# SOLE TRUSTEE LOKA SHIKSHANA TRUST v. COMMISSIONER OF INCOME TAX, MYSORE

- **Citation:** [1976] 1 S.C.R. 461
- **Court:** Supreme Court of India
- **Decided:** 1975-08-28
- **Case number:** Civil Appeal No. 2130 and 2131 of 1970
- **Bench:** fl. R. KHANNA, M. H. Beg, A. C. Gupta
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/sole-trustee-loka-shikshana-trust-v-commissioner-of-income-tax-mysore-6619
- **Pages:** 26

## Headnote

461
lncon1e Tax Act, 19'61, Section 2(15)-Definition of 'Charitable purpose'-
"The advancement of anv other object of f?eneral public utility not invof\·ing the
carr;inR on of any activity for profit', n1eaning of-"Profit'' if confined onlv to
private vrofit.
lnco111e Tax Act, 1961. Sections 2(15) and 11-"Education". 111eani11g a/-
Appellant trust engaged in the business of printing and publication of newspaper
and journals and making profits, if entitled to tax exe1nption.
Section 2(15) of the Income-tax Act provides that 'charitable purpose' includes relief of the poor, education medical relief. and the advancement of any
other object of general public nti.lity.
The appellant is a sole trustee of the "1-0ka _shikshana ·Trust'', holding pro~
perties mentioned in a schedule attached to a deed of trust executed on 19-2-1962
by himself purporting to re-declare a trust of 15-7-1935. The total assets of the
earlier trust of 1935 consisted of a sum of Rs. 4308.10.9 only. Under the provisions the earlier trust. the trustee had carried on a lucrative business of pr~nt
ing at Bclgaum, and, thereafter, he started publishing a daily newspaper.
The
value of the redeclared trust of 1962 stood at, Rs. 2,97,658/-. Clause 2 of the
trust deed provided that the object of the Trust shall h~ to educate the people of
India in general and of Karnatak in particular by
(a) establishing, conducting and helping directly or indirectly instiluiions
calculated to edncate the people by spread of knowledge on all
matters of general interest and welfare;
(b) founding and running reading rooms and libraries and keeping and
conducting printing houses and publishing or aiding the publicat'.ion
of books, booklets, leaflets, pamphlets, magazines etc., in Kannada
and other languages, all these activities being started, conducted and
carried on with the object of educating the people;
(c) supplyi.ng the Kannada speaking people with an organ or organs of
educated public opinion and conducting journals in
Kannada and
other language for the dissemination of useful news and information
and for the ventilation of public opinion on matters of general public
ntiEty; and
(d) helping directly or indirectly societies and institutions which have all
or any of the aforesaid objects in view.
The Income-tax Officer sent a communication to the trust on April 27, 1963 to
the effect that, s!.nce the only activity of the trust was printing. publication, and
sale of newspaper, weekly and monthly journal, the trust carried on an activity
for profit. The claim of the sole trustee was rejected, and, having been unsuccess-
·,rut through ou~ the appellant has preferred thi5 appeal after certification of the
case under section 261 of the Income-tax Act. J9()L
Dismissing the appeal,
H
HELD: (Per H. R. Khanna and A. C. Gu9ta, JJ.)
(I) It is not correct to say that the word "profit" in section 2(15) of the Act
means private profit. The word used in the de:fin~tion provision is profit and not
private profit and it \\-'Ould not be permissible to read in the definition the word
16-U39 Sup. C 1/75
4 62
SUPREME COURT REPORTS
11976] I S.C.R.
"private" as q~alifying profit even though su::h word is not the:·e.
There is al-....l
no apparent justification or cogent reason for placing much a construct:on on the
word .. P ofit'".
[47281
The words "general
pμrpose are very .. wide. public utility" contained 1n 1he definition of charitaqle
These words exclede objects of p:-1vale gain.
l472C]
A II India Sp/1111crs' Association v. Commissioner of I ncon1e·tax { 1944)
2
I.T.R. 482, relied on.
'
lt. is also not correct to say that the newly added words "not involvincr the
car~y.1ng on .of any. activity for profit" merely qualify and affirm what \Va~ the
pos1tLon as It obtained under the _definition in the Act of .1922.
Ji' the 1egis~
]ature intended that the concept of charitable purpose should be the·sam~ under
the Act of 196 l as it was in the Act of 1922, there was no necessitv for it
to add the new word

## Text

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SOLE TRUSTEE LOKA SHIKSHANA TRUST
v.
COMMISSIONER OF INCOME TAX, MYSORE
August 28, 1975
(fl. R. KHANNA, M. H. BEG AND A. C. GUPTA, JJ.]
461
lncon1e Tax Act, 19'61, Section 2(15)-Definition of 'Charitable purpose'-
"The advancement of anv other object of f?eneral public utility not invof\·ing the
carr;inR on of any activity for profit', n1eaning of-"Profit'' if confined onlv to
private vrofit.
lnco111e Tax Act, 1961. Sections 2(15) and 11-"Education". 111eani11g a/-
Appellant trust engaged in the business of printing and publication of newspaper
and journals and making profits, if entitled to tax exe1nption.
