
when you grow up and have dealings with other people, some of whom
are not straight you learn by experience and thus add
to your know
ledge of the
ways of the world. If you are not careful, your wallet is
liable to be stolen or you are liable to be cheated by some unscrupulous
person. The thief
who removes your
wairet and the swindler who cheats
you teach you a lesson and in the process make you
wiser though
poorer.
If you visit a night club, you get acquainted witli and add to your know
ledge about some
of the not much revealed realities and mysteries of
life. All this in a way is education in the great school of life. But that is
not the sense in which the word
"education" is used in clause (15) of
section
2. What education connotes in that clause is the process . of
training and developing the knowledge, skill, mind and character of
students
by' formal schooling.
The question
as to whether a trust the object of which is to supply
the people with an organ of educated public opinion should be con
sidered
(o be one for education or for any other object of public utility
was considered by the Judicial Committee in the case of In re The
Trustees·of the 'Tribune'('). In that case a person who owned a press
and a newspaper created
by his will by which his property in the stock
and goodwill of
the press and newspaper was made to vest permanently
in a committee of certain members.
It was the
duty of the said com
mittee of trustees under the W'i]] "to maintain the said press and news
paper in an efficient c?ndition, and to.keep up the liberal policy of the
said newspaper, devot1!1g the surplus mcome of the said press and
newspaper a.fter defraymg all current expenses in improvin.g the said
newspaper and placing it on a footing of permanency." Ii was· also
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470
SUPREME COURT REPORTS fl 976] 1 S.C.R.
provided. by an arrangement made subsequently that in case the paper
ceased
to function or for any other reason the surplus of the income
could not be applied
to the object mentioned above, the same should be
applied for the maintenance of a college which had been established out
of the funds of another trust created by the same .testator. There was
surplus income in the hands of the trustees after defraying the expenses
of the press and the newspaper. Question arose
as to whether that
R
income was liable to be assessed in the hands of the trustees. The
• Judicial Committee held that the object of the settlor was to supply the
province of the Punjab with an organ of educated public opinion and
this
was prima facie an object of general public utility. Their Lordships un-~quivocally expressed the view that they were not prepared to hold
that the property referred
to in the various paragraphs o( the will was
held for the purpose of
"education" in the sense that word was used in C
section 4 of the Indian Income-tax Act of 1922. The above decision
of the Judicial Committee applies directly to the present case and in view
of this decision, we would hold that the object of the appellant-trust
was
'"the advancement of any other object of general public
utility".
It has been poiuted out in the earlier part of the judgment that in
the. definition of charitable purpose as given in section 2(15) of the Act
the words "not involving the carrying on of any activity for profit" have
been added at the end
of the definition as it was given in section 4(3)
of the Indian Income-tax Act, 1922. The position as it existed under
the Act of 1922
was that once the purpose of the trust was reliet of the
poor, education, medical relief or the advancement of any other object
of general public utility, the trust
was considered to be for a charitable
purpose. As a result of the addition of the words
"not involving the
carrying on of any activity for profit" at the end of the definition in
section 2 ( 15) of the Act even if the purpose of the trust is "advance
ment of any other object of general public utility", it wo~ld not be con
sidered to be "charitable purpose" unless it is shown that the above
purpose does not involve the carrying on of any activity for profit. The
result thus of the change in the definition
is that in order to bring a case
within the fourth category of charitable purpose,
it would be necessary
to show that (
1) the purpose. of the trust is advancement of any other
object of general public utility, and
(2) the above purpose docs not
involve the carrying on of any activity for profit. Both the above con
ditions must be fulfilled before the purpose of the trust can be held to
be charitable purpose.
It is not necessary for the decision of this case,
as already mentioned above, to go into the question as to ·whether the
words
"not involving the carrying on of any activity for profit" also
qualify the first three categories of charitable purpose, namely, relief of
the poor, _education and medical relief.
Question then arises as to whether the purpose of the appellant-trnst
can be considered to be one not involving the carrying on of any activity
for profit. So far as this question is concerned, we find that the appel
lant-trust started with a sum of Rs. 4.308, 10 As. 9 Pies. The schedule
attached to the trust deed dated April 10, 1947 shows that the assets of
the trust consisted of printing machines, accessories, motor-cars, build
ing, stocks of paper and other miscellaneous things. The total value of
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LUKA SHIKSHANA TRUST v. C.I.T .. (Khanna, J.) 471
the assets was Rs. 2,97 ,658, out of which the value of the building sites.
and the buildings was Rs. 47,500. As against that, the liabilities of the
trust amounted
to Rs. 1,24,086. The net value of the assets of the trust
rose in 1947 to a figure of Rs. 1,73,571, 14 As. 4
Pies. For the assess
ment year 1962-63, which
is
the year under appeal, the total receipts of
the trust were of the amount of Rs. 22,55,077. The main sources of
these receipts were sales of newspapers and magazines through agents,
receipts on account of advertisements, receipts for job printing bills be
sides son1~ other rrtinor items. "As against t~e reCeipls, th~ n:ajor ite~
of expenditure were the purchase of newsprmt, paper, pnntmg type5"
printing and other material, the salaries and allowances of the staff,.
remuneration to news agencies and railway freight. There can, there
fore, be no doubt that the trust bas been carrying on the busi11ess of
publishing newspaper and weekly and monthly magazines. The profits.
from the aforesaid business would also apparently account for the mani
fold increase in .the value of the assets of tlle trust. The emphasis on
business activity of the trust is also manifest from clauses 6, 10, 14, 16-
and 18 of the trust deed reproduced above. The fact that the appellant
trust
is engaged in the business of printing and publication of
newspaper
and journals and the further fact that the aforesaid activity yields or is
one likely to yield profit and there are no restrictions on the appel\ant
trust earning profits in the course of its business would
go to show that
the purpose of the appellant-trust does not satisfy the requirement that
it
should be one
"not involving the carrying on of any activity for profit".
It is true that there are some business activities like mutual insu
ra,1ce and co-operative stores of which profit making is not an essential
ingredient, but that
is so because of a self-imposed and innate restric
tion on making profit
in the carrying on of that particular type of. busi
ness. Ordinarily profit motive
is a normal incidence of business
activity and
if the activity of a trust consists of
carryi•ag on of a business
and there are no restrictions on its making profit, the court would be
well justified in assuming in the absence of some indication to the
con•·
trary_ that the object of the tn~st involves the carrying on of an•
act•vtty tor profit. The expresswn "business", as observed by Shah J'.
spe_aking for the Court in the case of State of Gujatat v. M / s.
