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Director Of Income-Tax (Exemption) v. Eternal Science Of Man'S Society
Factual and Procedural Background
The Income-tax Appellate Tribunal relied on a Division Bench decision of this court in CIT v. Hotel and Restaurant Association, [2003] 261 ITR 190, to hold that the accumulation of income by the respondent-assessee for multiple purposes was permissible. The present appeal challenges the correctness of the Tribunal's order permitting such accumulation by the respondent-trust.
Legal Issues Presented
- Whether accumulation of income by the respondent-trust for multiple objects, including acquisition of movable and immovable property for the purposes of the trust, is permissible under law.
- Whether accumulation for acquisition of property without specifying the precise purpose violates the charitable objects stipulated in the trust's memorandum.
Arguments of the Parties
Revenue's Arguments
- The accumulation in the present case was made for six different objects out of a total of 22 objects for which the trust was established.
- While accumulation for multiple objects is permissible, the accumulation for acquisition of movable and immovable property was challenged because it did not specify the purpose of such acquisition.
- The clause permitting acquisition of property could potentially allow the trust to acquire property for purposes not included in the memorandum, which is impermissible.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| CIT v. Hotel and Restaurant Association, [2003] 261 ITR 190 | Permissibility of accumulation of income for multiple purposes by a trust | The Court relied on this precedent to uphold the Tribunal's finding that accumulation for a plurality of purposes was permissible. |
Court's Reasoning and Analysis
The Court observed that accumulation of income for multiple purposes is permissible under the law, as established by the cited precedent. The respondent-trust had accumulated income for six different purposes, five of which were undisputedly charitable. The sixth purpose involved acquisition of movable and immovable property for the achievement of other objectives of the trust.
The Court rejected the Revenue’s contention that clause (f) permitting acquisition of property could allow the trust to act beyond its stated charitable objects. It reasoned that since all 22 objects in the memorandum are charitable, acquisition of property under clause (f) must be for one of those charitable purposes. The Court found the apprehension that property could be acquired for non-charitable purposes to be unfounded, emphasizing that the reference to the trust’s purposes must be confined strictly to those enumerated in the memorandum.
Accordingly, the Court found no merit in the Revenue’s objection and upheld the Tribunal’s order.
Holding and Implications
The appeal is dismissed.
The direct effect of this decision is the affirmation that accumulation of income by a charitable trust for multiple purposes, including acquisition of property as stipulated in the memorandum of objects, is permissible. No new precedent was set, and no broader legal implications beyond the parties are discussed.
T.S Thakur, J.:— The Income-tax Appellate Tribunal has, relying upon a Division Bench decision of this court in CIT v. Hotel and Restaurant Association, [2003] 261 ITR 190, held that the accumulation of its income by the respondent-assessee for a plurality of purposes, was permissible. The present appeal assails the correctness of the said order.
2. Ms. Bansal counsel appearing for the Revenue, argued that the accumulation in the present case was for six different objects out of a total of 22 objects for which the trust had been established. These objects, in regard to which the accumulation was made by the assessee, are as under:
“(a) Publication of books, literature, magazines, pamphlets, etc. for children and for educating people in the art of living based on the Indian traditions and modern scientific knowledge.
(b) To provide monetary assistance to any educational or other institution engaged in the promotion of education or physical health, or social and spiritual upliftment or to collaborate with organisation having such national or international programme for promotion of social and educational and/or physical health including sports.
(c) To establish and run nursery schools for children.
(d) To establish and run libraries for children and adults.
(e) To donate to educational and other institution engaged in promotion of physical health, mental and intellectual health and so develop selflessness, love truth and real brotherhood.
(f) To acquire any movable and immovable property or lease, or gift or hire or purchase for any of the purposes of the society including the above objects.”
3. She submitted that while the plurality of the objects for purposes of accumulation was permissible in law, in the light of the decision of this court referred to above, the accumulation in the instant case, was also for acquisition of movable and immovable property or lease or gift or hire or purchase for any other purpose of the society. She thus found fault with the order passed by the Tribunal in so far as it permitted accumulation even for the purpose of acquisition of property without specifying the purpose for which such acquisition was being made.
4. There is, in our opinion, no merit in that contention. The Tribunal, as noticed earlier, rightly held on the authority of the decision of this court referred to above that accumulation is permissible for a plurality of purposes also. The respondent-trust had accumulated its income for six different purposes extracted above. There is no controversy about five of the said objects being charitable in character. The criticism about the sixth object is that it permits acquisition of property whether movable or otherwise for the achievement of other objects for which the trust/society has been established. It was contended by Ms. Bansal that reference to any of the purposes of the society in clause (f) (supra) may include purposes which are not actually included in the memorandum or the objects of the trust. She submitted that while all the 22 objects may be charitable in character as on date, the accumulation of income in terms of clause (f) may permit the trust/society to acquire land for a purpose which is not included as one of the 22 objects stipulated in the memorandum. That is not however the correct perspective from which the question has to be viewed. The trust in question has been established in terms of a memorandum to which the Tribunal has made a reference.
5. It is not the case of the Revenue that any one of the objects out of the 22 objects enumerated therein is not a charitable object. If that be so, clause (f) permitting acquisition of movable or immovable property for achievement of one of those purposes would necessarily imply that the property is acquired for one of the charitable purposes stipulated in the memorandum. The apprehension of Ms. Bansal that the accumulation may be used for acquisition of property to be used for a purpose other than those enumerated in the memorandum is, in our opinion, far-fetched. Reference to the purpose of the trust in clause (f) must necessarily be confined to purposes that are enumerated in the memorandum and not those that the society/trust may otherwise have in mind.
6. There is, in the light of the above, no merit in this appeal which does not even otherwise raise any substantial question of law for our consideration. The appeal fails and is hereby dismissed.
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