Saurashtra Cricket Association v. Income Tax Officer

C/SCA/2321/2014 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/SPECIAL CIVIL APPLICATION NO. 2321 of 2014With R/SPECIAL CIVIL APPLICATION NO. 2323 of 2014 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALA andHONOURABLE MR. JUSTICE BHARGAV D. KARIA ================================================================ 1 Whether Reporters of Local Papers may be allowed to NOsee the judgment ?2 To be referred to the Reporter or not ?NO3 Whether their Lordships wish to see the fair copy of the NOjudgment ?4 Whether this case involves a substantial question of law NOas to the interpretation of the Constitution of India or any order made thereunder ? ================================================================ SAURASHTRA CRICKET ASSOCIATION Versus INCOME TAX OFFICER ================================================================ Appearance: MR TUSHAR P HEMANI(2790) for the Petitioner(s) No. 1MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1MRS MAUNA M BHATT(174) for the Respondent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALAand HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 21/01/2020 ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1. Boththesepetitionsarefiled challenging the notice issued under Section 148 of the Income Tax Act, 1961 (for short 'the Act, 1961') for reopening of the assessment year 2009-10 and assessment year 2010-11. Both these petitions were heard analogously and are being disposed of by this common judgment and order. 2.For sake of convenience, Special Civil Application No. 2321 of 2014 is treated as lead matter. 3.The petitioner has challenged the notice dated 08.01.2013 issued under Section 148 of the Act, 1961 by the respondent seeking to reopen the assessment for the A.Y. 2010-11 as well as assessment order dated 30.01.2013 passed by the respondent under Section 143 r/w. Section 147 of the Act, 1961, during the pendency of the petition before this Court. 4.The Coordinate Bench of this Court passed the common order dated 17.02.2014 in both the petitions, which read thus: 1. Heard, Mr. Mihir Joshi, learned Sr. Advocate with Mr. Tushar P. Hemani, learned Advocate for the appellant. 2. Learned Sr. Advocate moves a Draft Amendment, same is allowed. The amendment shall be carried out during the course of the day. 3. The learned Sr. Advocate invited the attention of this Court to the averments made in Paragraph-2.10, which reads as under; 2.10 However, the Respondent, vide order dated 16.04.2013 disposed off the objections raised by the Petitioner and inter alia held that when the original assessment order is framed due to oversight and inadvertence or a mistake, the reopening is valid. A copy of the order dated 16.04.2013 passed by the Respondent is annexed herewith and marked hereto asAnnexure Kto this petition. 4. The learned Sr. Advocate, then, invited the attention of this Court to Paragraph-3.10, which reads as under; 3.10 The Petitioner further submits that whenever an assessment order is framed u/s 143(3) of the Act, the Assessing Officer builds an opinion about all the issues which are expressly and impliedly accepted by him. Under such circumstances, any variation from the opinion, already framed by the Assessing Officer in absence of any tangible material would amount he hierarchy in status of the Court in the country is not decisiveto change of opinion, and therefore, it is not open to the Respondent to now, change his opinion, and reopen the concluded assessment is sought to be done. 4. The learned Sr. Advocate, then, invited the attention of this Court to Paragraph-3.10, which reads as under; 3.10 The Petitioner further submits that whenever an assessment order is framed u/s 143(3) of the Act, the Assessing Officer builds an opinion about all the issues which are expressly and impliedly accepted by him. Under such circumstances, any variation from the opinion, already framed by the Assessing Officer in absence of any tangible material would amount he hierarchy in status of the Court in the country is not decisiveto change of opinion, and therefore, it is not open to the Respondent to now, change his opinion, and reopen the concluded assessment is sought to be done. 5. The learned Sr. Advocate placed reliance on a decision of this Court in the matter of SIDDHI VINAYAK TRANSPORT ASST. COMMISSIONER OF INCOME TAX, [2013] 35 taxmann.com 84(Gujarat). The learned Sr. Advocate invited the attention of this Court to Paragraphs- 9 to 12, thereof; 09. It thus clearly emerges from the record that the Assessing Officer now wishes to reexamine the petitioners claim of deduction on the premise that the earlier Assessing Officer made an error in limiting such allowance to 20% of the total expenditure. In his opinion, 100% disallowance was called for. To the extent that the Assessing Officer, in the scrutiny assessment, did not disallow 80% of the expenditure and limited the disallowance to 20%, had committed an error. 