Raipur Mfg. Ci; .• C') though extensively used in taxing statutes, is a
word of mdefimte import. In taxing statutes, it is. used in the sense
of an <>ccupa!Ion, or profession which occupies the time, attention and
labour of a p;:rson, noi;mally with the object of making profit. To
regard an act~v1ty as busmess there must be a course of dealings, either
actually contmued or contemplated
to be continued with a profit motive, a?d not fo: sport or pleasure. Whether a person carries on
bus1.1ess m a i:ar~1cular commodity must depend upon the volume,
frequency, contmmty and regularity of transactions of purchase and
?ale m. a class of goo~s and the transactions must ordinarily be entered
~nto with a profit motive. By the·use of the expression "profit mot;ve"·
1t is" n~t intended that profi~ must in fact be earaed. Nor does· the
expLss1?n cover a mere ~estre to make some monetary gain out of a
tr~sact1on or even a senes of transactions. It predicates a motive
which pervades the whole series of transactions effected by the person irr
(I) [1967] l s. c. R. 618.
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472 SUPREME COURT REPORTS (1976] ! S.C.R.
the course of his activity. In the case of Commissioner of I ncomc-tux
v. Lahore Electric Supply Co. Ltd.(
1
), Sarkar J. speaking for the majo-
rity observed that business as contemplated by section 10 of the Indian
Income-tax Act, 1922,
is an activity capable of producing a profit
11 hich
can
be
ta;;ed. In the case of the appellant-trust the activity of the
1rust, as already observed earlier, has in fact been yielding profits and
that apparently accounts for the increase ia the value of its assets.
We are
not impressed by the submission of the learned counsel for
1he appellant that ,Profit under section
2(15) of the Act means private
profit. The word used in the definition given in the above
providon
is profit and 110t private profit and it would not be permissible to read
in the above definition the word "private" as qualifying profit even
1hough
'such word is not there. There is also no apparent
justifica
tion or cogent reason for placing such a construction on the word
"profit". The words "general public utility" contalaed in the definition
of charitable purpose are very wide. These words,
as held by the
Judicial Committee in the case of
All India Spinners'
Associaricn v.
Commissioner of Income-tax(2), exclude objects of private gain. It
is also difficult to subscribe to the view that the newly added words
"not involving the carrying on of any activity for profit" merely qualify
and affirm what was the positio'a as it obtained under the definition
given in the Act of 1922.
If the legislature intended that the concept
of charitable purpose should be the same under the Act of
1961 as it was in the Act of 1922. there was
no necessity
for it to add
the new words in the definition. The earlier definition did not involve
any ambiguity and the position in law was clear and -admitted of no
doubt after the pronouncement of the Judicial Committee in the cases
of Tribune aad All India Spinners' Association (supra). If despite that
fact, the legislature added new words in the definition of charitable
purpose, it would be contrary to all rules of construction to ignore the
impact of the newly added words and to so construe the definition as
if the newly added words were either not there or were intended to be
otiose and redundant.
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The appeals
fail and are dismissed but in the circumstances
without F
costs.
BEG, J. The question, answered in the negative in this case by the
Mysore High Court, which is now before
us after certification of the ease
under
Section 261 of the Income tax Act, 1961 (hereinafter referred
to as 'the Act'), was framed by the Income-tax Tribunal as follows:-
"Whether on the facts and in the circumstances of the case, the G
income of the Loka Shikshana Trust was entitled to exemption
under Sec. 11 of the lncome tax Act, 1961 read with Sec. 2(15)
of the same
Act., for the assessment year 1962-63''.
The appellant
is a sole trustee of the
"Loka Shikshana Trust", hold
ing properties mentioned in a schedule attached to a deed of trust exeeu-
1ed on 19-2-1962
by himself purporting to re-declare a trust of H
15-7-1935. The total assets of the earlier trust of 1935, known as the
(1) (1966)
60 I. T. R. I. (2) (1944) 12 I. T. R. 482.
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LOKA SHIKSHANA TRUST V. C.I.T .. (Beg,/.) 47:>
"National Literature Publications Trust", consisted of a sum of Rs.
4308.10.9 only. It appears that, under the provisions of the earlier
trust the trustee had carried
on a lucrative business of printing, under
the
~ame of "Karnatak Prakashana Manda!", at Belgaum, and, there
after, it
was shifted to Hubli where be started publishing a daily newspap~r called "Samyukt!' Karnatak". The print in~ business m;ist have
been lucrative because mvestments of profits from
It, together w.1th some
possible
"donations", expanded the assets ofi the redeclared trust of 1962
so much that the schedule attached to the trust deed of 1962 shows
their value to be Rs. 2,97,658/-. After deducting the total liabilities of
the trust,
shown as Rs.
1,24,086.10 annas, the net value of the assets
is given as Rs. 1,73,571.14.4 .
Even
if the obvious inference from statements found in the
trust
deed of 1962, which is part of the statement, of the case, show.ing the
assets
ofl the trust of 1953 as well as of the re-declared trust of 1962,
that the trustee
was carrying on a fairly Iucratjve business, the profits
of which had been utilised for building up its assets, could possibly
be·
ignored, we find, from the statement of the accounts submitted by the
appellant trustee himself to the Income-tax Department for the assess
ment year 1962-63,
with which we are concerned, that the trust had"
made quite cons.iderable profits from various activities carried on as a
part of its ordinary and regular
.. business. Here, a gross income of Rs.
22,55,077.46
nP is shown. This Included Rs. 12,31,954.54 from sales
of newspapers and magazines through agents, Rs. 7,29,249.27 from
adtertisements and notices alone, Rs. 1,27,422.53 as payments of "job·
printing bills". The sales of its newspapers and journals through retail
ers brought
in Rs.
66,010.68 np. The subscribers of newspapers, and
journals contributed Rs. 51,8Q3.74. "Profits" from sales of other pubJ.i
cations are shown as Rs. 5040.05 np. Income from "sundry receipts" is
given as Rs. 2964.57 np. "Profits from the,,ale of a van and machinery
.are shown
as Rs. 4829.83.
Some other income is shown as Rs.
