# YOGIRAJ CHARITY TRUST v. COMMISSIONER OF INCOME-TAX, NEW DELHI

- **Citation:** [1976] 3 S.C.R. 947
- **Court:** Supreme Court of India
- **Decided:** 1976-03-30
- **Case number:** Civil Appeals Nos. 937 to 966 of 1971
- **Bench:** A. N. Ray, M. H. Beg, Jaswant Singh
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/yogiraj-charity-trust-v-commissioner-of-income-tax-new-delhi-6853
- **Pages:** 9

## Headnote

Exen1ption from /ncome-tax-Rejigious and
charitable
purposes .. -I ndian
l11co1ne-tax Act, 1922-Section 4(3)(i)-Intent-Test
for
trea~ing a
Trust
incuJnt' as of a charitable 1wture and for entitlenient to exe111rti(!n u11Jer s. 4(3)
(i) ibid.
Charitable purposes under s. 4(3) of the Income Act includes relief of the
poor, education, medical relief and the advancement of any other object of
general public utility, but nothing contained in clause (i) and (ii) of s. 4(3)
applies and shall operate to exempt from the provisions of the Act that part of
the income from property held under a trust or other legal obligation for private
religious purposes which does not ensure for the benefit of the public.
,'\ii the six income-tax references made by the Income-tax Appellate_ Tribunal,
Delhi Bench under s. 66(1) of the Indian Income-tax
Act,
1922 as
to
''\vbether on the facts and in the circumstances of the case the income of the
tirust whic.h was spent on the religious and charitable purp6ses within the taxable territories was exempt under s. 4(3) (i) of the Indian Income Tax Act.
1922" \Vere answered in the negative and in favour of Revenue, by the Division
Bench of the Delhi High Court holding "that the property of the trust cannot
be held to be v.··holly for religious or charitable purposes".
The terms of the
trust deeds in all the cases are similar and the pattern of financial dealing of
the various trusts is also the same as could be seen from the objects of the
trusts particularly clauses (5) (a), which are, inter alia, as follows :-
A
B
c
D
(i) To open, found, construct, establish takes over, equip, promote,
conduct, maintain, support, subsidise, grant aids and make donaE
tions to schools, colleges, Pathshalas, boarding
houses.
reading
clubs, libraries, art, music or literary societies and other institution~,
educational or otherwise, w;sociations, printing
presses,
journals,
newspapers, periodicals, and other religious, commercial, industrial,
legal, medical, engineering scientific or other knowledge or training.
(ii) To give stipends. scholarships, travelling expenses allowances and
monetary aids to students and scholars in India and abroad engaged
F
in any of the pursuits referred to in sub-clause {i).
(iii) To found, construct, maintain, support, assit_;t or
grant
aids
or
subscriμions to temples, prayer or congregational halls or other
buildings for cultural, social or religious discourses.
(iv) To open, found conduct, maintain, or contribute to the opening
and maintaining of such institutions where work at living wageS
can be provided to poor and deserving people and also be conducive -
to the development of industries and benefit of the poor.
G
(v) To open, found, establish, equip, finance assist, maintain or contribute to religious commercial technical industrial or
commercial
concerns, institutions, associations or bodies imparting any type of
traiiaing or providing employment to persons.
(vi) To give donations. subscriptions or contributions to anv
other
Charitable Trust in Jaipur State or outside.
-
Clauses 11 and 16 of the deed give an uncontrolled discretion to the trustees
to spend the whole of the trust fund on any of the non-charitable obiects of
the trust. The non-charitable obJects authorise the opening and maintaining of
commercial institutions where work at Jiving wa~es can be orovided to the
H
948
SUPREME COURT REPORTS
(1976] 3 S.C.R.
A
poor and also to contribute to commercial, technical, industfial or commercial
concerns, institutions associations or bodies imparting any type of training .or
providing ep1ployment to persons.
B
c
D
E
F
G
H
Dismissing the appeals by Special Leave, the Court held :-
( 1) In order to claim the benefit of exemption under s. 4(3)(i) of the
Act the property must be held under trust or other legal obligation wholly for
religious or charitable purposes.