10. We are not examining the validity of the contention of the Assessing Officer, recorded in the form of reasons, for issuing the notice. We are limiting our observations to his assuming jurisdiction of reopening of the assessment on such basis. When the earlier Assessing Officer had framed scrutiny assessment and examined certain deductions thoroughly, it was, thereafter, simply not open to the latter Assessing Officer to reopen the assessment on the basis that the earlier Assessing Officer committed a legal error. Once the claim was examined, scrutiny assessment was framed and Assessing Officer came to the conclusion with or without recording reasons in the assessment order, such an assessment could not have been subjected to the process of reopening. This is not to suggest that the Revenue would be rendered without any remedy even in a case where the Assessing Officer committed a gross error in under assessing income chargeable to tax. 11. Section 263 of the Act, of course, when the requirements laid down in the provisions are satisfied, empowers the Commissioner to take such an order in revision. However, the succeeding Assessing Officer cannot doubt the legality of a conclusion recorded by the earlier Assessing Officer in his assessment order, which was framed after scrutiny. In same what similar circumstance, we had in our judgment dated 16.4.2013 passed in S.C.A. No. 357 of 2013 in case of Transwind Infrastructure Pvt. Lid. Vs. Income Tax Officer, made following observations : 10. From the above, it can be seen that the Assessing Officer was acutely conscious about the petitioner not having deducted tax on labour payment charges of Rs. 3.05 crores and the petitioners contention that it was so done because provision for TDS was not applicable. He was not convinced by such explanation. He, however, for some strange reasons did not apply the provision of Section 40(a)(ia) of the Act instead made adhoc disallowance of Rs. 25,60,000/@ 8% of the total labour payment charges. after scrutiny. In same what similar circumstance, we had in our judgment dated 16.4.2013 passed in S.C.A. No. 357 of 2013 in case of Transwind Infrastructure Pvt. Lid. Vs. Income Tax Officer, made following observations : 10. From the above, it can be seen that the Assessing Officer was acutely conscious about the petitioner not having deducted tax on labour payment charges of Rs. 3.05 crores and the petitioners contention that it was so done because provision for TDS was not applicable. He was not convinced by such explanation. He, however, for some strange reasons did not apply the provision of Section 40(a)(ia) of the Act instead made adhoc disallowance of Rs. 25,60,000/@ 8% of the total labour payment charges. 11.Whatever be the legality of such assessment, fact remains that, in the scrutiny assessment, the Assessing Officer had thoroughly and fully scrutinized the assessees claim of deduction of labour expenditure. To the extent he was inclined to disallow the same, he did so. By no stretch of imagination it can be stated that the issue was not at large before the Assessing Officer in the original scrutiny assessment. Any reexamination of such a question at this stage would only amount to change of opinion. Remedyofreopeningtheassessment, therefore, was simply not available. In the decision of the Supreme Court in case of Commissioner of Income Tax Vs. Kelvinator of India Ltd. reported in [2010] 320 ITR 561 (SC) the Apex Court observed as under: On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, reopening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a goby and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post 1[st ]April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of mere change of opinion, which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain precondition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of change of opinion as an inbuilt test to check abuse of power by the Assessing Officer. Hence, after 1[st] April, 1989, Assessing Officer has power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words reason to believe but also inserted the word opinion in Section 147 of the Act. However, on receipt of representations from the Companies against omission of the words reason to believe, Parliament reintroduced the said expression and deleted the word opinion on the ground that it would vest arbitrary powers in the Assessing Officer. 12. If the Revenue was of the opinion that the Assessing Officer erroneously and to the 12. If the Revenue was of the opinion that the Assessing Officer erroneously and to the prejudice of the interest of the Revenue allowed certain claim, in a given situation, it would have been open for the appropriate authority to exercise revisional powers. However, once the claim was fully examined, power of reopening was simply not available. 