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

JUDGEMENT

(1.) THIS is a reference under 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 -63. The question of law referred for our opinion is : "Whether, on the facts and in the circumstances of the case, the income of the Loka 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 -6 -

(2.) THE assessee is the trustee of the Loka Shikshana Trust which was created by a deed dated April 10, 1947. There was a trust called "The National Literature Publications Trust" created by an earlier deed dated July 15, 1935. Under the said trust, the trustee was conducting a printing press and publishing 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 April 10, 1947, was executed for a re declaration of the trust. The object of Loka Shikshana Trust are set out in clause 2 of the said trust deed. The said clause reads as follows : "2. The objects of the trust shall be to educate the people of India in general and of Karnatak in particular by : (a) establishing, conducting and helping directly or indirectly institutions calculated to educate 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 publication 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) supplying the Kannada speaking people with an organ or organs of educated public opinion and conducting journals in Kannada and other languages for the dissemination of useful news and information and for the ventilation of public opinion 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."

(3.) UP to and including the assessment year 1961 -62, the income of the trust was exempted from Income Tax by the Income Tax authorities under the provisions of section 4(3) (i) of the Indian Income Tax Act, 1922. When the 1961 Act came into force of the first day of April, 1962, the question arose was exempt from tax 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 said 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 on 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 the income of the trust was, therefore, entitled to exemption under section 11(1)(a) of the Act.