Commissioner Of Income-Tax vs Shri Ram Education Foundation
2000 Latest Caselaw 1295 Del

JUDGMENT

Arijit Pasayat, C.J.

1. At the instance of the Revenue, the Income-tax Appellate Tribunal, Delhi Bench-E (in short "the Tribunal"), has referred the following question, under Section 256(1) of the Income-tax Act, 1961 (in short "the Act"), for the opinion of this court :

"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the business of the Jugnu activity was property held under trust for charitable purposes and income there from was to be exempted in accordance with the provisions of Section 11 ?"

2. The assessment year involved is 1972-73.

3. The factual position in a nut-shell is as follows :

The assessed is a society registered under the Societies Registration Act, I860. The object for which the foundation was established was, inter alia, to furnish theoretical and practical education in business and science. In furtherance of the aforesaid objects, it was provided that the foundation may open schools, colleges and other educational institutions, open industrial and commercial undertakings as a means of training men or in support of the institution solely or in partnership with others. In 1950, an institution known as Lala Madan Mohan Lall Mabila Shilp Vidyalaya transferred all its assets and liabilities to the foundation on the condition that it shall apply the assets for the object of Lala Madan Mohan Lall Manila Shilp Vidyalaya Society. In furtherance of the objects of that society, for the purpose of which assets were placed on trust with the foundation, it was running a vocational training centre in the name of "Jugnu" which trains women in the art of stitching and embroidery. Sale of the products of the said fugnu resulted in some surplus. During" the relevant assessment year the assessed disclosed a sum of Rs. 39,392 to have been derived from Jugnu activity. Exemption was claimed in respect of this income under Section 11 of the Act. The Income-tax Officer was of the view that the activity run by the foundation has resulted in surplus which is taxable. The assessed carried the matter in appeal before the Appellate Assistant Commissioner (in short "the AAC"), who upheld the conclusions of the Income-tax Officer. The matter was carried in further appeal before the Tribunal. It was contended that the primary object and purpose for which jugnu activity was carried on was plainly an object of general pubiic utility and it did not involve the carrying on of any activity for profit. The Tribunal accepted this stand holding, inter alia, as under :

"On the materials placed before us there is no scope for concluding that the primary object or dominant purpose of the institution is the carrying on of an activity for profit. The real purpose of the institution is the advancement of the object of imparting vocational training and teaching to

needy women. We therefore hold that the business of the Jugnu activity is property held under trust and for charitable purposes and income there from is to be exempted in accordance with the provisions of Section 11. The lower authorities were wrong on this point and the decisions are set aside."

4. On being moved for reference the question as set out above has been referred for the opinion of this court.

5. We have heard learned counsel for the Revenue. There is no appearance on behalf of the assessed in spite of service of notice.

6. In view of the factual conclusion arrived at, as noted above in the quoted portion, the Tribunal has rightly held that the income was exempted under Section 11 of the Act. The guidelines to be applied in such cases have been indicated by the apex court in Addl. CIT v. Surt Art Silk Cloth Manufacturers Association [1980] 121 ITR 1. That being the position, our answer to the question referred is in the affirmative, in favor of the assessed and against the Revenue.

7. The reference stands disposed of.