In the High Court of Judicature at Madras
Dated: 01/12/2003
Coram
The Hon'ble Mr. Justice R. Jayasimha Babu
and
The Hon'ble Mr. Justice S.R. Singharavelu
Tax Case No. 28 of 2000 and Tax Case No. 266 of 2000
and Tax Case No. 270 of 2000
Sri Aurobindo Ashram Harpegon
Workshop Trust,
3 & 5, Rue Dupuy,
Pondicherry - 605 001. ... Appellant in
all the T.Cs.
-Vs-
The Assistant Commissioner
of Wealth-tax,
Circle I (1),
Pondicherry. ... Respondent in
all the T.Cs.
Tax Case appeal under Section 27A of the Wealth Tax Act, 1957 against
the order of the Incometax Appellate Tribunal, Madras "D" Bench, made in
W.T.A. Nos: 1188, 1189 and 1190/Mds/92 dated 14.10.1999 for the assessment
years 1983-84, 1984-85 and 1985-86.
!For appellant : Mr.P.P.S. Janardhanaraja for
M/s. Subbaraya Aiyar
^For respondent : Mr. T. Ravi Kumar,
Junior Standing counsel for
Incometax Department.
:O R D E R
(Order of the Court was
delivered by R. Jayasimha Babu, J.)
The question raised in these appeals by the assessee is as to whether
the Tribunal is right in holding that the assessee is not entitled to
exemption under Section 5 (1) (i) of the Wealth Tax Act.
2. The assessee is a trust whose objects are set out in clause 4A of
the Trust Deed dated 18th December 1967, which reads thus :
” 4A. The objects of the Trust shall be :
i. To aid and assist in the development, and maintenance of Sri
Aurobindo International Centre of Education and Sri Aurobindo Ashram or any
other public Trust for charitable purpose and to establish and/ or take over
and/or purchase and/or otherwise acquire and run and manage services and
industries required for the purpose of Sri Aurobindo International Centre of
Education and/or Sri Aurobindo Ashram and/or departments connected therewith
or any other Public Trust for charitable purpose.
ii. To organise, encourage, promote, spread and impart all kind of
educations and/or aid and/or assist in imparting and/or contribute to Sri
aurobindo Ashram and/or Sri Aurobindo International Centre of Education for
commercial, industrial and other educations both theoretical and practical
based on the ideals of Sri Aurobindo and the Mother;
iii. To carry on practical research, experiments, works, etc. for
the solution of labour problems and solve them and demonstrate the solution in
actual practice and for this purpose and for promotion and demonstration of
harmonious, integrated and right relationship between labour, management and
consumers to promote and/or establish model industries and businesses;
iv. To impart and/or aid in imparting integral education and to
promote and to help, the establishment and development of an intergral society
and life divine in all its aspects and departments on the lines envisaged by
Sri Aurobindo and the Mother;
v. To promote, carry on, aid or assist various works and efforts in
connection with labour welfare or for the benefit of labour and/or for finding
work for the unemployed;
vi. To establish and organise, maintain, grant and assist without
distinction of religion or community, schools, dispensaries, recreation
centres, libraries, Technical and Experts aid and advice bureau, parks,
children’s centres, physical culture centres, etc.;”
2. Clause 4B of the trust deed obligates the trustees to utilise the
entire income and corpus of the trust only for contributing to Sri Aurobindo
International Centre of Education and/or to Sri Aurobindo Ashram and/or for
the carrying on the objects of the Trust and/or for the development of the
activities and properties of the trust. Clause 4C of the trust deed further
obligates the trustees to carry on only such Trade, Commerce and Industry as
can be carried on either in the course of actually carrying out of any or part
of any of the purposes of Sri Aurobindo Ashram and/or Sri Aurobindo
International Centre of Education and/or this Trust.
3. Clause 6 of the deed in its sub-clauses (i) to (xiv) specifies the
powers of the trustees in addition to those conferred on the trustees by the
general law or other terms of the document. The trust deed is a lengthy
documents and contains 44 clauses. The assessee trust has been treated as a
public charitable trust within the meaning of Section 11 of the Income Tax
Act.
4. Section 5 (1) (1) of the Wealth Tax Act provides that wealth tax
shall not be payable by an assessee in respect of any “property held by him
under trust or other legal obligation for any public purpose of a charitable
religious nature in India”. There is a proviso under that clause which is not
relevant for the present purpose as the revenue has not sought to rely on the
same for denying the exemption to the assessee.
5. The term “charitable” has not been defined in the Wealth Tax Act.
However, in the income tax Act in Section 2(15) “charitable purpose” has been
defined in an inclusive way as including “relief of the poor, education,
medical relief and the advancement of any other object of general public
utility.” The words “not involving in the carrying on any activity for profit”
which had followed “the object of general public utility” were omitted from
the definition by the Finance Act 1983 with effect from 1.4.1984.