2337.95. Interest on investments
is shown as Rs. 1762.71. A glance
at items of expenditure
shows that nothing was spent for which a deduc
tion could not
be claimed by any private concern carrying on a
profit
able business. These .items of expense consisted of money spent on
repairs of buildings, payments of taxes, purchases of newsprint and·
other kinds oE paper, ink, photographic materials, blocks, binding, stit
ching and packing materials, payments of salaries, wages and allowances
to the
staff. After deducting the total expenditure of Rs. 4,92,246.81 from the gross income, the net income for the year is shown as
Rs. 30,376.80 np. for which exemption from Income-tax is claimed by
the appellant on the ground that it
is protected from taxation by
Sea
tion 11 read with Section 2(15) of the Act.
The trust deed of 1 ?62, which, as already stated, is a part of the
statement o~ the case, gives the past history of the trust in the course
?fa fairly long .P'.t;amble. It contains the following pass;ge g;iving some
idea of the actml!es, of the trust, the composition of its present assets
as well as of utilisation of its income since 1935:
"AND WHEREAS in furtherance of the objects contain
ed in the sajd deed of Trust. dated 15th July, 1935, I took
474
SUPREME COURT REPORTS [1976) 1 S.C.R.
over on 17-7-1935 a concern called the Karnatak Prakashana
Manda!, Belgaum, and conducted a printing Press fior some
time at Belgaum, and, thereafter, at Hubli, and printed aml
published a daily paper "Samyukta Karnatak", and a weekly
paper called "Weekly Samyukta Karnatak", which was later
called "Karmaveer", and also published certain books, pam
phlets, and other literature, as a result whereof the property
of the trust increased from time to time, and the said property
is today comprised of printjng presses, buildings, land and
other property which is set out in the schedule hereunder
written".
The trust deed also contains a reference to what necessitated a re
·~eclaration of the trust. An amended meaning of "charitable purpose",
-given in Section 2 ( 15) of the Act of 1961, must have given rise to some
·doubts in the minds of the maker of the trust about the taxability of the
income of the trust which was exempted from payment of income-tax
Jn the pasL He said :
"And" whereas doubts have arisen regarding the legal vali
dity of the Trust declared in the aforesaid Deed of Trust dated
15th July 1935.
AND whereas it became necessary to· take steps to remove
the said doubts and to prevent similar doubts arising
.in future,
I, Ranganath Ramachandra Diwakar, who has been the
only
Trustee of the National Literature Publication Trust declared
.as aforesaid, have obtained legal opinion in the matter of the
said Trust and I am desirous, with a view to carry.ing out pub
lic purposes ofi a charitable nature, of re-declaring the Trusts.
in accordance with the legal opinion clbtained by me as afore
said, on which
I hold and shall continue to hoid the original
Trust amount of Rs.
4,308.10.9, and all contributions,
additions. accumulations, and acquisitions to the same which
are now comprised in the Schedule hereunder written and all
the properties, funds, assets, and any conversions or reconver
sions thereof and the investment
in which the same mav from
time to time be
held". ·
The objects of the trust arc set out as follows :
"2. The object of the Trust shall be to educate the
people of India in general and of Karnatak
in particular
by, .
(a) establishing, conducting
and helping directly or in
directly institutions calculated to educate the people by spread
·of knowledge on all matters of general interest and welfare:
(b) founding and running reading rooms and libraries
and keeping and conducting printing houses and publishing
or aiding the publication of books, booklets,
leaflets, pam~
phlets, magazines ets. in Kannada and other languaoes. all
these activities being started, conducted, and carried ~n with
the object of ooucating the people;
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LOKA SHIKSHANA TRUST V. C.l.T.. (Beg, J.) 475
(c) supplying the Kannada speaking people w.itb an organ
or organs of educated public opinion and conducting journals
in Kannada and other languages for the dissemination of
use
. ful news and information and for the ventilation of public
opinion
on matters of general public util,ity; and
( d) helping
di;ectly or indirectly societies and institutions
which have all or any of the aforesaid objects in view".
In addition to the power which _the sole trustee bad to collect dona·
tions and subscript.ions for the trust, he had all the powers which the
sole manager of a
busine-ss may have in order to carry it on profitably.
He had the power
of transferring trust properties and funds if he thought
"it expedient in the interest of the objects of the Trust, to transfer the
assests and !iahilities of this Trust
to any other Charitable
Trust or
institution conducted
by such Trust, which, in the opinion
pf the origi
nal Trustee or the Board of Trustees, has objects similar to the objects
of this Trust and
is capable of carrying out the objects and purposes
of this Trust either fully or
part.ially". (Paragraph 17 of the Trust
deed). Although, the "original trustee" w"' not "to take any remune
ration" for discharging his duties as a trustee, yet, he was not precluded
"from being paid out of the Trust fund such remuneration as may be
deemed proper for carrying out any work and duty in connection with
the conduct
or management of inst,itutions of the Trust, or with the
business
of printing, publishing or other activities carried on by the
Trust". He was to be paid expenses incurred in travelling or otherwise
in connection with
his duties as a trustee (paragraph 16 of the Trust
deed).
The
"original trustee" could invest trust monies and profits "in
any investment authorised by law for the investment of Trust fur.ds or
in shares, or securities
or debentures of Limited
Companies· in India
or outside" (para 4 of the Trust deed). He had the "power to mortgage,
sell, transfer and give on lease or
to otherwise deal with the Trust
property or any portion
thereQf for the purpose of
the· Trust and to
borrow monies or raise Joans for the purpose of the Trust whenever
he may deem it necessary
to do
so" (para 8 of the Trust deed). FUP
thermore, the Trustee had the "power and authority to spend and utilise
the money and the property of the Trust for any of the purposes of this
Trust
in such manner as to him may appear
proper".
It appears to us that, with this profit making background of the
trust, its loosely stated objects, the wide powers of the sole trustee, and
the appar.ently profitable mode of conducting business, just like any
commercial concern, disclosed not only by the terms of the trust but ·
by the statement of total expenditure and income by the trustee, it is
very difficult to see what educational or other charitable purpose the
trust l;Y~S serving unless the di~se~ination of information a'nd expression
of opm10ns through the publications of the trust was in itself treated
as the really educat.ional and charitable purpose.