The only relaxation is that all the primary
objects of the trust must be of religious and charitable nature and the existence
of an

## Text

947
YOGIRAJ CHARITY TRUST
v.
COMMISSIONER OF INCOME-TAX, NEW DELHI
March 30, 1976
[A. N. RAY, C.J., M. H. BEG AND JASWANT SINGH, JJ.]
Exen1ption from /ncome-tax-Rejigious and
charitable
purposes .. -I ndian
l11co1ne-tax Act, 1922-Section 4(3)(i)-Intent-Test
for
trea~ing a
Trust
incuJnt' as of a charitable 1wture and for entitlenient to exe111rti(!n u11Jer s. 4(3)
(i) ibid.
Charitable purposes under s. 4(3) of the Income Act includes relief of the
poor, education, medical relief and the advancement of any other object of
general public utility, but nothing contained in clause (i) and (ii) of s. 4(3)
applies and shall operate to exempt from the provisions of the Act that part of
the income from property held under a trust or other legal obligation for private
religious purposes which does not ensure for the benefit of the public.
,'\ii the six income-tax references made by the Income-tax Appellate_ Tribunal,
Delhi Bench under s. 66(1) of the Indian Income-tax
Act,
1922 as
to
''\vbether on the facts and in the circumstances of the case the income of the
tirust whic.h was spent on the religious and charitable purp6ses within the taxable territories was exempt under s. 4(3) (i) of the Indian Income Tax Act.
1922" \Vere answered in the negative and in favour of Revenue, by the Division
Bench of the Delhi High Court holding "that the property of the trust cannot
be held to be v.··holly for religious or charitable purposes".
The terms of the
trust deeds in all the cases are similar and the pattern of financial dealing of
the various trusts is also the same as could be seen from the objects of the
trusts particularly clauses (5) (a), which are, inter alia, as follows :-
A
B
c
D
(i) To open, found, construct, establish takes over, equip, promote,
conduct, maintain, support, subsidise, grant aids and make donaE
tions to schools, colleges, Pathshalas, boarding
houses.
reading
clubs, libraries, art, music or literary societies and other institution~,
educational or otherwise, w;sociations, printing
presses,
journals,
newspapers, periodicals, and other religious, commercial, industrial,
legal, medical, engineering scientific or other knowledge or training.
(ii) To give stipends. scholarships, travelling expenses allowances and
monetary aids to students and scholars in India and abroad engaged
F
in any of the pursuits referred to in sub-clause {i).
(iii) To found, construct, maintain, support, assit_;t or
grant
aids
or
subscriμions to temples, prayer or congregational halls or other
buildings for cultural, social or religious discourses.
(iv) To open, found conduct, maintain, or contribute to the opening
and maintaining of such institutions where work at living wageS
can be provided to poor and deserving people and also be conducive -
to the development of industries and benefit of the poor.
G
(v) To open, found, establish, equip, finance assist, maintain or contribute to religious commercial technical industrial or
commercial
concerns, institutions, associations or bodies imparting any type of
traiiaing or providing employment to persons.
(vi) To give donations. subscriptions or contributions to anv
other
Charitable Trust in Jaipur State or outside.
-
Clauses 11 and 16 of the deed give an uncontrolled discretion to the trustees
to spend the whole of the trust fund on any of the non-charitable obiects of
the trust. The non-charitable obJects authorise the opening and maintaining of
commercial institutions where work at Jiving wa~es can be orovided to the
H
948
SUPREME COURT REPORTS
(1976] 3 S.C.R.
A
poor and also to contribute to commercial, technical, industfial or commercial
concerns, institutions associations or bodies imparting any type of training .or
providing ep1ployment to persons.
B
c
D
E
F
G
H
Dismissing the appeals by Special Leave, the Court held :-
( 1) In order to claim the benefit of exemption under s. 4(3)(i) of the
Act the property must be held under trust or other legal obligation wholly for
religious or charitable purposes.
The only relaxation is that all the primary
objects of the trust must be of religious and charitable nature and the existence
of any ancillary or secondary object which is not of a religious or charitable
nature but which is intended to subserve the religious and charitable objects
may not prevent the grant of an exemption.
