COMMISSIONER OF INCOME TAX Vs. CHERUPUSHPAM HOSPITAL TRUST

JUDGEMENT

(1.) AT the instance of the Revenue, the Income-tax Appellate Tribunal (in short, "the Tribunal") has referred the following question of law for the decision of this court :

(2.) THE respondent (assessee) is a charitable trust. It was formed as per deed dated January 30, 1970. As the name itself indicates, its object was for affording medical relief to the poor by establishing hospitals, nursing schools, etc. THE Income-tax Officer, construing the trust deed, held that since the trustees were carrying on a business in textiles, for the purpose of financing the construction of a hospital at Palai in a land taken on lease, it is pursuing an activity of general public utility and so the assessee did not qualify for exemption under Section 11 of the Income-tax Act. In appeal, the Commissioner of Income-tax (Appeals) held that Clauses 2 and 3 of the trust deed should be construed together and not in isolation and in that perspective, the trust is entitled to relief under Section 11 of the Act. In the appeal filed before the Income-tax Appellate .Tribunal by the Revenue, the Tribunal, after perusing the relevant Clauses in the trust deed and placing reliance on the decision of the Supreme Court in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1, concurred with the decision of the Commissioner of Income-tax (Appeals). It is, thereafter, at the instance of the Revenue, and in pursuance of the directions of this court in 0. P. No. 7355 of 1982, that the Tribunal has referred the question of law, formulated hereinabove, for the decision of this court.

(3.) IT cannot admit of any doubt that the objects specified in Clause 2 of the trust deed, stated above, are only objects relating to medical relief, relief of the poor and education. They are admittedly charitable purposes within the meaning of Section 2(15) of the Act. The tail end portion of Clause 2, when it refers to "such other acts of general public utility", can only refer to acts of public utility, which are akin to or similar to the prior or earlier clauses of Clause 2. The Commissioner of Income-tax (Appeals) as also the Appellate Tribunal have taken the same view. In our opinion, the said view is plainly right. So, the tail end clause "such other acts of general public utility" should be and is confined to such other activities relating to "medical relief, relief of the poor and education", which will admittedly come within the first three clauses of Section 2(15) of the Act. The only other question is whether Clause 3 can be construed as an "object of the trust". We should state that even on a bare perusal of Clause 3, it is evident that Clause 3 only enunciates or specifies the power of the trustees to raise funds by certain methods for finding money for carrying out the objects stated in the trust deed. One of them is by carrying on any business. The income so obtained from business is only to find money for carrying out the objects of the trust. IT is only to facilitate the carrying on of the charitable objects of the trust specified in Clause 2. Clause 3 cannot, by any stretch of reasoning, be construed to be the "object of the trust". IT is only a power given to the trustees to do certain things to find money. The objects of the trust and the powers of the trustees to be exercised in effectuating the objects are distinct and different. The object and the power--power and purpose--are sometimes not distinctively and with clarity, stated. So also the corpus of the trust is still different from the "object" and the "power". But it is for the court to scan the entire deed and understand distinctly the three different and distinct things--the corpus, the object and the power--See CIT v. Shri Shaila Industrial and Spiritual Colony Charities [1973] 87 ITR 175 (Ker). Once it is established that the objects of the trust are "charitable purposes", the fact that the trustees are authorised to carry on business to find funds for the trust in order to effectuate the objects of the trust is of no relevance and the exemption available under Section 11 of the Act cannot be denied--Surat Art Silk Cloth Manufacturers Association's case [1980] 121 ITR 1. The surplus, if any, remaining after meeting the objects of the trust specified in Clause 2 of the trust deed can be added or converted as forming the "corpus of the trust". With the above aspects in mind, if we scan Clauses 2 and 3 of the trust deed, they will unambiguously point out that the objects of the trust, as per Clause 2, are only to afford medical relief, relief of the poor and education ; Clause 3 is only a power vested in the trustees to augment or raise or find funds for meeting the obligations cast on the trust by Clause 2 of the trust deed, by taking any one or other steps contemplated in Clause 3 of the trust deed. On these premises, we have no doubt in our mind that the Tribunal was right in holding that the respondent (assessee) is entitled to exemption under Section 11 of the Income-tax Act. We answer the question referred to us in the affirmative, in favour of the assessee and against the Revenue.