6. This Court in the case of Commissioner of Wealth Tax vs. Gangabai
Charities [(1999) 236 I.T.R. 735] has held that the interpretation of a trust
deed for considering the liability of the trust for being regarded as a
charitable trust under the Income Tax Act is relevant for the purpose of
considering the claim of such a trust for exempting its properties from wealth
tax under the Wealth Tax Act.
7. The Supreme Court in the case of Commissioner of Income Tax vs.
Andhra Chambers of Commerce [(1965) 55 I.T.R. 722] has held that the
incidental benefit received by a member of the chamber would not debar the
chamber of commerce from being treated as an institution which is charitable
as the benefit received by the executor is only incidental.
8. A Constitution Bench of the Supreme Court in the case of
Additional Commissioner of Income Tax, Gujarat, vs. Surat Art Silk Cloth
Manufacturers Association reported in 121 (1980) I.T.R. 1 has held that the
object of the Surat Art Silk Cloth Manufacturers Association which was to
promote commerce and trade in art silk yarn, raw-silk, cotton yarn, etc. was
an object of general public utility. It was also held in that case that
though the primary purpose of the trust is advancement of objects of general
public utility, the institution would remain charitable even if a non
charitable object was mentioned in the deed, provided it was only incidental
for achieving the primary purpose of the trust.
9. More recently, a two Judge Bench of the Supreme Court in the case
of Director of Income Tax vs. Bharat Diamond Bourse [(2003) 259 I. T.R.
280] held that a diamond bourse whose principal object was to facilitate the
diamond trade so that maximum revenue could be earned by way of foreign
exchange and also make the diamond trade more competitive in the international
market, was an object of general public utility and, therefore, charitable.
10. The objects of the trust in this case are clearly such as to
entitle the trust to be regarded as charitable trust as all the objects
qualify for being treated as objects either for promoting education or as
objects of general public utility. This trust, as noticed earlier, has been
treated as charitable trust under the Income Tax Act. We see no good ground
to treat the trust differently for the purpose of the Wealth Tax Act as the
properties held by the trust are burdened with the obligation of being used or
applied only for the objects of the trust which are charitable in nature.
11. Learned counsel for the revenue sought to contend that this Court
has already rejected a similar claim by a trust similar to the one now before
us in the case of Commissioner of Income-tax, Tamil Nadu V, vs. Workshop
Trust, [(1983) 142 I.T.R. 26]. In that case, the Court considered a trust
deed which was executed by a disciple of Shri Aurobindo, who after having
started a carpentary workshop, created a trust called a Workshop trust. The
Court held that as the only purpose of the trust was to benefit the Aurobindo
Ashram financially and the trust had no other purpose, it was not possible to
regard the trust as a charitable trust. It was found that there were no
educational objects in the trust that was created, and the there was no other
object of general public utility and further that the trust that was created
did not fall within any other accepted heads of charity. The facts of this
case are entirely different. The mere fact that the author of this trust like
the author of the other trust considered in that case, are disciples of Sri
Aurobindo, does not on that score, render all trust created by such disciples
not charitable.
12. The objects of this trust which have been extracted clearly show
that the objects were not confined to pass on the income of the business run
by the trust to Aurobindo Ashram. The objects are much wider and include
objects of general public utility.
13. The numerous powers conferred on the trustees in relation to the
actual running of the business does not in any way derogate from the objects,
as all powers are to be exercised only for the purpose of fulfilling the
objects of the trust, and the trustees have no right to distribute among
themselves any part of the income or the properties of the trust.
14. Clause 4B of the Trust deed makes it amply clear that the corpus
of the trust was only to be utilised and/or accumulated for contributing to
the Aurobindo International Centre of Education and other institutions which
are charitable institutions. As held by the Supreme Court in the case of
Surat Art Silk Cloth Manufacturers Association cited supra, the carrying on of
an activity for profit in the course of actually carrying out the primary
purpose of the trust would not disqualify the trust from being regarded as a
charitable trust. The fact that the trust here carries on a business and
derives an income therefrom and holds properties for the purpose of running
the business does not, disable it from being regarded as a charitable trust
and the properties held by it as being held for a charitable purpose. It is
not the case of either the revenue or the assessee that the properties held
are for religious purposes.
15. The view taken by the Tribunal that the properties held by this
Trust are not held for charitable purpose is, therefore, erroneous. The
appeal is allowed. The question set out earlier is answered in favour of the
assessee and against the revenue.
Index : Yes
Website: Yes
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To
1. The Assistant Registrar,
Income Tax Appellate Tribunal,
Rajaji Bhavan, III Floor,
Besant Nagar,
Madras 90.
2. The Secretary,
Central Board of Revenue,
New Delhi.
3. The Commissioner of Wealth Tax,
Madras
4. The Commissioner of
Wealth Tax (Appeals),
Madras.
5. The Assistant Commissioner
of Wealth Tax,
Circle I (1),
Pondicherry.