Section 2(15) of the Income-tax Act provides that 'charitable purpose' includes relief of the poor, education medical relief. and the advancement of any
other object of general public nti.lity.
The appellant is a sole trustee of the "1-0ka _shikshana ·Trust'', holding pro~
perties mentioned in a schedule attached to a deed of trust executed on 19-2-1962
by himself purporting to re-declare a trust of 15-7-1935. The total assets of the
earlier trust of 1935 consisted of a sum of Rs. 4308.10.9 only. Under the provisions the earlier trust. the trustee had carried on a lucrative business of pr~nt
ing at Bclgaum, and, thereafter, he started publishing a daily newspaper.
The
value of the redeclared trust of 1962 stood at, Rs. 2,97,658/-. Clause 2 of the
trust deed provided that the object of the Trust shall h~ to educate the people of
India in general and of Karnatak in particular by
(a) establishing, conducting and helping directly or indirectly instiluiions
calculated to edncate the people by spread of knowledge on all
matters of general interest and welfare;
(b) founding and running reading rooms and libraries and keeping and
conducting printing houses and publishing or aiding the publicat'.ion
of books, booklets, leaflets, pamphlets, magazines etc., in Kannada
and other languages, all these activities being started, conducted and
carried on with the object of educating the people;
(c) supplyi.ng the Kannada speaking people with an organ or organs of
educated public opinion and conducting journals in
Kannada and
other language for the dissemination of useful news and information
and for the ventilation of public opinion on matters of general public
ntiEty; and
(d) helping directly or indirectly societies and institutions which have all
or any of the aforesaid objects in view.
The Income-tax Officer sent a communication to the trust on April 27, 1963 to
the effect that, s!.nce the only activity of the trust was printing. publication, and
sale of newspaper, weekly and monthly journal, the trust carried on an activity
for profit. The claim of the sole trustee was rejected, and, having been unsuccess-
·,rut through ou~ the appellant has preferred thi5 appeal after certification of the
case under section 261 of the Income-tax Act. J9()L
Dismissing the appeal,
H
HELD: (Per H. R. Khanna and A. C. Gu9ta, JJ.)
(I) It is not correct to say that the word "profit" in section 2(15) of the Act
means private profit. The word used in the de:fin~tion provision is profit and not
private profit and it \\-'Ould not be permissible to read in the definition the word
16-U39 Sup. C 1/75
4 62
SUPREME COURT REPORTS
11976] I S.C.R.
"private" as q~alifying profit even though su::h word is not the:·e.
There is al-....l
no apparent justification or cogent reason for placing much a construct:on on the
word .. P ofit'".
[47281
The words "general
pμrpose are very .. wide. public utility" contained 1n 1he definition of charitaqle
These words exclede objects of p:-1vale gain.
l472C]
A II India Sp/1111crs' Association v. Commissioner of I ncon1e·tax { 1944)
2
I.T.R. 482, relied on.
'
lt. is also not correct to say that the newly added words "not involvincr the
car~y.1ng on .of any. activity for profit" merely qualify and affirm what \Va~ the
pos1tLon as It obtained under the _definition in the Act of .1922.
Ji' the 1egis~
]ature intended that the concept of charitable purpose should be the·sam~ under
the Act of 196 l as it was in the Act of 1922, there was no necessitv for it
to add the new words in the definition.
The earlier definition did not' involve
any ambiguity. and the position in law was clear and admitted of no doubt
after the pronouncement of the Judicial Committee in the Tribune case ( 1939)
7 ITR 415 ~lnd in the case of Aft J11dia Spinners' Association. If despite that
fact, the legislature added new words in th.e definition of charitable purpose, it
would be contrary to all rules of construc:t!on to ignore lhe impact of the newly
added words and to so construe the defintt1on as if 1he newly addeJ "'"ords were
either not th~re or \Vere intendeJ to be otiose a-nd redundant.
[47CC-E}
(ii) The sense in which the V.'ord "education" has been used in section
2(15) is the ~ystematic instruction, schooling, or training given to the young
in preparation for the work of life.
It also connotes the whole course
of
scholastic instruction which a person has received.
The word ''education'' has
not been used in that wide and extended sense. according to which every
acquisition of further knowledge cono;;titutes education.
According to thi-s wide
and extended sense. travelling is education.
because as a result of travelling
you acquire fresh knOwledge.
Likewise. if you read newspapers and magazines,
see pictures. visit art galleries, museums and zoos, you thereby add to your
knowledge.
Ag:iin. when you grow up and have dealings with other people,
some of whon1 are not straight. you learn by experience and thu..:; adJ to your
,knowledge of the ways of the world.
lf )'OU are not careful. your wallet
is liable to be stolen or you are liable to be cheated by some unscrupulous
person.