12. Such observations would apply in the present case also. We make it clear that it is not a case where the Assessing Officer, while framing original scrutiny assessment, did not examine the petitioners claim of deduction. He was acutely conscious of such a claim and was also of the opinion that the entire claim was not required to be granted. He called for explanation of the assessee and aftertakingintoconsiderationthe explanation, made disallowance to the extent he was convinced to do. If, in the process, he made a legal error, the succeeding Assessing Officer cannot correct such an error, through the process of reopening of the assessment. This is precisely, in the present case, what the respondent seeks to achieve. His reasons recorded clearly reflect such a state of affairs. He expresses his opinion that the disallowance which was limited to 20% of the expenditure was not justified in law and the entire expenditure should have been disallowed. We are afraid, this cannot be the basis for reopening of the assessment previously framed after scrutiny. 6. In view of the above, both the matters require consideration. Hence, RULE. 7. NOTICE as to interim relief, returnable on 3 MARCH, 2014. Ad-interim-relief in terms of PARA-7(b), till then. Direct service is permitted. 5.The Assessing Officer has issued notice under Section 148 of the Act by recording the following reasons for reopening the assessment: “REASONS FOR REOPENING THE ASSESSMENT In this case, the return of Income declaring total income of Rs.NIL has been filed by the assessee Trust. The said return was selected for scrutiny and assessment u/s. 143(3) of the Act was finalized on 20.04.2012, determining total Income at Rs.NIL. 2.On scrutiny of the case records, it reveals that During the F.Y. 2009-10 relevant to AY 2010-11, the assessee-trust has received Rs.13.34 crore from BCCI being TV subsidy/subvention income i.e. sharing of TV broadcasting right income from BCCI. This amount has been credited to income and expenditure as income of the Trust. This income was received in lieu of various tournaments held by BCCI including the one-day tournament held at Rajkot. It is also noticed that the assessee-trust had received TV subsidy of Rs.8.02 crore in AY 2007-08 & 13.81 crore during AY 2009-10. This indicates that the assessee-trust is in business of entertainment of public at large by arranging / hosting / managing cricket matches at national and international level and generate income out of such activity. 3.Secondly, the assessee-trust had also generated advertisement sales income of Rs.1,58,13,475/- during the one day match held on 25.12.2009 at Rajkot. The assessee has raised bills on various parties for sales of advertisement during the year. 4.The above activity of the assessee is very much clear that the assessee had been carrying out the activity in the nature of trade, commerce or business, the activity by the assessee was not to be treated as “charitable purpose” in view of amended provision of Section 2(15). 5.I have, therefore, reason to believe that in this case income claimed as exempt is requires to be taxed. Thus, there is under assessment of income for A.Y. 2010-11. Accordingly, this is a fit case for reopening of the assessment u/s. 147 of the I.T. Act.” 4.The above activity of the assessee is very much clear that the assessee had been carrying out the activity in the nature of trade, commerce or business, the activity by the assessee was not to be treated as “charitable purpose” in view of amended provision of Section 2(15). 5.I have, therefore, reason to believe that in this case income claimed as exempt is requires to be taxed. Thus, there is under assessment of income for A.Y. 2010-11. Accordingly, this is a fit case for reopening of the assessment u/s. 147 of the I.T. Act.” 6.It appears that the Assessing Officer has issued notice under Section 148 in view of the amended provision of Section 2(15) of the Act, 1961 and the sole objection for reopening is such amendment. 7. In view of the above, it is not necessary to advert to the facts of the case, as similar issue is considered by the Coordinate Bench including in case of the petitioner in Tax Appeal No. 268 of 2012 and other allied matters and has held in favour of the assessee, as under: “163.We sum up our final conclusions as under; (i)In carrying on the charitable activities, certain surplus may ensue. However, earning of surplus, itself, should not be construed as if the assessee existed for profit. The word “profit” means that the owners of the entity have a right to withdraw the surplus for any purpose including the personal purpose. (ii)It is not in dispute that the three Associations have not distributed any profits outside the organization. The profits, if any, are ploughed back into the very activities of promotion and development of the sport of cricket and, therefore, the assessees cannot be termed to be carrying out commercial activities in the nature of trade, commerce or business. (iii) It is not correct to say that as the assessees received share of income from the BCCI, their activities could be said to be the activities of the BCCI. Undoubtedly, the activities of the BCCI are commercial in nature. The activities of the BCCI is in the form of exhibition of sports and earn profit