This is because such an ancillary
or secondary obje1:t even though not of a religious or charitable nature is
intended to effectuate the main and primary objects of the trust.
A clear
distinction n1ust be draw'n between the object ot' a trust and the pOWers conferred upon the trustees as incidental to the carrying out of the object.
Mere
application of income to charity 'on the other hand will not avail to secure
ex.emption if under the terms of the will or deed the income is
applicable
in the first instance to non-charitable objects and only the residue will go to
charity. [953-A-B, C, DJ
Conunissioner of Tnconie Tax
v.
Andhra Chamber of Commerce ( 1965)
--.+
55 I. T.R. 722 applied.
Sole Trustee Loka Sl1ikshana Trust v. Conunissioner of Income-tax, Mysore
[19761 1 SCR 461; All India Spinner's Association v. Commissioner of lncometax (1944) 12 l.T.R.
482;
C.l.T,
v. Krishna Warriar
[1964] 8 SCR 36;
Conunissioner of lnco111e Tax v. Bengal Home Industries Association 48 I.T.R.
181; Hyderabad Stock Exchange Ltd. v. C.I.T. 66 I.T.R. 195; and Commissioner
of /ncouze Tax v. Radhaswami Satsang Sabha 25 I.T.R. 472. discu~cd and
distinguished.
(ii) The test is that if one of the obiects of the trust deed is not of a religious or charitable nature and the trust deed confers full discretion on the
trustees to spend the trust funds for an object other than of a religious or
charitable nature, the exemption under s. 4(3) (i) of the Act is not available
to the assessee.
[955DJ
Laksluni Narain Nath Trust v. Commissioner of Income Tax (1969)
73
I.T.R. 402, followed.
(iii) Where there are several objects of trusts some of which are charitable
and some non-charitable and the trustees in their discretion are to apply the
income to any of the objects, the \Vhole trust fails and no part of the income
is exe1npt from the tax.
Where the objects are distributive. each and every
one of the objects nlust be charitable in order that the trust might be upheld
as a valid charity. Tf no definite part of the property or its income is allocated to charitable purposes and it would be open to the trustees to apply the
whole incon1e to any of the non-charitable objects
no exemption
can
be
claimed [952F-H]
Ea.\f l11dta Industries (Madras) Pvt. Ltd. v. Conunissioner of Income Tax
(1967) 65 T.T.R. 611 and Moha1nn1ed Ibrahin1 Riza v. C.l.T. 57 I.A .. 260
applied.
(iv) In the instant case the various industrial and commercial concerns were
,
~
not
st~Jrted by Ram Krishna Da1mia in furtherance of the objects of tru~ts.
_.,,
The concerns \Vere started for the purpose of earning profits which were to be
distributed to the share holders who had invested share money in those concen1s.
The trust property could not be said to be wholly for religiouti
or
charitable purposes \1.'ithin the meaning of s. 4(3) (i) of the
Act.
f954G-H,
955-CJ
Argun1ents for tlze avvellant:
(1) The Trus'~ is entitled! to claim exemption under s. _4(3)(i) of the Act
because the t.rust 'is for religious and charitable purposes only.
YOGIRAJ CHARITY TRUST V. C.I.T. (Ray, C.J.)
94 9
(2) .!\.s 10 clauses which confer power on the trustees to establish any
A
business, undertaking or industry the
inco-!11~ derived fro!?
~uch commercial
concern is to be spent \Vholly for the reltg1ous and chantab1e purposes and
,,_
"'
therefore exemption is permissible under s. 4(3)(i) oi the Act.
(3) The dominant purpose of the founder of the trust as expressed in
the forefront of the Deed is religious or charitable and even if money be
spent on non-charitable purposes it should not be held that the trust is meant
for non-charitable purposes and the founder has expressly provided in Clause
30 of the Trust deed that the deed should not become invalid for the reason
that. some object might be considered unla\vful.
(4) lf any income fron1 the tn1st is utilised
<ind
<tpplied
\\'holly
in
carrying out the primary purposes of the trust. the Tn1st is entitled to claim
exemption under proviso (b) to section 4(3) (i) of the Act and there was no
bar on the trust to carry on business under the Act provided the profits of
business were utilised only for charitable purposes.
