SAKTHI CHARITIES Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) AT the instance of the assessee, the following two questions have been referred by the Income-tax Appellate Tribunal to this court for its opinion :

(2.) THE assessee, Messrs. Sakthi Charities, was established under a trust deed dated June 25, 1968, declared by the founder and donor, Shri N. Mahalingam, by an initial donation of Rs. 5,000. According to the terms of the said trust deed, the trust fund and its properties are to consists of such initial donation and all funds and assets, movable and immovable, thereafter to be donated by the trustees, Messrs. Sakthi Sugars Limited and its directors and shareholders and others for the purpose of the trust. THE following are the objects set out in the trust deed :

(3.) SO for as the first submission is concerned, we have already referred to clause 'k', 'l', and 'o'. Clause 'k'provides for promoting the welfare and well being of the employees of M/s. Sakthi Sugars Ltd., their wives, husbands and children during the tenure of their employment. Clause 'l' provides to help the destitute wives, husbands and children of the deceased employees of M/s. Sakthi Sugars Limited, and clause 'o' provides for sending and financing persons for advanced studies in sugar technology and allied subjects for the better and more efficient carrying on of the industries under the maintenance and management of M/s. Sakthi Sugars Ltd. All the above three clauses are for the promotion and welfare of the relations of the employees or the deceased employees of M/s. Sakthi Sugars Limited and for financing the studies in sugar technology for the efficient carrying on of the business of Messrs. Sakthi Sugars Limited. Clauses 'k' and 'o' do not refers to poverty. Though clause 'l' proceeds on the basis of proceed on the basis of poverty, still it is a clause conferring benefit only on the relations of the deceased employees of M/s. Sakthi Sugars Limited. Having regard to the fact that the benefits under these clauses are not available to the members of the public in general or even a section of the general public, but are available only to persons employed or connected with M/s. Sakthi Sugars Limited, the Tribunal appears to be right in holding that the objects set out in clauses 'k', 'l' and 'o' are not charitable in nature. The decision in J. K. Hosiery Factory v. CIT , supports the said view of ours that where the benefit of a trust goes to a particular group of people connected with the founder of the trust or its trustee and not a definite class of public, then its objects cannot to be taken to be charitable. In that case a company executed a trust under which some directors of the company were appointed as trustees. The trust deed empowered the trustees to construct residential quarters for workmen in general and in particular for the workmen of the company and its allied concerns. A question arose as to whether the objects of the trust were exclusively charitable for the purpose of s. 4(3)(i) of the Indian I.T. Act, 1922. The Allahabad High Court held that the expression "workmen in general" did not fix a definite class of public which was intended to be benefited under the trust deed, that as the trust was expected to earn profit by providing quarters for the workmen, it cannot be taken to be a charitable object, that even if the provision for "workmen in general" were to be taken as a charitable object, as the trustees had complete discretion to spend the entire income from the trust for the benefit of the workmen belonging to the company and its allied concerns, the object of the trust cannot be taken to be charitable, and that, at any rate, it was a mixture of charitable and non-charitable, and that, at any rate, it was a mixture of charitable non-charitable objects, and as such exemption under s. 4(3)(i) of the 1922 Act will not be available.