out of it. However, if the Associations host any international match once in a year or two at the behest of the BCCI, then the income of the Associations from the sale of tickets etc., in such circumstances, would not portray the character of commercial nature. (iv)The State Cricket Associations and the BCCI are distinct taxable units and must be treated as such. It would not be correct to say that a member body can be held liable for taxation on account of the activities of the apex body. (v)Irrespective of the nature of the activities of the BCCI (commercial or charitable), what is pertinent for the purpose of determining the nature of the activities of the assessees, is the object and the activities of the assessees and not that of the BCCI. The nature of the activities of the assessee cannot take its colour from the nature of the activities of the donor. Discussion of case law: 164. We shall now proceed to deal with the decisions, upon which, strong reliance has been placed on behalf of the Revenue. 165. In the case of Truck Operators Association (supra), the assessee Truck Operators Association had filed an application in Form No.10A for registration of the Society under Section 12AA of the Act along with the certificate of registration granted by the Registrar of Societies and a copy of Memorandum and By-Laws of the Society. The Commissioner rejected the application holding that the Discussion of case law: 164. We shall now proceed to deal with the decisions, upon which, strong reliance has been placed on behalf of the Revenue. 165. In the case of Truck Operators Association (supra), the assessee Truck Operators Association had filed an application in Form No.10A for registration of the Society under Section 12AA of the Act along with the certificate of registration granted by the Registrar of Societies and a copy of Memorandum and By-Laws of the Society. The Commissioner rejected the application holding that the Association was not formed for advancement of object of general public utility within the meaning of Section 2(15) of the Act. The Tribunal allowed the assessee's appeal and directed the Commissioner to grant the registration under Section12AA to the assessee- Society. The Revenue went in appeal before the High Court of Punjab & Haryana. The High Court thought fit to allow the appeal, observing as under; “9. On examination of the objects and the purpose of the Association in the present case, it emerges that the respondent-Association is union of Truck Operators constituted for facilitating its members to carry on the trade of transportation and not to allow the outsider or non-member to undertake any business activity within the precincts of Hansi Town/village. The Association charges fees from its members before the transportation on the basis of the distance involved. The membership and payment of fees are mandatory and the element of voluntary contribution is missing. The association is vigorously pursuing transportation business by receiving freight charges on behalf of its members. The welfare activities adopted for the truck drivers, cleaners and mechanics of the truck owners are in the nature of staff welfare activities, and mechanics of the truck owners are in the nature of staff welfare activities, as are common in other business organizations which cannot be termed for general public utility. 17.The assessee was a union of transport operators registered as a Trade Union under the Indian Trade Unions Act, 1926. On analysis of the objects of the union for which it was constituted, it was discerned that the surplus funds of the trade union could be distributed among the members at the time of its dissolution. In other words, C/SCA/2321/2014 JUDGMENT it was held that the rules and regulations do not impose a legal obligation on the assessee or its members to hold the income of the assessee only for charitable purposes and the element of private gain could not be excluded. The union was, thus, heldnottobeaCharitable Institution.” 166. Thus, on the facts of that case, the High Court took the view that the assessee was not carrying on the activities for charitable purposes and, therefore, was not entitled to the benefit of registration under Section 12AA of the Act. One important aspect which was noticed by the High Court was that the surplus funds of the Trade Union could be distributed among the members at the time of its dissolution. The High Court noticed that the rules and regulations did not impose a legal obligation on the assessee or its members to hold the income of the assessee only for charitable purposes and the element of private gain could not be excluded. This decision, in our opinion, is of no avail to the Revenue. 