A rg111ne11ts {nr thl' respondents:
(1) The Trust \Vas not entitled to claim exemption under s. 4(3)(i) of the
Indian Income-tax Act, 1922 for the simple reason that some of the object of
tthe Trust gave a discretion to the Trustees to apply the funds of the Trust
to purporses which could not be regarded charitable in the eye of la\v,
<2) If out of several objects of the Trllst some of them were found to be
B
c
non-charitable, the '\vhole trust would fail and no part of its income \vould be
D
exempt from tax.
( 3) It was not a genuine charitable trust as claimed by the assessee but
its creation and existence were a camouflage and \\'ere meant only as a device
for the benefit of the settlor Shri Ram Krishna Dalrnia and the industrial and
commercial concerns controJled by him.
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 937 to 966
of 1971
Bishamber Lal, D. N. Banerjee, Pramod Dayal and M. Iyengar,
for the appellant.
• Hardyal Hardy (In CA 937 /71), S. P. Nayar (In CAs. 938-966)
for the respondent.
The Judgment of the Court was delivered by
RAY. CJ.
These appeals by special leave are from the judgment
dated 26 May, 1970 of the High Court of Delhi.
The question referred to the High Court under section 66 (1) of
the Income Tax Act, 1922 referred to as the Act was as follows :
"Whether on the facts and in the circumstances of the
case the income of the trust which was spent on the religious
and chantable purposes within the taxable territories was
exempt under section 4 (3) (i) of the Indian Income Tax
Act, 1922".
The main judgment was delivered in Income Tax Reference No.
40 of 1965.
The High Court answered the question in the negative.
The trust in Income Tax Reference No. 40 of 1965 was taken
as typical of all the cases.
The deed of trust dated 12 April, 1948
E
F
H
950
SUPREME COURT REPORTS
[1976] 3 S.C.R.
A
was made by Ramkrishna Dalmia.
The trust was called
"Jaipur
Charitable Trust". In Jaipur Charitable Trust Rs. 10,000 was given
on trust on the terms and conditions set out in the deed.
'°' I
B
c
D
E
F
G
The objects of the trust in clause 5 (a) are, inter alia, as follows :
(i) To open, found, construct, establish, take over, equip,
promote, conduct, maintain, support, subsidise, grant aids
and make donations to schools,
colleges, Pathshalas,
boarding houses, reading clubs, libraries, art, music
or
literary societies and other institutions,
educational or
otherwise, associations, printing presses, journals, newspapers, periodicals, and other publications for imparting
or developing religious, commercial, industrial,
legal"
medical, engineering scientific or other
knowledge
or
training.
(ii) To give stipends, scholarships, travelling expenses allowances and monetary aids to students and scholars in India
~
and abroad, engaged in any of the pursuits referred to in
sub-clause (i).
(iii) To found, construct, maintain, support, assist or grant aids
or subscriptions to temples, prayer or congregational halls
or other buildings for cultural, social or religious discourses.
(iv) To open, found conduct, maintain, or contribute to the
opening and maintaining of such institutions where work
at living wages can be provided to poor and deserving;
people and also be conducive to the
development
of
industries and benefit of the poor.
( v) To open, found, establish, equip, finance, assist, maintaia
or contribute to religious, commercial technical, industrial,
or comn1ercial concerns, institutions,
associations
or
bodies imparting any type of training or providing employment to persons.
(vi) To give donations, subscriptions or contributions to any
other Charitable Trust in Jaipur State or outside.
There are other objects to help widows, orphans, lunatics, indigent persons and to give relier to the poor and distressed, to build,
equip, tak.e over, conduct, maintain and grant aids to dispensaries,
maternity homes, hospitals, lunatic asylums, to construct. erect and
maintain bridges, ghats, to give relief by subscription or otherwise during
famines, flood, earthquake, pestilence, to help or maintain institutions
for .the cultural,, social or economic advancement of any country or
countries.
For the purpose of carrying out the trust the trustees are empowered
in clause 5 (b), inter alia, (a) to purchase oc otherwise acquire any
H
property, rights leases, concession; (b) to purchase or acquire, start
establish, equip or close any business undertaking or industry; ( c)
purchase, acquire or undertake the whole or any part of property and
liabilities on any person, firm or company.
