COMMISSIONER OF INCOME TAX Vs. DHARMADEEPTI

JUDGEMENT

(1.) This Reference is at the instance of the department and the question referred to us for the year 1969-70 by the Income Tax Appellate Tribunal, Cochin Bench reads as follows:

(2.) The relevant objects of the company are detailed in Clause.3(a), 3(b)(iv), 3(c), 4(iii) and 4(iv) and they read as follows:

(3.) The assessee contended that no business activities as envisaged by Clause.3(c) describing "other objects" in the Memorandum as required by S.13 of the Companies Act, 1956, had been actually carried on by the assessee and no income whatever had been derived from any such business of conducting the chitties has been described in the memorandum only as "incidental objects" and as it is evident from the memorandum that the main objects of the company are those described in Clause.3(a) the income from the conduct of business of chitties which is the property held under trust is property held under trust for a charitable purpose and must therefore be exempt from tax under S.11 of the income tax Act 1961, for short, the Act. This is the very same question that we dealt with in a batch of cases, Income Tax Referred Case Nos. 51 to 56 and 79 of 1972 wherein the facts were practically the same and in which we pronounced judgment just now ( 1974 KLT 585 ). We would however like to add a word more in this case in addition to what we said in our judgment in those cases. In view of the altered definition of the term "charitable purpose", the question whether an object of a company is a main object or is only an incidental object loses much of its significance. We say so because we conceive that even in cases where a business is conducted not in carrying out the objects of the company but only in aid of achieving the objects of the company if that business is so linked or connected with the objects of the company and if the objects are such that it will fall only under "objects of general public utility the charitable purpose will cease to be a charitable purpose as defined in the Act. And if the incidental object or even the purpose of the company is business, as conducting kuries the income or atleast a specified part of it must be exclusively applicable to charitable purpose in order that income or the specified part thereof could be exempted from tax A complete discretion in the directors to apply the funds to charitable and non charitable purpose (which in this case would include business) would make the trust a non charitable trust So in Oxford Group v. Inland Revenue Commissioners reported in 1949 (2) All ER 537 (31 Tax Cas. 221) it was observed that 'although a religious body might, without losing its religious character, engage in a number of subsidiary activities which were not purely religious, a trust which was so worded as to permit the expenditure of income by such a body in such subsidiary activities was not a good charitable trust. It was further held that the objects set forth in Clause.3(c), paragraphs (9), (10), of the memorandum of association were not merely ancillary to the main objects expressed in sub clauses (A) and (B), but themselves conferred powers on the company which were so wide that they could not be regarded as charitable'. The principle has been clearly expressed if we may say so with respect by Lawrence L. J. in Keren Kayemeth Le Lisroel Ltd. v. Inland Revenue Commissioners reporteds in (1932) 17 Tax Cases 27, 40, 41 as follows: --