166. Thus, on the facts of that case, the High Court took the view that the assessee was not carrying on the activities for charitable purposes and, therefore, was not entitled to the benefit of registration under Section 12AA of the Act. One important aspect which was noticed by the High Court was that the surplus funds of the Trade Union could be distributed among the members at the time of its dissolution. The High Court noticed that the rules and regulations did not impose a legal obligation on the assessee or its members to hold the income of the assessee only for charitable purposes and the element of private gain could not be excluded. This decision, in our opinion, is of no avail to the Revenue. 167. In National Institute of Aeronautical Engg. Educational Society (supra), the assessee was an educational society. It moved an application before the Commissioner for grant of registration under Section12AA of the Act. The Commissioner, after examining the record before him, concluded that the assessee was not carrying any charitable activity within the meaning of Section 2(15) as it was charging substantial fees from the students and making huge profits from that business. Consequently, the assessee's application was rejected. The Tribunal, however, allowed the appeal of the assessee. The Revenue went in appeal before the High Court of Uttarakhand. The High Court, while allowing the appeal preferred by the Revenue, observed as under; procedure for registration. Clause (a) of sub Section (1) of Section 12AA empowers the CIT to call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of the activities of the trust or institution and may also make such inquiries, as he may deem necessary in this behalf. Said provision in Section 12AA makes it clear that CIT is not supposed to allow registration with blind eyes. In the present case, CIT has considered the relevant papers before him, which included the income and expenditure accounts of the previous years after the society got registered with the Assistant Registrar Firms, Societies and Chits. The CIT, after considering the record before him, has observed that the society (present respondent) is charging substantial fees from the students and making huge profits. 11. After considering the submissions of the learned Counsel for the parties, we are of the view that mere imparting education for primary purpose of earning profits cannot be said to be a charitable activity. We are of the firm view that, in the expression 'charitable purpose', 'charity' is the soul of the expression. Mere trade or commerce in the name of education cannot be said to be a charitable purpose. And Commissioner Income Tax has to satisfy itself as provided under Section 12AA of the Act before allowing the registration. Question of law stands answered.“ 168. Thus, in the aforesaid case, the High Court took the view that as the Society was charging substantial fees from the students and making huge profits, it could not be said that the assessee was carrying on any charitable activity. This decision also is of no avail to the Revenue. 169. In Hyderabad Race Club (supra), the registration. Question of law stands answered.“ 168. Thus, in the aforesaid case, the High Court took the view that as the Society was charging substantial fees from the students and making huge profits, it could not be said that the assessee was carrying on any charitable activity. This decision also is of no avail to the Revenue. 169. In Hyderabad Race Club (supra), the assessee was a Society registered under the Societies Registration Act, 1860 and the objects, for which, the assessee was established were specified in Para No.3 of the Memorandum of Association. The objects were to encourage, promote the scientific breeding and training of horses, ponies and mules and to carry on the business of a race club in all its branches etc. The ITO rejected the assessee's claim that it was a charitable institution and that its income was exempt under Section 11 on the ground that the assessee was carrying on a business by conducting races which was an activity for profit. On appeal by the assessee, the Tribunal upheld the ITO's order. The matter was ultimately heard by a Full Bench of the High Court of Andhra Pradesh. While answering the substantial question of law in favour of the Revenue and against the assessee, the Full Bench observed as under; “9. It would thus be seen that the scientific breeding and training of horses and the imparting of instructions relating to horse breeding in all its aspects, is shown as an incidental or ancillary object in the memorandum of association of the assessee-company which was established in April 1971. Learned counsel submits that in thememorandumof association constituting the assessee as a company in April, 1971, carrying on the business of a race club in all its branches had to be specified as the main object in order to meet the requirements of the company law, although in point of fact the main object for which the assessee-company was established, was what was stated as an incidental or ancillary object against sl. no. 4 referred to above. It is pointed out that for the purpose of incorporating a company, the business which the company carries on has to be specified as the main object and all other objects have to be specified as incidental or ancillary objects, and this classification