V. C. Daga, J.@mdashThese tax appeals have been filed at the instance of the Revenue.
2. Heard finally by consent of parties at the stage of admission on the following substantial question of law arising from the impugned orders passed
by the Income Tax Appellate Tribunal (""the Tribunal"" for short) :
1. Whether, on the facts, and in the circumstances of the case and in law, the Tribunal was right in holding that no part of the income of the trust is
taxable under the provisions of Sub-section (4A) of section 11 of the Income Tax Act without appreciating the fact, that after the insertion of
Section 11(4A) of the Income Tax Act from the financial year, 1983, that is from April 1, 1984, exemption in respect of profits and gains of
business is available to only those institutions whose business is carried on for charitable purpose by the beneficiaries of trust ?
Facts :
3. The short facts involved in the present appeals are as under :
The respondents herein, the Bombay Bullion Association Dharam No Kanto Trust, Mumbai (""the trust"" for short), claimed to be a charitable trust
earning income from weighing activities. The trust claimed exemption u/s 11A of the Income Tax Act, 1961 (""the Act"" for short). The exemption
claimed by the trust was denied by the Assessing Officers for both the assessment years 1989-90 and 1991-92. The orders of the Assessing
Officers were confirmed by the appellate authority for both the assessment years in question. Appeals were carried to the Tribunal and the Tribunal
was pleased to allow appeals. The Tribunal while allowing the appeals held that the business activities of the trust having being conducted by the
charitable trust for a charitable object, without any object of earning profits and gains out of the charges collected by it from the weighment facility
provided to the public, was entitled to claim exemption u/s 11(4A) of the Act. Accordingly, the Tribunal allowed both appeals and set aside the
orders of both the authorities below. The above orders of the Tribunal are the subject-matter of challenge in the appeals filed u/s 260A of the Act
at the instance of the Revenue.
Issue:
4. The short issue sought to be raised in the present appeals is as under :
Whether the respondent/assessee-trust is entitled to claim exemption u/s 11(4A) of the Act when the business activities of the trust are not carried
on by the beneficiaries of the trust ?
Statutory provision :
5. Before proceeding to consider the above issue in the backdrop of the question of law extracted in the opening part of the judgment, it would be
proper to read the relevant provision of law prevailing at the relevant time in this regard.
(4A) Sub-section (1) or Sub-section (2) or Sub-section (3) or Sub-section (3A) shall not apply in relation to any income, being profits and gains
of business, unless :
(a) the business is carried on by a trust wholly for public religious purposes and the business consists of printing and publication of books or
publication of books or is of a kind notified by the Central Government in this behalf in the Official Gazette ; or
(b) the business is carried on by an institution wholly for charitable purposes and the work in connection with the business is mainly carried on by
the beneficiaries of the institution,
and separate books of account are maintained by the trust or institution in respect of such business.
The arguments :
6. Learned counsel appearing for the appellants relying on the text of Clause (b) of Sub-section (4A) contended that though the business was being
carried on by the charitable institution for charitable purpose, but the same not being carried on by the beneficiaries of the institution, the trust is not
entitled to claim the exemption u/s 11(4A) of the Act.
7. Learned counsel for the respondent-assessee (trust) tried to support the orders of the Tribunal and made the following submissions to support
the orders thereof:
(a) The facility for authoritative weighment of bullion or jewellery for a nominal charge is a great benefit to the public.
(b) The charges charged are incidental and not with the intention to make profit.
(c) The activities of the trust as per the trust deed specifically provide for the same.
(d) The business is mainly carried on by the beneficiaries of the institution through their employees and servants, whose work is supervised by the
committee of management appointed by the trustees through the board of directors. Hence, the respondent/assessee answers the requirements of
Subsection (4A)(b) of Section 11 of the Act.
8. Learned counsel for the trust in order to highlight the above submissions, has taken us through the trust deed produced at the time of hearing.
The relevant clauses of the trust deed for appreciation of submissions are reproduced hereinbelow :
To all to whom these presents shall come, the Bombay Bullion Association Limited, a company limited by guarantee and registered under the
Indian Companies Act, 1913, and having its registered office at 185, Sheikh Memon Street, Bombay-2, hereinafter referred to as ''the Trustee,
send greetings.
Whereas in or about 1951 Bullion Exchange Limited (in voluntary liquidation) through their solicitors, Motichand and Devidas, handed over to the
trustee the equipments for the purpose of weighing precious metals known as ''Sheth Gordhandas Ranchhodas Bhagatwalla, Kanto'' and
subsequently known as ''Dharamno Kanto'' which was established at 1st Agiary Lane, Bombay-2, in rented premises in the property belonging to
Seth Dossabhai Maganlal Bullion Association Dispensary for the purpose of maintaining and running the said Dharamno Kanto for the benefit of
the public in general.