The thief who removes your wallet and the swindler \Vho che~ts you
teach you a le'.'6on and in the process make you wiser though poorer.
If
you visit a night club. you get acquainted with and add to your knowledge
about some of the not much revealed realities and mysteries of life.
All
this in a way is education in the great school of life.
But. that i.;. not the
sense in which the word "education'' is used in clause ( 15) of section 2.
\Vhat
education connotes in that clause is the process of training and deve1oping the
knowledge. skill. mind. and chara:ter of students by formal schooling. [469C-F]
(iii) The fact that the appellant trust is engaged in the busincs<:: of printing
and publication of newspaper and journals and the further fact that the afore~
said activity vields or is one likely to yield profit and there are no re~trictions
on the aotY."llant-trust earning profits in the course of its busin..:ss ·would go
to show that the purpose of the appellant-trust does not satisfy the requirement
that it should be one "not involving the carrying on of any activity for profit."
[471C·D]
Jn re The Trnstees of the 'Tribune (1939)7 ITR 415, State of· Gujorat v.
M/s. Raipu.- Mff?. Co., [19671 1 S.C.R. 618, and Co111missioner of lrico1ne-tax
v. Lahore Electric Supply Co. Ltd., [1966] 60 I.T.R. I, referred to.
Per M.H. Beg, J. (Concurring)
(i) It has been declared repeatedly by the Courts. even before the addition,
-Of the words "not involving the carrying on of any activity for profit" to the
definition of "charitable purpose'', that acthities motivated by private profit
making fell outsi'de the concept of charity a1together.
It is n1ore reasonable
to infer that the words used clearly imposed a new qualification on publtc
utilities entitled to exemotion.
It was obvious that, unless such a limitation
was introduced, the fourth and last category would become too wide to prevent
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L-OKA SHIKSHANA TRUST v. C.I.T. (Khanna, J.)
463
its abuse.
Wicle words so used could have been limited in score by judicial
interpretations ejusdem generis so as to confine the last category to objects
similar to those in the previous categories and also subject to a dominant
ccncept
of charity which must
govern all the four categories.
But,
the
declaration of law by the Privy Council, in the Tribune case had barred this
method of limiting an
obviously
wide
category
of
profitable
activities
of general public utility found entitled to exemption.
Hence, the only other
way of cutting down the wide sweep of objects of ''general public utility" entitled
to exemption was by legislation.
This, therefore, was the method Parliament
adopted as is clear from the speech of the Finance Minister who introduced the
amendment in Parliament.
r482F-Hl
lncon;e Tax Co1111nissioners v. Pe111se/, [1891] A.C. 531, 583; A1orice v.
Bishop of Durhan1. (1805) 10 Ves. 522:
All Jndia Spinners' Association v.
Co1n1nfasioner of J11co111e Tax, Bon1bay, 1944(1:2) ITR 482, 486; Con1missioner
of Jncon1e-Tax, Madras v. Andhra Chanzber of Conunerce, 1965(55) I.T.R.
722, 732; /11 re Gro11e-Gredy [l929J 1 Ch. 557, 582; Cape Brandy Syndicate v.
I.R.C, [1921] 1 K.B. 64, 71; Rt. Hon'ble Jerald Lord Strickfand v. Carn1elo
Mifud Bonnici, A.J.R. 1935 P.C. 34; The
Englislunan
Ltd. v. Laipat Rai,
l.L.R. 37 Cal. 760; Anandji Hasidas & Co. P1·t. Ltd. v. E11gineeri11R Afa;.donr
Sangh &: A.nr., A.LR. 1975 S.C. p. 946 @ 949; Co111111issio11er of lnconw-1ax
Gujarat v. Vadi!al Lallubhai, 1972 (86) I.T.R. p. 2; Connnissioner of l11con1etax v. Sadora Devi, 1957 (32) I.T.R. 615 @-627 [1958] I. S.C.R. I and In re the
Tribune, (19319) 7 J.T.R. 415, referred to.
(ii) If the profits must ne::essarily feed a charitable purpose, under the
terms of the trust, the mere fact that the ac ivities of the trust yield profit
will not alter the charitable character of the trust.
The '.est is the genuineness
of the purpose tested by the obligation created to spend the money exclusively
or essentially on ·:charity",
If that obligation is there. the
income
beC'omes
entitled lo exemption.
That is the most reliable test.
The governine idea of
charity must qualify purpose of every category enumerated in :-;ectiOn 2(15)
of the Act of 1961.
[483-C-D]
(iii) Although the term 'education', as used in section 2(15) of the Act,
seem'> wider and more comprehensive than education through educational
institu\.ions. such as Universitie-s, whose income is given an exemption fron1
income tax separately :under section 10(22) of the Act, provided the educa:ional
institution concerned does not exist "for purposes of profit", ye\ the edu:ational
effects cf a newspaper or publishing business are only indirect, proble'matica1.
and quite incidental so that, without imposing any condition or qualification
upon the nature of information to be disseminated or ma-terial to be published,
the mere pr;blication of news or views cannot be said. to serve a purely or even
predon1inantly educational purpose in its ordinary and l!&ual sense.