/
~
(
,
YOGIRAJ CHAR'ITY TRUST V. C.I. T. (Ray, C.J.)
9 5 J
The property of the Trust is vested in the trustees. Clause (9)
A
of the Trust Deed provides that the Trustees shall carry out the aforesaid objec'.s from out of the net income of the Trust left after meeting
the expenses of management and all charges and outgoings so far as
such income shall permit, and shall not utllize the income or any
portion thereof for any other objects or purpose.
Section 4(3) (il of the Act is as follows :-
g
"Any income, profits or gains falling within the following
classes shall not be included in the total income of the person
receiving then1;
(i) Subject to the provisions of clause (c) of sub-section
(!) of section 16, any income derived from property held
under trust or other legal obligation wholly for religious or
charitable purposes, in so far as such income is applied or
accumulated for application to such religious or charitable
purposes as relate to anything done within the taxable territories, and in the case of property so held in part only for
such purposes, the income applied or finally set apart for
application thereto :
Provided that such income shall be included in the total
income.
(a) xx
xx
xx
(b) in the case of income derived from
business, carried on
behalf of a religious or charitable institution, unless the
c
D
income is appljed wholly for the purpose of the institutions
E
and either-
( i) the business is carried on in the course of the actual
carrying out of a primary purpose of the institution, or
(ii) the work in connection with the business is mainly carried
on by beneficiaries of the institution.
(iii) any income of a religious or charitable institution derived
from voluntary contributions and applicable solely to
religious or charitable purposes."
Charitable purpose under section 4(3) of the Act includes relief
of the poor, education, medical relief and the advancement of any other
object of general public utility, but nothing contained in clause (i) or
clause (ii) of section 4(3) applies and shall operate to exempt from
the provisions of the Act that part of the income from property held
under tmst or other legal obligation for private religious
purposes
which does not ensure for the benefit of the public.
The terms of the Trust Deeds in all the cases are similar.
The
pattern of financial dealings of the various Trusts is also the same.
G
The appellant contends that Trust is entitled to claim exemption
H
under section 4(3) (i) of the Act because the trust is for religious and
charitable purposes only.
As to clauses which confer power on trustees to establish any business, undertaking or industry it is said by
A
B
c
D
E
952
SUPREME COURT REPORTS
[1976] 3 s.c.R.
the appellant that the income derived from such commercial concern
is to be spent wholly for the religious and charitable purposes and
therefore exemption is permissible.
The appellant contends that the
dominant purpose of the founder of the trust as expressed in the forefront of the Deed is religious or charitable and even if money be spent
on non-charitable purposes it should not be held that the trust is
meant for non-charitable purpose. The appellant also relies on clause
30 of the trust deed where it is said that the deed should not become
invalid for the reason that some object might be considered unlawful.
The Revenue denies the claim for exemption on the ground that
some objects are non-charitable and the trustees are given an unfettered
discretion with regard to the utilisation of the income.
Some of the
objects of the Trust according to the Revenue give absolute discretion
to the Trustees to apply the funds of the Trust for purposes which cannot be regarded charitable in the eye of law.
The R.evenue contends
that if out of several objects of the Trust some are found to be noncharitable, the whole trust will fail.
The Revenue also contends that
it is uot a genuine charitable trust bnt its creation and existence are
a camoullage and are meant only as a device for the benefit of the
settlor and the industrial and commercial concerns controlled by him.
Clauses 11 and 16 of the deed give an uncontrolled discretion to
the trustees to spend the whole of the trust fund on any of the noncharitable objects of the trust.
The non-charitable objects authorise
the opening and maintaining of commercial institutions where work at
living wages can be provided to the poor and also to contribute to
co1nmercia1, t~chnical, industrial or commercial concerns, institutions,
associations or bodies imparting any type of training
or providing
employment to persons. The Revenue contends that these clause~ are
clearly non-charitable.