for the limited purpose of the Companies Act should not, according to the learned counsel, be confused with the real object for which the assessee-company was established. According to the learned counsel, the basic or dominant object for which the assessee was established, whether as a society prior to April, 1971, or as a company from April, 1971, was to encourage and promote the scientific breeding and training of horses and to impart instructions in and to diffuse useful and scientific knowledge of horse breeding and to encourage horse breeding in all its aspects which, according to the learned counsel, are objects of general public utility. The other objects specified, whether in the memorandum of association relating to the assessee as a society or in the memorandum of association relating to the assessee as a company, are all subservient to the main object of "scientific horse breeding". Consequently, the doctrine of dominant or primary object should be invoked in the present case in order to examine whether the dominant or primary object for which the assessee is established, is charitable in character. 10. We are unable to agree with the learned counsel that the dominant or primary object for which the assessee is established either as a society or as a company, is the scientific breeding of horses, and not for the purpose of carrying on business in conducting races. Referring to the memorandum of association of the assessee as a society under the Societies Registration Act, we see no ground to regard the object specified in clause (c) of para 3 as a power conferred on the society to carry on the business to advance and promote the socalled main object of scientific breeding and training of horses. In the first place, paragraph 3 specifically mention that carrying on the business of a race club is an object for which the society is established. It is not in the nature of a power conferred on the society. It is true that some of the objects specified in para 3 of the memorandum of association relate to powers conferred on the society and there is, to some extent, a mix-up of the objects and powers in pars. 3. We have, however, no difficulty in regarding the carrying on of the business by conducting races as being in the nature of an objects rather than a power. If any doubt in the above regard subsists as regards the memorandum of association of the society, that is clearly set at rest while setting out the objects for which the assessee was established as a company. As we have already referred to above, the memorandum of association of the assessee after its incorporation in April, 1971, as a company clearly states that the main object to be pursued by the assessee company on its incorporation, is to carry on the business of a race club in all its branches. Even when the assessee was a society, carrying on the business of a race club was obviously the main object although it was mixed up with other objects, as there was no statutory requirement that the main objects and ancillary objects should be separately specified in the case of society. We are unable to appreciate the learnedcounsel'scontentionthat notwithstandingthememorandumof association specifying the carrying on of the business of a race club as the main object for which the assessee-company was incorporated, we should hold that the main object for the purpose of the Companies Act is the carrying on of the business of a race club, and the main object for the purpose of the I.T. Act is the scientific breeding of horses. We must reject the contention that the main objects for which the assessee was established should be regarded differently for the purpose of the companies Act and the I.T. Act. The provision contained in the memorandum of association is unlearned counsel. We have, therefore, no difficulty in coming to the conclusion that the main object for which the assessee was established whether as a society or as a company, was to carry on the business of a race club and all other objects are either incidental or ancillary to the above main object. Thus, even invoking the doctrine of dominant or primary object, we must hold that the assessee was established with the dominant or primary object of carrying on the business of a race club by conducting a races which, on the own admission of the learned counsel, is not charitable in character. This itself is sufficient to demolish the assessee's claim that it must be regarded as having been established for charitable purposes by invoking the doctrine of dominant or primary object.” 