Judging
from the facts set out in the trust deed itself, the sole trustee had managed
to mak~ the satisfaction of the needs mentioned in clause 2(c) a hi2hly prOfitable business.
The deed puts no condition upon the 0::onduct of the - newspaper
and publishing business from which one could infer that it v.'as to be on "no
profit~and no lq..;;s" basis.
The High Court was right in coming to the conclusion that the appellant is not entitled to claim exemption from
income-tax.
[485-E-G, 486-D]
EaSJ India !nduMrie$ (Madras) Pvt. Ltd. v. Comniissioner of l11con1e.tax,
!vludra<>, 1967 (65) I.T.R. 611; Commissioner of Income-tax, Madras v. Andhra
C!wnzber of Commerce, 1965 (55) I.T.R. 722; Md. I(Jrahim Rizo v. Co1n1nissioner of Income-tax, Nagpur, (1930) L.R. 57 I.A. 260 and Co1nnd.uionet of
lncon1e-1ax, West Bengal II v. Indian Chamber of Commerce, 1971 (81) r.T.R.
147.
t!RGUMENTS
for the appellant
( 1) Tue objects clause of the Trust is so worded as to make it clear that
1he whole and sole object of the Trust is education of the people of India
464
SUPREME COURT REPORTS
[1976] 1 S.C.R.
in general and of Karnatak in particular by the four means or modes set out
in that clause.
Those four means or modes are not separate objects of
the
Trust but are merely the instrumentalities prescribed by the Settler for achieving the specified object of education. Even assuming for the purpose of argument that sub-clauses (a) to (d) of clause 4 of the Trust Deed are separate
and distinct objects of the Trust, clause ( c) which covers a newspaper or a
journal is itself an object falling within the category of "education".
(2) The words added in the 1961 Act "not involving the carrying on of
any activity for profit" go only with the last head viz. ''any other object of
general public utility" and not with the first three heads. This is put beyond
doubt by the comma which appears after each of the first three heads, there
being no comma after the fourth head.
(3) The present case falls within the second head of "charitable purpose",
1:;z. education.
The rulin.g of the Privy Council in the
Tribune case 1939
J.T.R. 415 does not apply to the facts of the present case.
( 4) Assuming that the case does not fall within the categol_ry of "education'"'
it falls within the last head "any other object of general public utility, and
the qualifying words "not involving the carrying on of any activity for profit''
are satisfied.
First the word "profit" means private gain, and the qualifying
words merely say expressly wha.t v:.·as implicit in the 1922 Act (1939 I.T.R.
415 at 423, and 1944 l.'f.R. 482 at 488).
Even assuming the word "profit"
covers prdfit for the Trust, involving no private gain, the qualifying words are
still satisfied.
They require that the object of the Trust should not involve,
i.e. entail, that the trustees should carry on the activity for profit.
No su::h
condition about making profit is imposed by the trust deed.
That profit may
result from the activities of the Trust in a particular year is wholly irrelevant.
Profit making is not the motive of the Trust.
(5) Provisions of section 11 of the Act clearly reveal that it is implicit in
the very scheme of the Act that a business undertaking can be held in trust
for an object of general public utility.
For the respondent
(i) The decision of the Privy Council in the Tribune r.:ase squarely applies
to1 the facts of the present case; (ii) For ascertaining that true meaning of the
expression "not involving the carrying on of an activity for profit" it was not
only permissible but only proper for the Courts to refer to parliamentary
debates and other proceedings of the legislature;
(iii) Where a business undertaking is held as property of the Trust and income resulting
therefrom is
wholly applied for charitable purposes such as education, medical relief of
the poor, or for any other object Qf. general public utility but with which object
the production of income i~ not linked it would be still exempt.
But it that
income is utilised only for the purposes of advancing the very object from the
advancement of which it is derived it would cease to be exempt. The means
and processes adopted by the Trustee for the advancement of the object were
such as rendered the
object itself as
non-charitable; (iv) The
expression·
"activity for profit" was much wider in scope than merely a business activity.
The legislature had intentionally used the
expression "activity"
instead of
business because in some cases the income produced from the activity may
not be 1ega11y assessable under the provisions of the Income-tax Act, 1961
under the head "Income, profits and gains of business'• (Section 28).
The
expression 'activity for profit" in the context meant activity for profit making;
(v) Since the advancement of .e~ucation was being achieved by ~eans invo!ving the carrying on of an activity for profit, the Trust would still be denred
exemption. In other words, the qualifying words a-dded to the definition at the
end did not govern merely the last category of charity i.e. the
object of
general public utility but equally governed the earlier three well known categories namely n1edical relief, relief of the poor, and• education.
The effect of
the qualifying words "not involving the carrying on an activity for profit" w_as
to deny exemption to trusts which carried On a profit-making activity for
advancing the object of general public utility.
