DIRECTOR OF INCOME TAX EXEMPTION Vs. SHILPAM

JUDGEMENT

(1.) We have heard the learned advocates for the parties. Even though two questions have been referred for our opinion, we think that the second question need not be touched since the first one deals with the points of controversy between the parties. The question as referred is as follows :

(2.) The learned Appellate Assistant Commissioner and the Tribunal have taken the view that Section 11(4A) of the Income-tax Act permits the charitable institution the benefit of exemption even if some profit is earned in the bargain. The learned Income-tax Officer had refused to grant exemption under Section 11 on the ground that the sale of books, etc., by which a profit was earned by the institution could not be considered as charitable purpose.

(3.) The Supreme Court in the case of CIT v. Andhra Pradesh State Road Transport Corporation has clearly observed that the predominant object of the activity, whether it is to carry out a charitable purpose or to earn profit, is of prime consideration in deciding the question of exemption under Section 11 of the Act. According to their Lordships if the predominant object is to carry out a charitable purpose and not to earn profit, the charitable purpose would not lose its character merely because some profit has arisen from the activity. The aforesaid ratio is clearly applicable to the facts of the case and we accordingly hold that the assessee was entitled to the grant of exemption. The question is answered in the affirmative accordingly.