The principal arguments advanced on behalf
of the
appellant-trustee
·:are: firstly, paragraph 2(c) of the Trust deeil only enables the trustee
476 SUPREME COURT REPORTS [1976] 1 S.C.R.
to supply the Kannada speaking people with organs or means for ex
pressing educated public opinion
as a mode of serving the real and
expressly mentioned purpose of
"education" wh.ich must control and
determine the
t.rue nature of the activities of the trust so that
prnfit
making, as an incidental consequence of these activities, was quite im
material; .and, secondly, even if the activitJe$ of the trust did not fall
within the separate category ofi "education" as such, in which case profit
yielding became quite irrelevant, but fell under the more general or
the 4th and last category o~ purposes of general public utility specified in
Sect.ion 2(15) of the Act, the mere fact that the conduct of the printing
h&.siness was profitable sometimes or even constantly was not enough
to make it an activity carried on "for profit". The first contention rests
on the assumption that an express mention of a dominant though general
purpose of "education" will enable the Courts to supervise the execu
tion of such a trust as one intended solely for educational purposes. The
six:ond submission, accepted by the Income-tax Tribunal but rejected
by the High Court, implies that the profit-making motive must
be
specifically and express'ly made the object of an activity which is
of
obvious utility to the public before exemption from taxation can be
denied to such an activity. In other words, the added qualification or
condition imposed upon a work of "general public utility", before it
could pass the test of a charitable purpose, made no difference to the
law. According to learned Counsel for the appellant, the amendment
was meant to make explicit what
was previously only implicit in
the law
as it stood. The argument thus is that the amendment only clar.ified
without actually changing the law on the subject.
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The last paragraph of clause (3) of Section 4 of the Indian Income-
tax Act of 1922 (hereinafiter referred
to as 'the Act of 1922') laid E
clown:
" 'charitable purpose' includes relief of the poor, educa
tion, medical relief and the advancement of any other object
of general public utility, but nothing contained Jn clause (i) or
clause
(ii) shall operate to exempt
fr_om the provisions of this
Act that part of the income from property held under a trust F
or other legal obligation Jlor private religious purposes which
does not enure for the benefit of the public''.
It will be notJccd that the provision set 'Out above did not really
define a "charitable purpose" but purports only to indicate a concept
of charity which would include the four categories of objects mentioned
there. The four-fold classification of charitable purposes has a history
in English law. A statute of Elizabeth I which "was not directed so
much to the definition of charity as to the correction ofi abuses which
had grown up
in the administration of trusts of a charitable
nature"
(See : Tudor on "Charities" six End. p. 2) had a preamble containing
an illustrative list of charitable objects which was never treated as ex
ha!11Stive. It, however, became the practice of Courts "to refer to the
preamble as a sort of index or chart in order to determine whether or
not a given purpose
was
charitable". Thus, a nurpose was considered,
in the eye of law, to be charitable only
if it came within the letter or
the spirit and intendment of the preamble of the statute of
E\J,zabeth.
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LOKA SHIKSHANA TRUST v. C.l.T .. (Beg, J.) 477
To give a semblance of order to the rather confusing mass of case
law which had accumulated on the subject, attempts were made to
classify purposes which had obta.ined recognition by Courts as charitable.
Lord Macooghten, in Income Tax Commissioners v. Pemsel(') adoptOO
aJour-fold classification of charitable purposes which had been first put
forward in the course of an argument by Sir Samuel Romilly in Morice
v. Bishop of Durham(
2
). These were: {l) Relief of poverty, (2)
advancement of education; (3) advancement of religion; ( 4) other
purposes beneficial
to the community not falling under any of the pre
ceding heads.
The last
or the residuary category seemed very wide and general.
Properly speaking, such a wide category would be .interpreted,
if it
were found in a statute, ejusdem generis with the previous three cate·
gories, which were less wide and more ·specific. The framers of our·
Act of 1922 must have been attracted by this classification which they
adopted with some modilicaitions, "Medical relief" was apparently sub
stituted for "advancement of religion". In All India Spinners' Associa
tion
v. Commissioner of Income-tax, Bombay('), Lord Wright, while
considering the meaning of
Sec. 4( 3) of the 1922 Act, observed (at
p. 486) :
"The Acr of 43 Elizabeth (160 I) contained in a preamble
a list of charitable objects which fell within the Act, and
this was taken
as a sort of chart or scheme which the
Courts adopted as a groundwork for developing the law, in
doing so they made liberal use of analogies so that the
modern English law can only be ascertained by considering
a mass of particular decisions often difficult to reconcile.
It
iB true that Section 4 ( 3) of the Act has largely been influ
enced by Lord Macnaghten's definition of charity in Pemsel
v. Commissioners for Special purposes of Income·tax (1891)
A.C.
531 at p. 583, but that definition has no statutory
authority
. and is not precisely followed in the most material
particular; the words of the section are 'for the advance
ment of any other object of general public utility',. whereas
Lord Macnaghten's words were 'other purposes beneficial to
the community'. The difference in language, particularly
the inclusion in the Indian Act
of the word 'public' is
of
importance.''
The trend of judicial pronouncements was to construe the words
"general public utility", in Section 4(3) of the Act of 1922, very
widely. The only serious limitation put on the character of a "general
public utility" seems to have been that it clearly excluded the object
of private profit making. Thus, in the All India Spinners' Association
case (supra), the Privy Conncil, while holding that the "primary ob
ject" of the Association appeared to be "the relief of the poor", said
(n~ 488): ·
, (1) [18911 A. C. 531, 583. (2) (1805) 10 Yes. 522.
(3) (1944)121.T.R.p.482 at 486.
17-L839SupCT/75
478 SUPREME COURT REPORTS [1976] 1 S.C.ll.
"That would be enough prima facie to satisfy the sta
tute. But there
is good ground for holding that the pur
poses
ol' the Association included the advancement
of other purp0ses of general public utility. These
last are very wide words. Their exact scope may require
on other occasion very careful consideration. They were
applied in the
Tribune Press case (1939) 66 I.A. 241; 7
I.T.R. ( 415) without any very precise
definition to the pro
duction of the newspaper in question under the conditions
fixed by the testator's will. The Board stated (at p. 256)
that
'the object
of the paper might be described as the
ob
ject of supplying the province with an organ of edu-
cated public opinion'. "
and that it should prima facie be held to be an object of
gelileral-public utility. These words, their Lordship think,
would exclude the object of private gain, such
as an
under
takiRg for commercial profit though all the same it would
subserve general public utility. But private profit was eli
minated in th~s case".
In Commissioner of Income-Tax, Madras v. Andhra Chamber of
<;ommerce('), this Court interpreting 'Section 4(3) of the -1922, Act,
!1eld (at p. 732) :
"The expression 'object of general public utility' in sec-
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the welfare of the general public". ·
Decision of some cases seems to have revolved round the question
whether the body of beneficiaries
was large enough to constitute the
purpose one of
"public utility".
