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

CIVIL APPEAL No. 2130/1970Supreme Court[1976] 1 S.C.R. 46128 August 1975Bench: 3 JudgesAuthor: HANS RAJ KHANNA, M. HAMEEDULLAH BEG, A.C. GUPTA26 pages
AI SummaryDismissed

What did the Supreme Court hold?

The Tribunal, dismissing the appeal, held that the word 'profit' in Section 2(15) of the Income-tax Act, 1961, is not confined to private profit and includes any profit earned from an activity. The Tribunal reasoned that the statute uses the word 'profit' without qualification, and there is no justification to read 'private' into it. The words 'general public utility' are wide but exclude objects of private gain. The Tribunal also held that the addition of the words 'not involving the carrying on of any activity for profit' in the 1961 Act was a legislative intent to impose a new qualification, and it was not merely affirming the position under the 1922 Act. The Tribunal further clarified that 'education' in Section 2(15) refers to systematic instruction and training, not the broad acquisition of knowledge through activities like reading newspapers. Consequently, the trust's engagement in the business of printing and publication of newspapers and journals, which yielded profit, did not satisfy the requirement of being an object 'not involving the carrying on of any activity for profit'. The Tribunal noted that the trust deed did not impose restrictions on profit-making, and the activities were conducted in a manner that could be lucrative, thus disqualifying it from being a charitable purpose.

What were the facts?

The assessee, Sole Trustee Loka Shikshana Trust, was established by a deed in 1962, re-declaring a trust from 1935. The earlier trust's assets were Rs. 4308.10.9, while the redeclared trust's value was Rs. 2,97,658/-. The trust's objects included educating people through establishing institutions, running reading rooms and libraries, publishing books and journals, and supplying Kannada-speaking people with organs of educated public opinion. The Income-tax Officer communicated on April 27, 1963, stating that the trust's sole activity was printing, publication, and sale of newspapers and journals, which constituted an activity for profit, thus rejecting its claim for tax exemption. The assessee appealed this decision to the ITAT.

What were the issues?

1. Whether the word 'profit' in Section 2(15) of the Income-tax Act, 1961, is confined only to private profit, or if it includes any profit earned from an activity. The assessee contended that 'profit' in Section 2(15) should be interpreted as private profit, and since the trust's activities were for general public utility, it should be considered charitable. The revenue argued that the word 'profit' is not qualified and includes any profit earned from an activity. 2. Whether the trust's activities of printing and publishing newspapers and journals, which yielded profit, satisfied the requirement of being an object of general public utility 'not involving the carrying on of any activity for profit' under Section 2(15). The assessee argued that these activities were educational and thus charitable. The revenue contended that the profit-making nature of the activity disqualified it from being a charitable purpose under the amended definition.

Which sections of the Income-tax Act were involved?

Section 2(15),Section 11,Section 261

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---,.. __ ) A B c D E );' G SOLE TRUSTEE LOKA SHIKSHANA TRUST v. COMMISSIONER OF INCOME TAX, MYSORE August 28, 1975 (fl. R. KHANNA, M. H. BEG AND A. C. GUPTA, JJ.] 461 lncon1e Tax Act, 19'61, Section 2(15)-Definition of 'Charitable purpose'- "The advancement of anv other object of f?eneral public utility not invof\·ing the carr;inR on of any activity for profit', n1eaning of-"Profit'' if confined onlv to private vrofit. lnco111e Tax Act, 1961. Sections 2(15) and 11-"Education". 111eani11g a/- Appellant trust engaged in the business of printing and publication of newspaper and journals and making profits, if entitled to tax exe1nption.

Section 2(15) of the Income-tax Act provides that 'charitable purpose' in- cludes relief of the poor, education medical relief. and the advancement of any other object of general public nti.lity.

The appellant is a sole trustee of the "1-0ka _shikshana ·Trust'', holding pro~ perties mentioned in a schedule attached to a deed of trust executed on 19-2-1962 by himself purporting to re-declare a trust of 15-7-1935. The total assets of the earlier trust of 1935 consisted of a sum of Rs. 4308.10.9 only. Under the pro- visions the e

The order continues below.

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