C.S.P.SINGH, J. - (1.) THE Tribunal Allahabad Bench has at the instance of the Addl. CIT, Lucknow, referred the following question for our opinion :-- "Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the object of the assessee trust are charitable within the meaning of S. 2(15) and that its income is exempt to the extent provided under S. 11 of the IT Act, 1961?"
(2.) ONE Niranjan Lal Bhargava created a trust which is the assessee in this case. The trust deed was executed on 13th Oct., 1952 and registered on the 19th March, 1953. The deed declared that the Niranjan Cinema and its building would vest in the trust deed. the object of the trust was to establish an educational institution where the religious teaching would be compulsory along with the study of ordinary subjects. Preference in admission was to be given to students belonging to Bhargava caste and in the event of vacancies to Brahmin students and for residue seats to such students as the trustees might think fit and proper to admit. The trustees were entitled to grant scholarships for special study and research of religious treatise. The founder trustee desired that the income from that trust property should be utilised for constructing a college, and after its construction for the expenses of the college. The author of the trust appointed himself as one of the trustees along with 10 other trustees, and retained the right to change the trustees during his life time. Sri Avinash Chandra and Sri Naresh Chandra were to Act as the managing Trustees and to get an amount of Rs. 1,000/- each out of the income of the trust. On the death of Avinash Chandra and Naresh Chandra, their respective eldest sons and grandsons were to be managing trustees. Provision was made for appointing the younger sons and grandsons of Avinash Chandra and Naresh Chandra as trustees by the general body of trustees, in case the eldest sons and grand sons were found to be unsuitable. The Managing trustees after Avinash Chandra and Naresh Chandra were to get a sum of Rs. 1,000/- each per month. In the event of the income from the trust property becoming less than 20,000/- per month, the monthly salary of the Managing trustees was to be reduced rateably. The author of the trust constituted himself the President of the trust, and after his death the trustees were given power to appoint President from the trustees were given power to appoint President of the trust, and after his death the trust desired that after his death Avinash Chandra and Naresh Chandra be treasurers and after them their sons and grand sons who were also to become managing trustees, would be made treasures. In the event of there being no issue in the family of Avinash Chandra and Naresh Chandra, the treasures were to be appointed by the general body of trustee. For the asst. yrs. 1958-59 to 1960-61, the income of the trust was held to be exempt by the Tribunal in appeal by its order dt. 28th Sept., 1966. The ITO following the order of the Tribunal treated the income of the trust exempt for the assessment year beginning from 1962-63 to 1966- 67. The CIT, however, issued a notice under S. 263(1) of the new Act. on the view that if the accumulated income of the trust was more than 20,000/- is was not entitled to exemption under s. 11 of the IT Act, 1961. The CIT after hearing the assessee came to the conclusion that the trust was not for charitable purpose as defined under S. 2(15) of the new Act, since the trust was carrying on the business of running a cinema which was an activity of profit. He accordingly set aside the order of the ITO, and directed him to make fresh assessments.
(3.) THE assessee preferred an appeal to the Tribunal. The Tribunal on appeal held that the business and the property itself was held in trust and the object of the trust was charitable as it contemplated the promotion of education and the founding of a college. In view of these conclusions, it aside the order of the CIT.;