Some of the decisions on income for which exemption was claimed
on the ground th.at it was meant for a charitable purpose falling with
in the wide residuary class perhaps travelled even beyond the "burst-
ing point" to which, according to Lord Rirn;sell of Killowen, Englislo.
Courts had stretched . the concept of charity [See : In re Grove
Grady(') ]. At any rate, the reason which induced our Government
to make an amendment by Section 2(15) of the Act of 1961 was thus
stated by the Finance Minister, Shri Morarji Desai, in the course of
his speech in Parliament explaining the proposed amendment (see :
Lok Sabha Debate date_d 18-8-1961) (') :
"The other objective of the Sekel Committee, limiting
the exemption only to trusts and institutions whose object
is a
genuine charitable purpose has been achieved by amending
the definition in clause 2 ( 15). The definition of 'charitable'
purpose in that clause
is at present so widely worded that
---~.--
(!) [1965] 551. T. R. p, 722 at 732. (2) [1929] 1 Ch. 557, 582.
(J) Lok Sabha Debates, TTnd Ser. Vol. LVI dt. 18-8-61. p. 2819 at p, 3674.
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LOKA SHIKSHANA TRUST V. C.LT .. (Beg, J.) 479
it c,an be taken advantage of even by commercial concerns
which,
while ostensibly serving a public purpose, get fully
paid for the benefits provided
by them, namely, the news-
paper industry which while running its concern on commer-
cial lines can claim that
by circulating newspapers it was
improving the general knowledge of the public. In order
to prevent the misuse
of this definition in such cases, the
Select Committee felt that the words 'not involving the
carrying oii. of any activity for profit' should be added to
the definition". ( p. 307 4).
) .
'J'
Mr. Palkh\vala objected strongly to any reference to the speech of
the Finance Minister, who proposed the amendment, for the purpose
of finding cut the object of the amendment He contended that speech
es made by Members of Parliament in the course of debates on pro-
.
visions enacted were not to be looked at for interpreting the language
of the enactment to which
we should confine ourselves. He relied on
the
well known dictum of Rowlatt
J., in Cape Brandy Syndicate v.
l.R.C.('), when that learned Judge said :
"In a taxing Act one has to look at what is clearly said
...... One can only look fairly at the language used".
It was contended that, as the meaning of words used in Section
2(15) was very clear we need go no further. I am not able to accept
this over-simplification of the problem before us. To say that the
concept of a charitable purpose, either before or after the amendinent
we are considering, was at all clear or free from considerable ambi·
guity and difficulty would be to ignore the plethora of not always
consistent case law which one can
find on the subject and to minimize
the difficulties of Courts.
"Charitable purpose" has never been at all
clearly defined or ex,haustively illustrated. We have, therefore, to
discover the mischief aimed at by the amendment
It is true that it is dangerous and may be misleading to gather the
meaning of the words used
in an enactment merely from what was
said
by any speaker in the course of a debate in Parliament on the
subjeet Such a speech cannot be used to defeat or detract from a
meaning which clearly emerges from a consideration of the enacting
words actually used. But, in the case before us, the real meaning and
purpose of the words used cannot be understood at
all satisfactorily
without referring
to the past history of legislation
mt the subject and
the speech of the mover of the amendment who was, undoubtedly,
in the best position to
ex.plain what defect in the law the amend
ment had sought to remove.
It was not
just the speech of any
member
in Parliament It was the considered statement of the
Finance Minister
who was proposing the amendment for a
particula.:
reason which he clearly indicated. If the reason given by him only
elucidates what is also deducible from the words used in the amend
ed provision, we do not see why we should refuse to take it into
(I) [1921] 1 K. B. 64,71.
480 SUPREME COURT REPORT (1976] 1 S.C.R.
consideration as an aid to a correct interpretation.
with and clarifies the real intent of the words nsed.
such circumstances, ignore
it?
It harmonises
Must
we, in
We find that Section 57, sub-s. (4J of the Evidence Act not
(!nly enables but enjoins Courts to take judicial notice of the course
qf proceedings in Parliament assuming, of course, that it is relevant.
It is tune that the correctness of what is stated on a question of
fact, in the course of Parliamentary proceedings, can only be proved
by somebody
who had direct knowledge of the fact stated. There
is, however, a distinction between the
(act that a particular statement
giving the purpose of an enactment
was made in Parliament, of which
judicial notice can be taken
as part of the proceedings, and the truth
of a disputable matter of fact stated in the course of
proceedings, whieh
has to be proved aliunde, that is to say, apart from the fact that a
statement about it
was made in the course of proceedings in
Parlia
ment (See; Rt. Hon"b/e Jerald Lord Strickland v. Carme!d Mifud
Bonnici(
1
), The Englishman Ltd. v. Lajpat Rai(
2
).
In the case before us, a reference was made merely to the fact
that a certain reason
was given by the Finance Miniser, who
pro
posed an amendment, for making the amendment. What we can take
judicial notice of is the fact that such a statement of the reason
was
given in the course of such a speech. The question whether the
ob
ject stated was properly expressed by the language of Section 2(15)
of the Act is a matter which we have to decide for ourselves as a
question of law. Interpretation of a statutory provision
is
always a
question of law on which the reasons stated by the mover of the
amendment can only be used
as an aid iu interpretatfon if we think,
as I do in the instant case, that it helps us considerably in
under
standing the meaning of the amended law. We find no bar against
snch a use of the speech.
In
An.andji Haridas & Co. Pvt. Ltd. v. Engineering Mazdoor
Sangh
& Anr.('), a Division Bench of this Court observed (at p.949)
"As a general principle of interpretation, where the words
of a statute are plain, precise, and unambiguous, the inten
tion of the Legislature is to be gathered from the language
of the statute itself and no external evidence such as Parlia
mentary Debates, Reports of the Committees of the Legisla
ture
or even the statement made by the Minister on the in
troduction of a measure or by the framers of the Act
is
ad
missible to construe those words. It is only where a statute
is not exhaustive or where its language is ambiguous, un
certain, clouded or susceptible or more than one meaning or
shades of meaning, that external evidence
as
to the evils,
if any, which the statute was intende~ to remedy, or of the
circumstances which led to the passmg of the statute may
(!) AIR 1935
P. C. 34. (2) I. L. R. 37 Cal. 760.
(3) A. I. R. 1975 S. C. 946 at 949.
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LOKA S!!IKSHANA TRUST v. C.l.T .. (Beg, !.) 481
be looked into for the purpose of ascertaining the object
which the Legislature had in view in using the words in ques
tion".