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LOKA SH!KSHANA TRUST V, C.J.T. (Khann{l, J.)
465
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
2130 and
2131 of 1970.
From the Judgment and Order dated the .12th February,
1970
of the Mysore High Court in I.T.R.C. Nos. 5 and 6 of 1968.
N. A. Palkhivala, and Vi~et Kumar, for the appellant.
G. S. Sharma and S. P. Nayar for the respondent.
N. A. Palkhivala, S. T. Desai, A. G. Meneses, Mrs. A. K. Venna,
P. N. Monga, J. B.
Dadachanji for the
Intervener-Tribunal Trust
Chandigarh.
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V. S. Desai and J. Ramamurthi for Intervener-Saiurashtra Trust,
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Bombay.
The Judgment of H. R. Khanna and A. C. Gupta, JJ, was delivered
by Khanna, J. M. H. Beg, J. gave a separate Opinion.
KHANNA, J.-The detailed facts of this case have been given in
the judgment of our learned brother Beg J. and. need not be repeated.
The question of law which was referred to the High Court and which
has been answered in, the negative against the assessee appellant i~ as
follows :
"Whether on the facts and in the circumstances of the
case, the income lo! the Lok Shikshana Trust was entitled to
exemption under section 11 of the Income-tax Act, 1961,
read with section 2(15) of the same Act, for the assessment
year 1962-63-?"
"Charitable purpose" was defined in section 4 ( 3) of the Indian Income-tax Act, 1922 was as under :
"In this sub-section 'charitable purpose' includes relief of
the poor, education, medical relief, -and the •acfvanceme>,1t of
any other object of general public utility."
·
The definition of "charitable purpose" as given in section 2(15) oi the
Income-tax Act, 1961 (hereinafter referred to as the Act) with which
we are concerned reads as under :
·
"(15)
'Charitable purpose' includes relief of the poor,
education, medical relief, and the advanceme11t of any other
object of general public utility not involving the carrying on
of any activity for profit."
It would appear from the above that in the definition of "charitable
purpose" as given in the Act the words "not involving the carryrag
on of any activity for profit" have been -added at the end of the definition as given in the Act of 1922.
We shall see as to what is
the
effect of the above addition.
466
SUPREME COURT REPORTS
[1976] 1 S.C.R.
In order to see as to whether the appellant-trust is for a charitable
purpose, we may first go into the question as to what is the object of
the apipellant-trust.
According to Mr. Palkhivala, learned counsel
for the appellant, the object of the appellant-trust is education, while
the· staud of Mr. Sharma on behalf of the revenue is that not education
but the last mentioned category in section 2(15), viz., the advancement of any other object of general public utility, is the object of the
appelJoant-trust.
The reason for the above divcrge·acc in the stands
of Mr. Palkhivala and Mr. Sharma is that according to Mr. Palkhivala,
the concluding words of the definition in section 2(15) of the
Act
"not involving the carrying on of any activity for profit" do not qualify
the first three categories of relief of the poor, education, or medical
relief but qualify only the fourth category of "advancement of any
other object of general public utility". Once the object of the appellanttrust is held to be education, the word trust would, according to Mr.
Palkhivala, be held to be for a public purpose as defined in section
2(15) of the Act.
In such an event, it would be immaterial whether
the object of the trust involves or does not involve the carrying on of
any activity for profit.
As against that, Mr. Sh>arma has co>,1troverted
the submission that the concluding words of the definition, viz., "not
involving the carrying on of any activity for profit" qualify only the
fourth category of "advancement of any other object of general public
utility".
According to Mr. Sharma, the cd,1cluding words qualify the
first three categories of relief of the poor, education and medical relief
also.
In any case, submits Mr. Sharma, the object of tbe appellanttrust falls in the fourth category of the definition, namely. "any other
object of general public utility." It is, in my opinion, not necessary
to express opinion i>,1 this case on the question as to whether the words
"not involving the carrying on of any activity for profit" qualify the
fourth object, viz., the advancement of any other object of general
public utility, or whether they also qualify the other three objects of
relief of the poor, education and medical re lief, because we are of the
view that the object of the appellant-trust was not education but any
other object of general public utility.
Clauses 2, 6, 10, ·14, 16 and
18 of the trust deed of the appellant read as under :
"2. The object of the Trust shall be to educate the people
of India in general and of Karnal'ak in particular by
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(a) establishing, conducting aud helping directly or indirectly institutions calculated to educate the people by
spread of knowledge ou all matters of ge+,1eral interest
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and welfare :
( b) founding and running reading rooms -and libraries and
keeping and conducting printing houses and publishing or aiding the publication of books, booklets, leaflets, pamphlets, magazines etc., /,, Kannada and other
languages, all these activities being started, conducted
and carried on with the object of
educating
the
people:
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LOKA SHIKSHANA TRUST V, C.I.T. (Khanna., /.)