Each clause is
independent and distinct,
According to the Revenue it is neither ancillary nor secondary to the
primary dominant purpose of the trust nor can it be said that these
clauses subservc the main object of the trust. Engagement in commercial institutions giving employment on wages cannot be said to
be
F
charitable object. Some of the objects of the trust are non-charitable.
G
H
The trustees have been authorised to utilize the income of the trust for
any purpose mentioned in the Trusi Deed.
The question is whether exemption can be granted where some
objects are charitable and some non-charitable.
Where there are
several objects of a trust, some of which are charitable and some noncharitable, and the trustees in their discretion are to apply the income
to any of the objects, the whole trust fails and no part of the income
is exempt from tax.
Where the objects are distributive, each and
every one of the objects must be charitable in order that the. trust
might be upheld as a valid charity.
If no definite part of the property or of its income is allocated to charitable purposes and it would
be open to the trustees to apply the whole income to any of the noncharitable objects no exemption can be claimed.
(See East
India
Industries (Madras) Pvt Ltd. v. Commissioner of Income tax(') and
Mohammad Ibrahim Riza v. C.l.T.(')
(1) (1967) 65 1.T.R. 611.
(2) 57 I.A. 260.
.
,,
,,.
I
YOGIRAJ CHARITY TRUST V, C.I.T. (Ray, C.J.)
953
ln order to claim the benefit of the exemption under section 4(3)
A
(i) of the Act the property must be held under trust or other legal
obligation wholly for religious or charitable purposes. The only relaxation which may arise in some cases is that all the primary objects of
the trust must be of a religious and charitable nature and the existence
of any ancillary or secondary object which is not ot a religious or
charitable nature but which is intended to subserve the religious and
charitable objects may not prevent the grant of an exemption.
This is
B
because such an ancillary or secondary object even though not of a
re!iQious or charitable nature is intended to effectuate the main and
primary objects of the trust.
If the primary or dominant purpose of a trust is charitable, another
object which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent c
the trust from being a valid charity. A clear distinction must be drawn
between the object of a trust and the powers conferred upon the trustees as incidental to the carrying out of the object. If the only object
of a turst is the construction and maintenance of a swimming bath
which is a purpose of general public utility, the fact that the trustees
are given the power to supply or sell refreshments to persons. who
resort to the bath would not make the trust any of the less charitable.
D
Mere application of income to charity on the other hand will not avail
to secure exemption if under the terms of the will or deed the income
is applicable in the first instance to non-charitable objects and only
the residue will go to charity.
(See Commissioner of Income Tax v.
A ndhra Chamber of Commerce (1).
The appellant contended that if any income from the Trust is, uti\iE
sed and applied wholly in carrying out the primary purposes of the
Trust, the Trust is entitled to claim exemption under proviso ( b) '.o
section 4(3) (i) of the Act. The appellant relied on the recent decision of this Court in Sole Trustee Loka Shikshana Trust v. Commissioner of Income Tax, Mysore(').
The Loka Shikshana Trust was
engaged in the business of printing and publication of newspaper and
journals and the further fact that the activity yielded profit and there
F
were no restrictions on the trust earning profits in the course of its
business went to show that the purpose of the trust did not satisfy the
requirement that it was one not involving the carrying on of any activity
for profit. This Court relied on the decision in All India Spinners'
Association v. Commissioner of Income Tax(') namely, that the charitable purposes exclude objects of private gain.
The appellant contended that there was no bar on the trust to carry
on business under the Act provided the profits of business were utilized
only for· charitable purpose. The appellant relied on the decision of
this Court in C.l.T. v. Krishna Warriar(') In Krishna Warriar's case the
trustees,, were directed to apply 60 per cent of the income of the business
vested in the trustees to charitable purposes and 40 per cent for the
benefit of the family.
The question was whether 60 per cent of the
(!) (1965) 55 I.T.R. 722.
(3) (1944) 12 l.T.R. 482.
(2) [1976] I SCR 461.
(4) [1964] 8 S.C.R. 36.
G
II
A
B
D
E
F
954
SUPREME COURT REPORTS
(1976] 3 s.c.R.
income was liable to tax under proviso (b) to section 4(3) (i) of the
Act on the ground that the entire income was not applied for charitable
purposes. The question that arose in that case dealt with the meaning of
the expression "part" as used in section 4(3) (i)
of the Act that "in
the case of profit so held in part o~ly _for such purposes the income applied or finally set apart for application thereto shall not be included
in the total income of the person
receiving'.