The Finance Minister's speech tells us that the Government was
accepting the recommendations of the Select Committee to which the
Bill which became the Act of 1961 had been referred. One of the re
commendations was :
"The Committee is of the opinion that the advancement
of an object of general public utility which involves the car
rying on of ,any activity for profit should not come within
the ambit of a charitable purpose".
[See Gazette of India Extraordinary Part II, Section 2, p.677 ( 4) ] .
In Commissioner of Income-tax, Gujarat v. Vadila/ La/lubhai(
1
),
this Court, following its earlier decision in Commissioner of Income
tax
v. Sadora Devi(
2
)
did not consider it at all inappropriate to refer
to a
Select Committee's Report for finding out the reason behind an
ambiguous provision so as to be able to apply the Mischief Rule.
It is too late in the day for Mr.
Palkhivala to object to the adop
tion of such a course
in an attempt to apply the Mischief Rule to
fiud out the reason behind an .amendment of the law.
The case on which Mr.
Palkhivala, the learned Counsel for
the appellant,
relies most
strongly for support to his client's case
on merits is : In Re the 'Tribune'('), where the Privy Council,
allowing an appeal from a Full Bench decision of the Lahore High
Court,
held that the income a Trust, the object of which was des
cribed
as
"supplying the province with an organ of an educated public
opinion", was entitled to exemption on the ground that it was a
trust for a purpose of "General public utility" and not just for pro
pagating any political views. It was also held there that such a
trust
would not fall within the category
of Trusts for education in
the sense in which that term appears in Section 4 of the Act of
1922. The PriVy Council, after observing that the Chief Justice
and Addison, J
., of the Lahore High Court, had laid some stress
on the
fact
"that the Tribune newspaper charges its readers and
advertisers at ordinary commercial rates
for the advantages
wltich
it affords", said (at p. 422) :
"As against this the evidence or finding do not dis
close that any profit was made by the newspaper or press
before
1918 and it is at least certain that neither was
founded
for private profit whether to the testator or any
other person.
By the
terms of the trust it is not to be
carried on
for profit to any individual. . It cannot, in their
(1) (1972) 86 I. T. R. p. 2.
(2) (1957)
32 I.T.R 615 at 627-[1958] 1 S. C. R.1.
(3) (1939) 7 I. T. R. 415.
482 SUPREME COURT REPORTS (1976] 1 S.C.R.
Lordships' opinion, be regarded as an element necessarily
pt'esent in any purpose of general public utility, that
it
should provide something for nothing or for less than it
costs or for less than the ordinary price. An elemosynary eleme1~t is not essential even in the strict English view of
charitable uses
(Commissioners v.
University College of
North Wales (1909) 5 Tax Cas. 408, 414)".
It seems clear to us that the amended provisions, Section 2 ( 15)
in the Act of 1961, was directed at a change of law
as it was de
clared by the Privy Council in the
Tribune case (supra). The amended
provision reads as follows :
"S. 2 ( 15) 'charitable purpose' includes relief of the
poor, education, medical relief, and the advancement of
any other object
of general public utility not involving the
carrying on of any activity for
profit;"
A
c
It is apparent that, even now, charitable purpose has not been
defined. The four-fold classification, which was there in the Act of D
1922,
is there even in the amended provision, but the last or general
category of objects of
"general public utility" is now qualified
by the need to show that it did not involve profit making, The
question before us, therefore
is : What is the meaning or
purpase
of introducing the limitation" not involving the carrying on of any
activity for profit" ? The contention of Mr. Palkhivala is that it
merely indicates that,
as was held in the Tribune case (supra) and E
other cases, the purpose must not be private profit making, or, in
other words, the benefit must
be to an object of
"general public
utility". This involves ·reading of the word "private" before "profit"
which is quite unjustifiable. Furthermore, if that was the sole pur-
pose of the amendment,
we think that the amendment was not
necessary at all.
It had been declared repeatedly by the Courts
even before the amendment that activities motivated
by private pro-F
fit making fell outside the concept
of charity altogether.
We think
that it
is more reasonable to infer. that the words used clearly im
posed a new qualification on public utilities entitled to exemption.
It was obvious that, unless such a limitation was introduced, the
fourth and last category would become too wide to prevent its abuse.
Wide words so used could have been limited in scope by judicial
·
interpretations ei,usdem generis so as to confine the last category G
to objects .similar to those in the previous categories and also subject
to a dominant concept of charity which must govern all the four
categories. But, the declaration of law by the Privy Council, in
the
Tribune case (supra), had barred this method of limiting an
obviously wide category of profitable activities of general public
utility found entitled
to exemption. Hence, the only other way of
cutting down the wide sweep of objects of
"general public utility" H
entitled
to exemption was by legislation. This, therefore, was the
method Parliament adopted
as is clear from the speech of the Finance
Minister who introduced the amendment in Parliament.
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LOKA SHiilSHANA TRUST V. <;.I.T., (Beg, !.) 483
The word "involve" does not, it seems to me, necessitate the bring
ing out of the, profit motiv~ of an activity expressly in the deed of trust
as
was suggested by the learned Counsel for the appellant. The dictionary meaning of the word 'involve' is : "to entangle; to include; to
contain; to imply" (see; The Shorter Oxford English bictionary-111
Edn. p. 1042). All profit making, even as a mere by-product, would
have been covered by the word "involving", which is of wide import,
if this word had stood alone ar
1'c! by itself without further qualifications
by the context. The use of the-words "for profit", however, shows
that the involvement of profit making should
be of such a degree or to
such an extent as to enable us to infer it to be the real object. As a
rule,
if the terms of the trust permit its operation
"for profit", they be~
come prima facie evidence of a purpose falling outside charity. They
would indicate the object of profit-making unless and until it is shown
th at terms of the trust compel the trustee to utilise the profits of busi
ness also for charity.
This means that the test introduced by the
amendment is : Does the purpose of a trust restrict
spenlding the in
come
of a profitable activity exclusively
6r primarily upon what is ,
"charity" in law ? If the profits must necessarily feed a charitable
purpose, nnder the terms of the trust, the mere fact that the activities
of the trust yield-profit
will
not alter the charitable character of the
trust. The test now
is, more clearly than in the past, the genuineness
of the purpose tested by tlie obligation created to spend the money ex
clusively or essentially on
"charity". If that obligation is there, the
income becomes e~itled to exemption. That, in our opinion, is the
most reliable test.
