Law:

Section:

Section 2(15) of the income-tax act, 1961-charitable purpose-Trust created for construction and maintenance of dharamshala for free public use-Trust deed provided for construction of some shops to be let out for rent and such rental income to be used for trust's objects-Trust collected rents from shops and also halting charges from passengers staying in dharamshala-Whether dominant object of trust was not to earn profit but to feed object of public utility and hence it was a charitable trust-Held, on facts, yes Facts The assessee-trust's objects were: (i) to construct and maintain a dharamshala for free public use; and (ii) to construct some shops and let them out so that the rent therefrom could be used to run the dharamshala. For the years 1971-72 to 1975-76, the assessee-trust claimed exemption under sections 11 to 13 read with section 2(15). The ITO, however, found that the passengers who stayed in the dharamshala were charged halting charges. He, therefore, held that the objects of the trust were not charitable. The AAC confirmed this. On further appeal, the Tribunal partially upheld the assessee's claim. On reference: Held Where the predominant object of the activity of the trust is the carrying out of the object of general public utility and not to earn profit, it would not lose its character of a charitable purpose merely because some profit arises from the activity. In the instant case, the income derived from the trust property had to be utilised for its upkeep and maintenance, i.e., to feed the object of public utility. It was clear that the dominant object of the assessee-trust was not to earn profit but to carry out the object of public utility and, therefore, the profit earned as rent from the dharamshala and the shops could not take the assessee-trust out of the definition in section 2(15). Hence, no activity for profit was carried on by the assessee-trust. Case review Addl. CIT v. Surat Art Silk Cloth Mfrs. Asson. [1980] 121 ITR 1 (SC) followed. Cases referred to Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 1 (SC), Indian Chamber of Commerce v. CIT [1975] 101 ITR 736 (SC), Mahakoshal Shaheed Smarak Trust v. CIT [1983] 140…

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