COMMISSIONER OF INCOME TAX Vs. SOLE TRUSTEE LOKA SHIKSHANA TRUST

JUDGEMENT

(1.) THIS is a referenceunder Section 256(1) of the Income Tax Act, 1961, hereinafter called the 'Act' made at the instance of the Commissioner of Income Tax, Mysore, Bangalore in respect of the assessment year 1962 -03. The question of law referred for our opinion is:

(2.) THE assesses is the trustee of the Lok Shikshana Trust which was created by a deed dated 10 -4 -1947. There was a trust called The National Literature Publication Trust' created by an earlier deed dated 15 -7 -1935. Under the said trust, the trustee was conducting a printing press and publishing a daily paper called 'Samyuktha Karnataka' and a weekly paper called 'Weekly Samyuktha Karnataka' which was later called 'Karma Veer' and also published certain books, pamphlets and other literature; as a result thereof the property of the Trust increased from time to time and, the said property comprised of printing presses, buildings, land and other property set out in the schedule to the trust deed dated 10 -4 -1947. Since doubts arose regarding the legal validity of the trust declared under the deed dated 15 -7 -1935, the trust deed dated 10 -4 -1947 was executed for a declaration of the trust. The objects of the 'Lok Shikshana Trust' are set out in Clause 2 of the said Trust deed. The said clause reads as follows: - -

(3.) UPTO and including the assessment year 1961 -62, the income of the Trust was exempted from income -tax by the IncomeTax Authorities under the provisions of Section 4 (3) (i) of the Indian Income Tax Act, 1922. When the Act came into force on the 'first day of April 1962, the question arose in, respect of the assessment year 1962 -63, whether the income of the Trust was exempt from lax under Section 11(1)(a) read with Section 2(15) of the Act. The Income Tax Officer taking his stand on the definition of 'Charitable purpose' contained in Section 2(15) of the Act held that the income of the Trust was taxable since its purpose was not charitable because it involved the carrying on of an activity for profit. Against the order, the Trustee appealed to the Appellate Assistant Commissioner of Income Tax, who, upheld the contention of the assessee on the ground that the restriction regarding the carrying of an activity for profit applied to all the heads of charitable purpose referred to in the definition and that the word 'profit' referred to in the definition clause meant 'private profit'. In the appeal preferred by the Department to the Tribunal, the Tribunal held that the restrictive words 'not involving the carrying on of any activity for profit' applied only to the last head of charitable objects; that the object of the Trust would fall only under the last head; that the main object of the Trust relating to supply of an organ of educated public opinion would not fall under the head 'Education'; that in the context of Section 2(15), 'Profit' could not mean private profit and it could only mean any surplus earned by an organised activity without any limitation of the extent of the distribution of such profits and that the activity of the Trust could be carried on and its objects could be advanced without expecting any profit and income of the Trust was therefore entitled to exemption under Section 11(1)(a) of the Act.