The difficult question, however, still remains : what is the mean
ing
of
"charitable purpose" which is only indicated but not defined by
Section 2(15) of the Act? It seems to me that a common concept
or element of "charity" is shared by each of the four different cate
gories of charity.
It is true that charity
\loes not necessarily exclude
carrying on an activity w~ich yields profit, provided that profit has to
be used up for what
is recognised as charity. The very concept of
charity denotes altruistic thought and action.
. Its object must neces
sarily be to benefit others rather than one's self. Its essence is self
lessness. In a truly charitable activity any possible benefit to the
person who does the charitable act is merely incidental or even acci
dental and immaterial. The action which flows from charitable
thinking is not directed towar'ds benefitting one's self. It is always
directed at benefitting others. It is this direction of thought and effort
and not the result
of what is
dop.e, in terms of financially measurable
gain, which determines that it
is charitable. This direction must be
evident and obligatory upon the trustee from the terms of a deed of
trust before it can
be held to be really charitable.
We think that this governing idea of charity must qualify purpose .
. of every category enumerated in Section 2(15) of the Act of 1961.
We think that the words introduced by the Act of 1961 to qualify the
last and widest category of objects of public utility were really in
tended to bring out what has to be the dominant characteristic of
484 SUPREME COURT REPORTS [1976] .1 -5.C.R.
each and every category of charity. They were intended to bring the
last and most general category
in line with the nature of activjties con
sidered truly charitable and mentioned
in the earlier categories.
Coming
now to the deed of trust before us, we find that the word
"education" is mentiof(ed by the maker of the trust in a rather cere
monial or ritualistic fashion
as a label for what he considers to be
charitable object. The third set of objects, in clause 2 of the deed
does not appear to be stated there merely
as a means of serving the
general purpose of
"education" separable from these objects in clause
(
c).
On the other hand, there are strong grounds for believing, in
the light of other provisions and profit making activities and background
0f the trust, that the object of education was mentioned in the deed
only
as a convenient cloak to conceal and serve the real and dominant
purpose of clause 2 (
c) which was to run a profitable newspaper and
publishing business without paying the tax on it. Just
as mere mak
ing of profit
as a consequence or incident of altruistic activity is not
decisive
of the real purpose or object of the activity, so also the
carrying on of a business for profit does not cease to be so merely
because losses are actually incurred
in certain years or because those
who carry it
on call it
"education". It would be difficult to find any
commercial activity which makes profits always or which expressly
gives out that its existence depends upon profit making although, in
practice, and, ultimately, its continuance may depend on profit
making. A
newly started business may, initially, have to run at. a
loss; but, at a later stage, it may earn magnificient profits. Therefore,
test of the real character or purpose of
an activity cannot be whether
its continuance
is made to depend upon profits resulting from it or
not. Such a test would be artificial and specious. I do not think
that the qualification introduced by Section
2(15) of the Act of 1961
was intended to compel Courts to look for the conditions
Ol'l which
continuance of activities of public utility
is made to depend. If
profit making results from them and these profits can be utilised for
non-charitable purposes the trust which makes this possible would not
be exempt from paying income-tax.
In the trust deed before us,
as we have already indicated, the
trnstee had not only wide powers of utilisation of trust funds for pur
poses of the trust but could divert its assets
as well as any of the funds
of the Trust
to other institutions whose objects are "similar to the
objects" of the trust and of "carrying out the objects and purposes
of this trust either fully or partially". The whole !deed appears to me
to be cleverly drafted so
as to make the purpose of clause 2 ( c) re
semble the one which
was held to be protected from income-tax in the
Tribune case
(supra) . Indeed the very language used by the Privy
Council in the Tribune case (supra), for describing the objects of the
Trust in that case, seems to have been kept in view by the draftsman
of the trust deed before
ns. And, we find that the power
"f diverting
the assets and income of the Trust, although conched
in language which
seems designed to counsel their
real effect, is decisive on the question
whether the trust is either wholly or predominantly for a charitable
purpose or not. The trustees
is given the power of deciding what
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LOKA SHIKSHANA TRUST v. C.!.T •• (Beg, J.) 48 5
purpose is allowed to or like an object covered .by the trust and how
it is to
be served by a diversion of trust
properties and funds. ~ the
trustee
is given the power to determine the
prol?°rtion of such dwe:
sion, as he is given here, the. trust could_ not be said to be wholly chari
table. He could divert as much as to make the chant.able part or
aspect, if any, purely illusory. Indeed, this
was the law even
befo~e
the qualifying words introduced by the 1961. Act. [See : East India
Industries (Madras) Pvt. Ltd. v. Commzsswner of Income-tax,
Madras('•), Commissioner of Income-tax, Madras v. Andhra Chamber
of Commerce(2),
Md. Ibrahim Riza v. Commissioner of
Income-((41c,
Nagpur(')]. Such a "trust" would be of doubtful validity, but I refrain
from further comment or any pronouncement upon the validity of such
a trust as
that was neither a question referred to the High Court in
this case nor argued anywhere.
The
mnendment of the 1961 Act col)Sidered by us compels closer
scrutiny of deeds of ostensibly charitable trusts with a view to dis
covering their real purposes by analysing the effects of their terms and
what they
permit. It narrows the scope of exemption from
income
tax granted at least under the last and widest category of charitable
trusts mentioned in Section
2(15) of the Act as was held in
Com
missioner of Income-tax, West Bengal ll v. Indian Chamber of Com
merce(•).
We are in agreement with the view expressed in the Tribune case
(supra) to the extent that
we think that a trust such as the one
con
sidered there does not, just like the trust before us, fall within th.e
category of education, as snch, mentioned in the statutory elucitlation
of charity, which was repeated in the 1961 Act, with an added qualifi
cation of the last and widest category. Although the term "educa
tion", as used in Section 2(15) of the Act, seems wider and more
comprehensive
than education through educational institutions, such
as
Universities, whose income is given an exemption from income-tax
separately under Section 10(22), provided the educational institution
concerned does not exist "for purposes of profit", yet, it seems to me
that the educational effects of a newspaper or p
1ublishing business are
onlr indirect, problematical, and quite incidental so that, without im
posmg any condition or qualification upon the nature of information
to
be
diss~minatetl or material to be published, the mere publication of
news or views cannot be said to serve a pnrely or even a predominantly
educal!onal purpose in its ordinary and usual sense. ·
Th~ PDrJX>ses with which we are concerned no doubt parade under ·
the guise or caption. of "education". They are found stated in clause
2(c) of th~ tlee?-. ~his clause speaks of a supply of "organs of edu
cated pubhc op1ruon to Kanada speaking people and of a presumed
need f~ "u~~fu!:' info~ation and "ventilation" of views on "matters
of publ~c .t;1tihty . ,~t IS left to the Ti:ustee to decide which class of
people 1s educate~ so as to !J:e penrutted to voice its views through
these organs
.. He
IS also to decide what is "useful" anl:I what is harm
ful and what is a matter of "general public utility". If, as it seems to
(1) (1967) 65 I. T. R. 611 (3) (1930) L. R. 57 I. A. 260
(2) (1965) 55. I. T. R. 722 (4) (1971) SJ I. T. R. 147. .