170. Thus, on the facts of that case, the Full Bench, ultimately, held that the assessee was established with the dominant or primary object of carrying on the business of a race club by conducting races which cannot be termed as charitable in character. This decision also is of no avail to the Revenue in the case at hand. 170. Thus, on the facts of that case, the Full Bench, ultimately, held that the assessee was established with the dominant or primary object of carrying on the business of a race club by conducting races which cannot be termed as charitable in character. This decision also is of no avail to the Revenue in the case at hand. 171. In Dharmaposhanam Co. (supra), the objects of the assessee Company were to raise funds by conducting kuries with Company as foreman, receiving donations and subscriptions by lending money on interest and by such other means as the Company would deem fit to do the needful for the promotion of charity, industries etc. The appellant derived income from the property, money lending and business in kuries or chit funds held under the trust and claimed exemption from tax in respect of the said income under Section 11. The Tribunal held that the assessee was not entitled to exemption. The matter went right upto the Supreme Court. The Supreme Court, while dismissing the appeal of the assessee, observed as under; “On a consideration of the rival contentions of the parties, the position appears to be this. The appellant can succeed in his claim to exemption under section 1 1 (1)(a) of the Act if the income from the business of conducting kuries and of money lending can be said to be income derived from property held under trust wholly for charitable purposes. It is well settled that business is "property" within the meaning of section 11(1)(e). C.I.T. v. Krishna Warrier, (1964) 53 ITR 176 (SC). That is also evident from the provisions of section 11 (4), and reference may be made also to section 13(1)(bb). Further, it is apparent from the terms of the Memorandum of Association and the Articles of Association that the business of conducting kuries and of money lending is held under trust. The question is: Is the business held under trust for charitable purposes ? There can be little doubt that when sub-clause (a) of clause 3 of the Memorandum says "To raise funds by conducting kuries, with company asforeman,receivingdonationsand subscriptions by lending money on interest and by such other means as the company deem fit". it refers to powers conferred on the appellant to raise money in aid of, and for the purpose of accomplishing, the objects mentioned in sub-clause (b) of clause 3 of the Memorandum. Upto June 6, 1965 sub-clause (b) read : "To do the needful for the promotion of charity, education, industries, etc. and public good". Can all the purposes mentioned in sub-clause (b) be described as charitable purposes ? Section 2(15) of the Act defines the expression "charitable purpose" as including "relief of the poor, education, medical relief and the "To do the needful for the promotion of charity, education, industries, etc. and public good". Can all the purposes mentioned in sub-clause (b) be described as charitable purposes ? Section 2(15) of the Act defines the expression "charitable purpose" as including "relief of the poor, education, medical relief and the advancement of any other object of general public utility not involving the carrying on of any activity for profit." Two objects in sub-clause (b) of clause (3) of the Memorandum need to be considered, "industries" and "public good". As regards the latter, the decision on what should be the "purposes of common good" was left to the general meeting by Article 58 of the Articles of Association. Having regard to the context in which these words appear in the Memorandum and the Articles, they must evidently be referred to the residue general head in the definition in section 2(15) of the Act, that is to say, "the advancement of any otherobjectofgeneralpublic utility............ But this head is qualified by the restrictive words "not involving the carrying on of any activity for profit." The operation of an industry ordinarily envisages a profit making activity, and so far as the advancement of public good is concerned, it is open to the appellant to pursue a profit making activity in the course of carrying out that purpose, which of course depends on the nature and purpose of the "public good. Nowhere do we find in the material before us any limiting provision that if the appellant carries on any activity in the course of actually carrying out those purposes of the trust it should refrain from adopting and pursuing a profit making activity. In Sole Trustee, Loka Shikshana Trust v. Commissioner of Income-Tax, Mysore, (1975) 101 ITR 234, 243 (SC), Khanna and Gupta, JJ., dealing with a case in which the assessee carried on a business in the course of the actual carrying out of a primary purpose of the trust, rejected the claim to exemption and declared :- "The fact that the appellant trust is engaged in the business of printing and publication of newspaper and journals and the further fact that the aforesaid activity yields or is one likely to yield profit and there are no restrictions on the appellant-trust earning profits in the course of its business would go to show that the purpose of the appellant- trust does not satisfy the requirement that it should be one 'not involving the carrying on of any activity for profit........ Ordinarily profit is a normal incident of business activity and if the activity of a trust consists of carrying on of a business and there are no restrictions on its making profit, the Court would be well justified in assuming in the absence of some indication to the contrary that the object of the trust involves the carrying on of an activity for profit." Beg, J., in the same case, observed "The deed puts no condition upon the conduct of the newspaper and publishing business from which we could infer that it was to be on "no profit and no loss" basis .... That character (i.e. of the deed) is determined far more certainly and convincingly by the absence of terms which could eliminate or prevent profit making from becoming the real or dominant purpose of the trust. It is what the provisions of the trust make possible or permit coupled with what had been actually done without any illegality in the ;Nay of profit making, in the case before us, under the cover of the provisions of the deed, which enable us to decipher the predominantly profit making character of the trust." Beg, J., in the same case, observed "The deed puts no condition upon the conduct of the newspaper and publishing business from which we could infer that it was to be on "no profit and no loss" basis .... That character (i.e. of the deed) is determined far more certainly and convincingly by the absence of terms which could eliminate or prevent profit making from becoming the real or dominant purpose of the trust. It is what the provisions of the trust make possible or permit coupled with what had been actually done without any illegality in the ;Nay of profit making, in the case before us, under the cover of the provisions of the deed, which enable us to decipher the predominantly profit making character of the trust." In a subsequent case, Commissioner of Income-Tax, Kerala v. Cochin Chamber of Commerce and Industry, (1975) 101 ITR 796 (SC), this Court extended the test to income derived from activities carried on in aid of, and incidental to, the primary object of the trust. We may note that no attempt has been made by the appellant before us to cast doubt on the validity of the observations made in those two cases, and we proceed on the footing that they convey the true content of the law. It is, therefore, apparent that among the objects contained in the original unamended sub-clause (b) of clause (3) of the Memorandum are objects which, while referable to the residual general head in the definition of "charitable purpose" in section 2(15) of the Act, nonetheless do not satisfy the condition that they should not involve "the carrying on of any activity for profit." The result is that the objects "industries" and "common good" cannot be described as "charitable purposes". What follows then is this, that the said sub-clause (b) can be said to contain some objects which are charitable and others which are non- charitable. They are all objects which appear to enjoy an equal status. It is open to the appellant, in its discretion, to apply the income derived from conducting kuries and from money lending, to any of the objects. No definite part of the business or of its income is related to charitable purposes only. Consequently, in view of Mohammed Ibrahim Raza v. Commissioner of Income-'Tax, (1930) LR 57 IA 260; AIR 1930 PC 226 and East India Industries (Madras) Private Limited v. Commissioner of Income-Tax, (1967) 65 ITR 611 (SC), , the entire claim to exemption must fail and it cannot be said that any part of the income under consideration is exempt from tax. That is the position in regard to the assessment years 1962-63 to 1965-66 before us” 172. Thus, in the facts of that case, the Supreme Court, ultimately, held that the objects “industries” and “common good” could not be described as “charitable purposes”. This decision also, in our opinion, is of no avail to the Revenue. 173. In the case of Sole Trustee Loka Shikshana Trust (supra), the appellant was the sole trusty of a trust. The object of the trust was to educate the people of India in general and of Karnataka 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 1962-63 to 1965-66 before us” 172. Thus, in the facts of that case, the Supreme Court, ultimately, held that the objects “industries” and “common good” could not be described as “charitable purposes”. This decision also, in our opinion, is of no avail to the Revenue. 173. In the case of Sole Trustee Loka Shikshana Trust (supra), the appellant was the sole trusty of a trust. The object of the trust was to educate the people of India in general and of Karnataka 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 language 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. The High Court held that the income of the trust was not entitled to exemption under Section 11 read with Section 2(15) of the Act. The assessee, went in appeal before the Supreme Court. The Supreme Court, while dismissing the appeal of the assessee, observed as under; “In addition to the power which the sole trustee had to collect donations and subscriptions for the