Krishna Warriar's
(supra) case does not deal with the effect of a deed which has charitable as well as non-charitable objects and the trustees have been given
the power to apply the whole of the trust fund
for
non-charitable
objects excluding charitable object.s.
The decision in C.l.T. v. Bengal Home Industries Association(')
Hyderabad Stock Exchange Ltd. v. C.l.T.(') C.l.T. v. Radhaswmni
Satsang Sabha(') on which the appellant relied are all applications of
the ruling in All India Spinners' Association (supra) case that what has
to be found out is whether the object clause has any non-charitable
object. In the Bengal Home Industries (supra) case, the object was to
promote and develop home industries, arts and crafts. The income of
the Association was to be applied solely towards the promotion of and
carrying out of its objects. No portion of the income could be paid or
transferred directly or indirectly by way of dividends to the members.
In the case of winding up the surplus could not be distributed to the
members but were to be transferred to the institution.
In the Hyderabad Stock Exchange (supra) case, the aims
and
objects were not only to further the interests of brokars and dealers
but also to assist, regulate and control the trade in securities, to maintain high standards of commercial honour and integrity, to discharge
and suppress mal-practices to settle disputes and decide all question
of usage, custom or courtesy in the conduct of trade or business. The
objects were found beneficial to a section of the public and of general
public utility. The profit were not to be distributed to the members
but were to be utilized for the promotion of the objects of the Exchange.
Therefore, the object was charitable and the income was applied wholly
for charitable purposes.
In Radl1aswami Satsang Sabha (supra), case several industrial and
commercial concerns were started for the benefit of the Satsanghis.
Those were not run for individual profits nor were the profits distributed among the members.
The concerns were started in furtherance
of its objects of religious and charitable nature.
In the present case, the Income Tax Authorities found that the
various industrial and commercial concerns were not started by Ram
Krishna Dahnia in furtherance of the objects of the_ trusts. The concerns were started for the purpose of earning profits which were to be
distributed to the share-holders who had invested share money in those
concerns.
---- ----
(I) 48 J.T.R. 181.
(2) 661.T.R. 195.
(3) 25 l.T.R. 472.
..
YOGIRAJ CHARITY TRUST V. C.I.T. (Ray, C.J.)
955
This Court in East India Industries (Madras) Privale Limited v.
C.l.T.(') found that one of the objeots of the trust was not for charitable
or religious purposes.
The object was to manufacture.
buy,
sell
and distribute a pharmaceutical medicinal, chemical and other preparations.
The other objects were charitable in nature. The Trust Deed
in East India Industries (Madras) Pvt. Limited (supra) case conferred
power on the trustees to apply the whole or any part of the trust property or fund for all or any other purposes of the trust.
This Court
found that there was no special trust and no particular item of property
had been bumdened with the performance of any specific object of the
trust.
It was open to the trustees to utilize the income for any one
of the objects of the trust to the exclusion of all other objects.
It
would not be a violation of the trust if the trustees devoted the entire
income to the carrying on of a business of manufacture, sale and distribution of pharmaceutical, medicinal and other preparations.
This
Court held that the trust property could not be said to be wholly for
religious or charitable purposes within the meaning of section 4(3) (i)
of the Act.
The present appeals are all of the type of East lndia
Industries (Madras) Private Limited (supra) case and fall within the
ruling in that case.
A
B
c
The test is that if one of the objects of the trust deed is not of
D
a religious or charitable nature and the trust deed confers full discretion on the trustees to spend the trust funds for an object other than
of a religious or charitable nature, the exemption under section 4(3)
(i) of the Act is not available to the assessee.
(See Lakshmi Narain
Nath Trust v. Commissioner of Income Tax(').
For these reasons the appeals are dismissed.
In view of the fact
E
that the High Court directed that the parties will bear their own costs,
the same order is made as to costs.
S.R.
(l) {1967) 65!. T.R. 611.
(2) (1969) 73 I.T.R. 402.
Appeals dismissed.