467
(c) supplying the Kannada speaking people with an organ
or organs of educated public opinicu and conducting journals ill' Kannada and other language for the
dissemination of useful news and information and for
the ventilation of public opinicia on matters of general
public utility; and
(d) helping directly or indirectly societies and institutions
which have all or any of the aforesaid objects in
view."
6. The Original Trustee shall have power and authority
to spend and utilise the money and the property of the Trust
for any of th~ purposes of this Trust in such manner as to him
may appear proper. The Original Trustee shall be entitled
to operate all the Banking accounts of the Trust.
10. The Original Trustee shall have full power to, take
over on such terms as he may deem fit such concern or concerns, or undertakings as, in his opinion, are congenial or
conducive to any of the purposes of the Trust.
14. The Original Trustee shall be entitled to appoint a
Manager or Managers of institutions of the Trust, Editor or
Editors and other subordinates for the purposes of carrying
out the printing and p,ublication of any newspaper or newspapers, weeklies, monthlies, magazines, books or other publications, and shall have power from time to time to delegate
to any one or more persons by Power of Attorney or otherwise any one or more of the following powers.
(a) To open one or more banking accounts, to operate the
same and to deposit and withdraw mo;,1eys from the
same;
(b) To give receipts or discharges for money or property
received by them or any one of them in the course of
business carried on by the Trust;
( c) To buy or sell paper, irik, machines, books and materials required for the purposes of the business of the
Trust;
( d) To enter into contracts With agents, dealers and others
in the course of the business of the Trust;
.
( e) To employ or remove subordinates and workers neces-·
sary for the work;
(f) and generally to do all things necessary and expedient
in carrying out the business entrusted to him or them.
16. The Original Trustee or Trustees shall not take any
remuneration for discharging his or their duties as a Trustee
or Trustees provided that this provision shall not preclude a
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SUPREME COURT REPORTS
[1976] 1 s.c.B.,
Trustee or .Trustees from being paid out of the Trust fund
such remuneration as may be deemed proper for carrying out
any work and duty in connection with the conduct or management of institutions of the Trust, or with the business of
printing, publishing or other activities carried on by the Trust.
A Trustee shall be entitled to be paid all expenses that may be
incurred by him in connection with his duties as a Trustee
including trave!Jing and other expenses.
18. The Original Trustee or other Trustees shall not be
responsible for any loss occasioned to the Trust in respect of
any business or dealings carried on on behalf of-the Trust
unless the sal)le is due to his own fraud or misappropriatioB
or breach of trust and every trustee shall be indemnified by
and out of the funds and moneys of the Trust against any loss
or damage which the Trustee might suffer in regard to any act,
deed, or omission of his in the performance of his duties as a
Trustee, including any fines or penalities imposed under the
Factory Act or any Labour Legislation or Press Act or any
other similar enactment."
The income-tax officer sent a communication to the trust on April 27,
1963 to the effect that since the only activity of the trust was printing,
publication and sale of newspaper, weekly and monthly journal, the
trust carried on an activity for profit and was not entitled to exemption.
In reply to that notice the Sole Trustee stated that the above mentioned
activities of the trust were covered by clause (c) of the objects clause
of the trust deed. It was added that the above object did not involve
the carrying on of any activity for profit. In a further communication
dated June 26, 1964 the Sole Trustee wrote :
"The Trust has four objects in its objects clause one of
which is to supply the Kannada speaking people with an
organ or organs of educated public opinion etc. (clause 2(c)
of Trust Deed). Under this clause we conduct the publication
of newspapers. This has not been agreed upon by yol11'
honour as a Charitable purpose and we have accordingly preferred appeals for relief.
The main object of the Trust is education and this mzy
be achieved by conducting and helping educational institutions having the similar objects as of our Trust. These are all
charitable objects. In case the Trust bas a surplus income it
cannot be spent on any object other than the objects of the
Trust. For the present we have been educating the Kannada
speaking people through newspapers and journals and we shall
be taking up the other ways and means of education as noted
in our trust deed as and when it is possible for Trust. We
have no option at al! except to spend our income on the objects of our Trust which are all charitable without any doubt
or ambiguity."
We have set out above the relevant clauses of the trust deed and the
material part of the communications sen~ by the Sole Trustee. It would
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LOKA SHIKSHANA TRUST v. C.J.T., (Khanna, J.)
469
appear therefrom that though a number of objects, including the setting
up of educational institutions, were mentioned in the trust deed as the
objects ot the trust, supplying the Kannada speakin!l people with an
organ of educated public gpinion was al§O one of those objects. The
communication sent by the Sole Trustee to the income-tax officer shows
that the trust at present is carrying out only the last mentioned object
of the trust, namely, supplying the Kannada speaking people with an
organ or organs of educated public opinion. The concentration so far
of the activities of the trust only on that object is in pursuance of clause e
6 of the trust deed, according to which original trustee shalf have power
and authority to spend and utilise the money and the property of the
trust for any of th"'-purposes of the trust in such manner as to him may
appear proper.
