COMMISSIONER OF INCOME TAX Vs. EAST INDIA INDUSTRIES PRIVATE LIMITED

JUDGEMENT

(1.) THE assessee, the East India Industries Ltd., paid a donation of Rs. 7,500 to a trust called the Agastyar Trust and claimed exemption from tax under section 15B of the Income-tax Act. THE trust had been created by the partners of a business firm, Messrs. K. Rajagopal and Co. This firm has been carrying on business in waste paper and under the terms of the partnership was setting apart 80 per cent. of the profits for charitable and religious purposes. One Venkataraman Chetti was appointed the trustee for administering these funds and on July 1, 1944, a trust deed was executed. It purports to be a declaration of trust made by the trustee, Venkataraman Chetti, and is witnessed by the two partners of the firm of Rajagopal and Co. We shall presently refer to the objects of the trust. But in so far as the assessee, who made the donation to the trust is concerned, his claim to exemption from income-tax was negatived by the Income-tax Officer on the ground that the trust does not fulfill the conditions laid down under section 15B of the Act. THE Appellate Assistant Commissioner to whom an appeal was taken held likewise. Apparently, before him the question whether the trust was one which complied with the conditions is proviso (b) to clause (i) of section 4(3) was more prominently argued. But, in any event, he held that since the trust itself was not entitled to the exemption contemplated under section 4(3)(i), the donor was likewise not eligible for exemption from tax on the amount of donation made to that trust.

(2.) WHEN the matter was taken up in further appeal to the Income-tax Appellate Tribunal, the Tribunal observed that in relation to the previous assessment year, it had held that the Agastyar Trust was a public trust and that any donation made to the said trust is an allowable deduction under section 15B. The matter was not further dealt within greater detail regarding the scope of the exemption contained in section 4(3)(i) of the Act in relation to the Agastyar Trust. Thereupon, the Commissioner of Income-tax made an application under section 66(1) of the Act and the Tribunal referred the following question for the determination of this court :

(3.) THE further clauses of the trust deed provide for the appointment of additional trustees, the administration and management of schools, colleges, etc., that might be set up, investment of the moneys, confer power on the trustee to alter the form of the properties and re-invest the funds, to grant leases, to borrow, and lastly, to conduct or carry on any business or undertaking alone or in partnership with any other person for the benefit of the trust. It is seen accordingly that most of the objects set out in the declaration of the trust are either of a charitable or religious nature. Once object, however, appears to partake of neither character and that is item 4 above : "to manufacture, buy, sell and distribute pharmaceutical, medicinal, chemical and other preparations and articles such as medicines, drugs medical and surgical articles, preparations and restoratives or foods." It appears further that in pursuance of the power vested in the trustees to conduct or carry on any business or undertaking alone or in partnership, the trust became a partner in two firms, the Indian Metal and Metallurgical Corporation and the Indian Textile Products Corporation.