486 SUPREME COURT REPORTS . [1976] 1 S.C.R.
us to be Ille position here, the Trustee is the sole judge of how these
presumed ~s are to be satisfied, he could certainly cater for them
in a manner which could be considered debased or offensive by people
of good tll\Ste with a proper sense of values. I do not mean t@ cast
the slightest reflection on the manner in which the appellant trustee
conducts bis business or on the quality or value of materials found in
his newspapers or other publications. We have no evidence and no
finding on these aspects of the case Defore us. All I would like to
point out here is that the trust deed leaves it entirely to the sweet
will of the sole trustee to decide all questions relating to policy or the
way in which the needs mentioned in clause 2(c) are to be met. Pro
vision for their satisfaction could be made in a manner which could be
very lucrative. This is the most relevant consideration in ascertain
ing the purpose of the trust from the point of view of profit making.
Judging from the facts set out in the trust deed itself, the sole
trustee had managed to make the satisfaction of the needs mentioned
above a
highly profitable business. The deed puts no condition upon
the conduct of the newspaper
at!d publishing business from which we
could infer that it was to be on "no profit and no loss" basis. I men-
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that this was the really basic purpose and principle for the coaduct of
the business of the trust before us. This assertion seems to be based
on nothing more substantial than that the trust
deed itself does not
expressly make profit
making the object of the trust. But, as I have
already
intlicated, the absence of snch a condition from the trust deed
could not determine its true character. That character is determined
for more certainly and convincingly by the absence of terms which E
could eliminate or prevent
profit making from becoming the real or
dominant purpose
of the trust. It is what the provisions of
the trust
make possible or permit coupled with what had been actually done as f
without any illegality in the way of profit making, in the case before
us, under
the cover of the provisions of the
dee\!, which enable us to
decipher the meaning
and determine the predominantly profit-making
character
of the trust. F
For the reasons
given above, I think that judgment of the Mysore
High Court must be and is affirmed, but, in the circumstances of the
case,
the parties will bear their own costs.
V.M.K. Appeals dismissed.
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In the landmark case of Sole Trustee Loka Shikshana Trust v. Commissioner of Income Tax, Mysore, the Supreme Court of India delivered a pivotal judgment that continues to shape the landscape of tax law for charitable institutions. This seminal ruling, a cornerstone in understanding Charitable Purpose under Income Tax Act and now authoritatively documented on CaseOn, provides a definitive Section 2(15) Interpretation. It meticulously examines the fine line between a non-profit objective and a commercial enterprise operating under the guise of charity, setting a crucial precedent for trusts engaged in profitable activities.
The Loka Shikshana Trust, the appellant, was primarily involved in the business of printing and publishing a daily newspaper and other journals in Karnataka. The trust deed declared its main object as the “education of the people of India.” Over the years, the trust’s activities proved to be highly lucrative, with its assets growing substantially from profits. Consequently, the trust claimed tax exemption under Section 11 of the Income Tax Act, 1961, arguing its income was derived from property held for a charitable purpose. The Income-tax Officer, however, rejected this claim, asserting that the trust was carrying on an “activity for profit,” thus disqualifying it from the exemption. After being unsuccessful in lower forums, the trust appealed to the Supreme Court.
The central question before the Supreme Court was: Can a trust engaged in a profitable business, such as publishing a newspaper, be considered to have a “charitable purpose” under Section 2(15) of the Income Tax Act, 1961, and therefore be entitled to tax exemption?
The case hinged on the interpretation of Section 2(15) of the Income Tax Act, 1961, which defines “charitable purpose.” The provision states that a charitable purpose includes:
“relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit.”
The critical part of this definition is the qualifying phrase, “not involving the carrying on of any activity for profit,” which was added to the 1961 Act and was absent in the preceding 1922 Act.
The Court, in a detailed analysis, broke down the appellant's arguments and clarified the legislative intent behind the law.
The trust first contended that its purpose was 'education,' which is one of the four specified charitable purposes and, they argued, was not subject to the 'no-profit' condition. The Supreme Court rejected this, holding that 'education' in the context of Section 2(15) refers to systematic instruction, schooling, and formal training. The general dissemination of news and views to the public, while informative, does not fall under this specific head. The Court affirmed that the trust's objective was more accurately described as “the advancement of any other object of general public utility.”
Since the trust's activities fell under the 'general public utility' category, they had to satisfy the condition of “not involving the carrying on of any activity for profit.” The trust argued that “profit” should be interpreted as “private profit” and that since its earnings were reinvested into the trust, the condition was met. The Court disagreed emphatically, stating:
Analyzing the nuanced distinction between the 1922 and 1961 Acts can be complex. For legal professionals on the go, resources like CaseOn.in's 2-minute audio briefs provide a quick and efficient way to grasp the core arguments and judicial reasoning in rulings like this one.
The Supreme Court dismissed the appeal, holding that the Loka Shikshana Trust was not entitled to tax exemption. It concluded that the trust’s purpose was the “advancement of an object of general public utility.” However, because its primary activity involved a systematic and profitable business of printing and publishing without any self-imposed restrictions on earning profit, it was clearly “carrying on an activity for profit.” Therefore, it failed to meet the definition of a “charitable purpose” as laid down in Section 2(15) of the Income Tax Act, 1961.
The judgment in Sole Trustee Loka Shikshana Trust established a vital legal principle: the advancement of a general public utility ceases to be a 'charitable purpose' for tax exemption if it involves a profit-making activity. The Court clarified that the motive is key. If a trust's primary activity is commercial and yields profits, it cannot be considered charitable, even if the profits are used for the trust's objectives. The ruling effectively closed a loophole that allowed commercial entities to operate under the cloak of charity and avoid taxation.
Disclaimer: The information provided in this article is for informational purposes only and does not constitute legal advice. For advice on any specific legal matter, please consult with a qualified legal professional.
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