The sense in which the word "education" has been used in section
2( 15) is the systematic instruction, schooling or training given to the
young in preparation for the work of life. It alw connotes the whole
course of scholastic. instruction which a person has received. The word
"education" has not been used in that wide and extended sense, according to which every acquisition of fnrther knowledge constitutes education.
Accord.ing to this wide and extended sense, travelling is education, because as a result of travelling you acquire fresh kuowledge. Likewise, if you read newspapers and magazines, see pictures, visit art galleries, museums and zoos, you thereby add to your knowledge. Again,
when you grow up and have dealings with other people, some of whom
are not straight you learn by experience and thus add to your knowledge of the ways of the world. If you are not careful, your wallet is
liable to be stolen or you are liable to be cheated by some unscrupulous
person. The thief who removes your wairet and the swindler who cheats
you teach you a lesson and in the process make you wiser though poorer.
If you visit a night club, you get acquainted witli and add to your knowledge about some of the not much revealed realities and mysteries of
life. All this in a way is education in the great school of life. But that is
not the sense in which the word "education" is used in clause (15) of
section 2.
What education connotes in that clause is the process . of
training and developing the knowledge, skill, mind and character of
students by' formal schooling.
The question as to whether a trust the object of which is to supply
the people with an organ of educated public opinion should be considered (o be one for education or for any other object of public utility
was considered by the Judicial Committee in the case of In re The
Trustees·of the 'Tribune'('). In that case a person who owned a press
and a newspaper created by his will by which his property in the stock
and goodwill of the press and newspaper was made to vest permanently
in a committee of certain members. It was the duty of the said committee of trustees under the W'i]] "to maintain the said press and newspaper in an efficient c?ndition, and to.keep up the liberal policy of the
said newspaper, devot1!1g the surplus mcome of the said press and
newspaper a.fter defraymg all current expenses in improvin.g the said
newspaper and placing it on a footing of permanency." Ii was· also
"""····-·-
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(!) (1939) 7 I. T. R. 415.
470
SUPREME COURT REPORTS
fl 976] 1 S.C.R.
provided. by an arrangement made subsequently that in case the paper
ceased to function or for any other reason the surplus of the income
could not be applied to the object mentioned above, the same should be
applied for the maintenance of a college which had been established out
of the funds of another trust created by the same .testator. There was
surplus income in the hands of the trustees after defraying the expenses
of the press and the newspaper.
Question arose as to whether that
R
income was liable to be assessed in the hands of the trustees. The
•
Judicial Committee held that the object of the settlor was to supply the
province of the Punjab with an organ of educated public opinion and
this was prima facie an object of general public utility. Their Lordships
un-~quivocally expressed the view that they were not prepared to hold
that the property referred to in the various paragraphs o( the will was
held for the purpose of "education" in the sense that word was used in
C
section 4 of the Indian Income-tax Act of 1922. The above decision
of the Judicial Committee applies directly to the present case and in view
of this decision, we would hold that the object of the appellant-trust
was '"the advancement of any other object of general public utility".
It has been poiuted out in the earlier part of the judgment that in
the. definition of charitable purpose as given in section 2(15) of the Act
the words "not involving the carrying on of any activity for profit" have
been added at the end of the definition as it was given in section 4(3)
of the Indian Income-tax Act, 1922. The position as it existed under
the Act of 1922 was that once the purpose of the trust was reliet of the
poor, education, medical relief or the advancement of any other object
of general public utility, the trust was considered to be for a charitable
purpose. As a result of the addition of the words "not involving the
carrying on of any activity for profit" at the end of the definition in
section 2 ( 15) of the Act even if the purpose of the trust is "advancement of any other object of general public utility", it wo~ld not be considered to be "charitable purpose" unless it is shown that the above
purpose does not involve the carrying on of any activity for profit. The
result thus of the change in the definition is that in order to bring a case
within the fourth category of charitable purpose, it would be necessary
to show that ( 1) the purpose. of the trust is advancement of any other
object of general public utility, and (2) the above purpose docs not
involve the carrying on of any activity for profit. Both the above conditions must be fulfilled before the purpose of the trust can be held to
be charitable purpose. It is not necessary for the decision of this case,
as already mentioned above, to go into the question as to ·whether the
words "not involving the carrying on of any activity for profit" also
qualify the first three categories of charitable purpose, namely, relief of
the poor, _education and medical relief.
Question then arises as to whether the purpose of the appellant-trnst
can be considered to be one not involving the carrying on of any activity
for profit. So far as this question is concerned, we find that the appellant-trust started with a sum of Rs. 4.308, 10 As. 9 Pies. The schedule
attached to the trust deed dated April 10, 1947 shows that the assets of
the trust consisted of printing machines, accessories, motor-cars, building, stocks of paper and other miscellaneous things. The total value of
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LUKA SHIKSHANA TRUST v. C.I.T .. (Khanna, J.)
