Law: Income Tax Act, 1961

Section: 11,2(15)

Income-tax----Exemption---Charitable trust---Charitable purpose---General principles---Trust must be for public benefit---Association of employees of company formed for death relief and service benefit---Only those subscribing to fund continuously or their dependents eligible to benefits---Managing Committee to have discretion in matter of grant of benefit---Benefit conferred is not public but private---Association not entitled to exemption---Indian Income Tax Act, 1961, Ss. 2(15) & 11---[CIT v. Andhra Pradesh Police Welfare Society (1984) 148 ITR 287 (AP) dissented from]. The respondent-association was formed by the employees of a company, BEL, with the aims and objects of rendering prompt financial assistance to bereaved families in case of death of the employees of BEL, and to any member who had been regular in subscribing to the fund for a continuous period of not less than seven years, in the event of termination of his services by BEL or on grounds of superannuation, medical disability or other grounds. Under rule 4 of the rules of the association, membership was confined only to subscribing members who were ultimately to be the beneficiaries. Disbursement of service benefits was to eligible persons alone, and regulated by the rules, and at the discretion of the managing committee. On the question whether the association was entitled to exemption under section 11 of the Income Tax Act, 1961: Held, that the rules unambiguously indicated that the benefit of the scheme or the alleged charitable purpose could be utilised only by specified persons who were required to be the subscribers or their dependents. Contributories to the fund allegedly collected for their personal benefits, could not be held to be forming an association for charitable purpose and thus, being entitled to the benefit of exemption under section 11 of the Act. The objects of the society did not fall within the purview of section 2(15) of the Act and its income was not exempt under sections 11 and 12 of the Act. The definition of the term "charitable purpose" under section 2(15) of the Act is inclusive and not exhaustive or exclusive. A perusal of the various provisions of the Act would…

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