And whereas the trustee accepted the said Dharamno Kanto and has been maintaining and running the said Dharamno Kanto for the purpose of
weighing precious metals for the benefit of the public in general through a committee of management appointed by the board of directors of the
trustee from time to time ;
And whereas nine persons are employed for the purpose of running the said Dharamno Kanto ;
... And whereas a provident fund account has been maintained in the books of account of Dharamno Kanto for the benefit of the staff;
... 1. This trust shall be called ''Bombay Bullion Association Dharamno Kanto Trust''. The management of the Bombay Bullion Association
Dharamno Kanto shall be carried out as follows :
2. The trustee through their board of directors hereinafter referred to as the ''Board'' shall every year appoint a committee of management
(hereinafter referred to as the ''committee''), of 5 (five) members in the maximum for the purpose of efficiently maintaining and running the said--
Dharamno Kanto for the benefit of the public in general. The members of the committee shall be from amongst the directors of the trustee and
subject to the approval of the board one from amongst the heirs of Seth Gordhandas or Bhagat. If such heir of Seth Gordhandas is not available,
the Board may appoint any other person whom it likes in his stead. The tenure of the committee and shall continue to function after the expiry of
the year till a new committee is appointed . . .
9. The submission of learned counsel for the respondent-trust is that reading the above relevant clauses in particular and the trust deed as a whole it
is clear that the trust was established for managing and running the activities popularly known as ""Dharamno Kanto"" ; a service of weighing
precious metals provided for the benefit of public in general. In his submission, it is clear from the trust deed that the beneficiaries of the trust are
the general public. The trust deed also provides for mechanism to run the activities of the trust and makes a provision for carrying on the business
activities of the trust. In his submission a specific provision is to be found in the trust deed to the effect that the committee of management
appointed by the board of directors consisting of the trustees is to carry on the business through the employees engaged for the purpose. He,
therefore, submits that the trust is entitled for exemption u/s 11(4A) of the Act.
Findings :
10. The crux of the controversy is : can it be said that a method followed by the trust for running the business activities of the trust in the stated
manner answers the requirement of Sub-clause (4A) of Section 11 of the Act; can it be treated that the business activities carried on in the manner
provided in the trust deed are being carried on by the beneficiaries of the trust. In order to deal with the question, it would be necessary to examine
the operation of Sub-clause (4A)(b) and of Section 11 of the Act, application thereof to various types of trusts. Let us consider the case of a trust
in which the beneficiaries are handicapped or blind persons or a trust wherein the beneficiaries are the minors. If Sub-clause (4A)(b) is to be
implemented in its literal sense, then the question is how such beneficiaries of such institution or trust themselves, can be expected to carry on the
business activities of the trust. The trust wherein beneficiaries are general public in such a case the beneficiaries themselves because of their
peculiarity are not expected to carry on business activities of the trust. The activities of the trust meant for the benefit of handicapped or blind
persons cannot be carried on by them, personally, because of their physical incapacity. The trust wherein minors are beneficiaries, minors cannot
carry on business of the trust because of their legal infirmity. No activities of such trust can be carried on by the beneficiaries because of the
peculiar class of beneficiaries to which they belong. The crucial question is, can such a trust be kept away from the benefits by adopting literal
interpretation of Subsection (4A)(b) of section 11 of the Act on the specious ground that they do not fulfil the literal compliance of Sub-section
(4A)(b) extracted above. No provision of law can be interpreted in such a manner which would take away the very spirit, object and purpose of
the provision itself and make it a dead letter. It will have to be interpretation in a manner which will not only put life in the provision, but would
make it workable.
11. In our view, the reading of the trust deed as a whole answers the requirement of Sub-section (4A)(b) of Section 11 of the Act. In the instant
case, the general public is the beneficiary. The business activities are carried on with the assistance of employees under the supervision of the
committee of management appointed by the board of directors. The adequate mechanism provided in the trust deed makes it clear that the
business activities of the trust are being carried on through servants and employees of the trust; may be under the supervision of the managing
committee appointed by the board of directors, who act for and on behalf of the beneficiaries; namely, the general public or public at large. If such
device is adopted by the trust, we are of the view that it would be a sufficient and substantial compliance of the provision of Sub-section (4A)(b) of
Section 11 of the Act. In this view of the matter, we are of the opinion, that the respondent-assessee has complied with the provision of Sub-
section (4A)(b) of Section 11, which stood on the statute book at the relevant time and, therefore, no fault can be found with the order of the
Tribunal and the respondent-trust was rightly held to be entitled for the exemption.
12. In this view of the matter, we answer the question accordingly, affirm the view taken by the Tribunal and dismiss the appeals with no order as
to costs.