471
the assets was Rs. 2,97 ,658, out of which the value of the building sites.
and the buildings was Rs. 47,500. As against that, the liabilities of the
trust amounted to Rs. 1,24,086. The net value of the assets of the trust
rose in 1947 to a figure of Rs. 1,73,571, 14 As. 4 Pies. For the assessment year 1962-63, which is the year under appeal, the total receipts of
the trust were of the amount of Rs. 22,55,077. The main sources of
these receipts were sales of newspapers and magazines through agents,
receipts on account of advertisements, receipts for job printing bills besides son1~ other rrtinor items. "As against t~e reCeipls, th~ n:ajor ite~
of expenditure were the purchase of newsprmt, paper, pnntmg type5"
printing and other material, the salaries and allowances of the staff,.
remuneration to news agencies and railway freight. There can, therefore, be no doubt that the trust bas been carrying on the busi11ess of
publishing newspaper and weekly and monthly magazines. The profits.
from the aforesaid business would also apparently account for the manifold increase in .the value of the assets of tlle trust. The emphasis on
business activity of the trust is also manifest from clauses 6, 10, 14, 16and 18 of the trust deed reproduced above. The fact that the appellanttrust is engaged in the business of printing and publication of newspaper
and journals and the further fact that the aforesaid activity yields or is
one likely to yield profit and there are no restrictions on the appel\anttrust earning profits in the course of its business would go to show that
the purpose of the appellant-trust does not satisfy the requirement that it
should be one "not involving the carrying on of any activity for profit".
It is true that there are some business activities like mutual insura,1ce and co-operative stores of which profit making is not an essential
ingredient, but that is so because of a self-imposed and innate restriction on making profit in the carrying on of that particular type of. business.
Ordinarily profit motive is a normal incidence of business
activity and if the activity of a trust consists of carryi•ag on of a business
and there are no restrictions on its making profit, the court would be
well justified in assuming in the absence of some indication to the con•·
trary_ that the object of the tn~st involves the carrying
on
of
an•
act•vtty tor profit.
The expresswn "business", as observed by Shah J'.
spe_aking
for
the
Court in the case of State of Gujatat v. M / s.
Raipur Mfg. Ci; .• C') though extensively used in taxing statutes, is
a
word of mdefimte import.
In taxing statutes, it is. used in the sense
of an <>ccupa!Ion, or profession which occupies the time, attention and
labour of a p;:rson, noi;mally with the object of making profit.
To
regard an act~v1ty as busmess there must be a course of dealings, either
actually contmued or contemplated to be continued with a
profit
motive, a?d not fo: sport or pleasure.
Whether a person carries on
bus1.1ess m a i:ar~1cular commodity must depend upon the volume,
frequency, contmmty and regularity of transactions of purchase and
?ale m. a class of goo~s and the transactions must ordinarily be entered
~nto with a profit motive.
By the·use of the expression "profit mot;ve"·
1t is" n~t intended that profi~ must in fact be earaed.
Nor does· the
expLss1?n cover a mere ~estre to make some monetary gain out of a
tr~sact1on or even a senes of transactions. It predicates a motive
which pervades the whole series of transactions effected by the person irr
(I) [1967] l s. c. R. 618.
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472
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(1976] ! S.C.R.
the course of his activity.
In the case of Commissioner of I ncomc-tux
v. Lahore Electric Supply Co. Ltd.( 1), Sarkar J. speaking for the majority observed that business as contemplated by section 10 of the Indian
Income-tax Act, 1922, is an activity capable of producing a profit 11 hich
can be ta;;ed.
In the case of the appellant-trust the activity of the
1rust, as already observed earlier, has in fact been yielding profits and
that apparently accounts for the increase ia the value of its assets.
We are not impressed by the submission of the learned counsel for
1he appellant that ,Profit under section 2(15) of the Act means private
profit.
The word used in the definition given in the above providon
is profit and 110t private profit and it would not be permissible to read
in the above definition the word "private" as qualifying profit even
1hough 'such word is not there. There is also no apparent justification or cogent reason for placing such a construction on the word
"profit".
The words "general public utility" contalaed in the definition
of charitable purpose are very wide.
These words, as held by the
Judicial Committee in the case of All India Spinners' Associaricn v.
Commissioner of Income-tax(2), exclude objects of private gain. It
is also difficult to subscribe to the view that the newly added words
"not involving the carrying on of any activity for profit" merely qualify
and affirm what was the positio'a as it obtained under the definition
given in the Act of 1922. If the legislature intended that the concept
of charitable purpose should be
the same under the Act of
1961 as it was in the Act of 1922. there was no necessity for it to add
the new words in the definition.
The earlier definition did not involve
any ambiguity and the position in law was clear and -admitted of no
doubt after the pronouncement of the Judicial Committee in the cases
of Tribune aad All India Spinners' Association (supra). If despite that
fact, the legislature added new words in the definition of charitable
purpose, it would be contrary to all rules of construction to ignore the
impact of the newly added words and to so construe the definition as
if the newly added words were either not there or were intended to be
otiose and redundant.
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BEG, J.