COMMISSIONER OF INCOME TAX Vs. YENNARKAY RAJARATNAM CHARITIES

JUDGEMENT

(1.) TWO questions have been referred to us. The assessment years are 1978-79 to 1981-82. The questions referred to us are, (1) "whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the assessee's claim for exemption under s. 11 of the IT Act was not hit by s. 13 (1) (bb) of the Act and consequently its income was exempt under s. 11 "" (2) Whether the Tribunal is correct in law in holding that the income derived by the assessee from exploitation of trade-mark was not a business activity for the purpose of s. 13 (1) (bb) of the IT Act, 1961 "

(2.) THE assessee is a charitable trust constituted under a deed of trust dt. 13th March, 1955. THE author of the trust, Yennarkay Rajarathnam, was the owner of the trade-mark "sun Flower" and "kanthi Flower", both of which were registered trade-marks. THE primary object of the trust was to pay 90 per cent of the income to Yennarkay Rajarathnam Welfare Centre, which was registered as a charitable institution under the Societies Registration Act. THE balance of 10 per cent was meant to provide scholarship to students for undergoing university or technical course in India or aboard. THE assessee was assessed as a charitable institution originally. In 1980-81 the ITO found that on as the trust was carrying on business in exploiting the commercial assets, namely, the trade-marks for the purpose of the trust, it would not be eligible for exemption under s. 11 of the Act. It was the view of the ITO that by operation of s. 13 (1) (bb) of the Act, the assessee became ineligible to claim exemption for its income under s. 11. In his view, the exploitation of the trade-mark amounted to carrying on business and that business was not one which was being carried on in the course of actual carrying out of the primary purpose of the trust.

(3.) EVEN otherwise, the business being the one which was held in trust, s. 13 (1) (bb) would not come in the way of the trust claiming exemption under s. 11 of the Act, having regard to the decision of this Court in the case of Thanthi Trust vs. Asstt. CIT.