DHARMAPOSHANAM CO. KERALA versus COMMISSIONER OF INCOME TAX, KERALA

Citation: [1978] 3 S.C.R. 1030 · Decided: 24-07-1978 · Supreme Court of India · Bench: Y.V. CHANDRACHUD · Disposal: Dismissed

Judgment (excerpt)

A 
ll 
c 
D 
E 
1030 
DHARMAPOSHANAM CO. KERALA 
v. 
COMMISSIONER OF INCOME TAX, KERALA 
July 24, 1978 
• 
[Y. V. CHANDRACHUD, C.J., D. A. DESAI AND R. S. PATHAK, JJ.] 
lnco1ne Tax Act, 1961, Sections 2(15) and ll(l)(a)-Clause 3(b) of 1he 
},femorandum of Association shows that one of the obiects of the co1119any lvas 
I ~ 
"To do the needful for the promotion of charity education, industries etc. and 
• 
public good", which is reiterated by Art. 58-The said object clause and Art. 
58 later on amended dropping the word "industries" and adding "1nedfcal relief" 
1 
-Whether the Kuries business its for charitable purposes and whether the income 
1~ 
arising out of conducting business of kuries or Chit funds liable to exe1nption J 
under Section ll(l)(a) of the Inconie Tax Act, 1961. 
'J-. 
The objects of the appellant company were "(a) to raise funds by conducting 
kuries ............ and (b) 
to do the needful for the promotion of charity, 
\ 
education, industries, etc. and public good". Art. 58 of the Articles of Associa-
tion provided that "the profit left after meeting the expenses of the company will 
)Je utilised for promoting educa·tion, industry, social welfare and such other pur-
poses of common good as are resolved by the general meeting." 
On June 7, 
1965 the appellant made certain alterations in its Memorandum of Association 
and its Articles of Association, by which the words "medical relief and other 
n1atters of public good" were substituted for the word "industries, etc. and 
public good". 
The appellant earned income from conducting kuries and money 
lending. 
He claimed exemption from tax under section 11 of the Income~tax 
Act, 1961 for the assessment years 1962-63 to 1968~69. The claim was rejected 
by the Income Tax Appellate Tribunal and the Kerala High Court also decided 
the question against the appellant. 
The appellant appealed. 
Dismissing the appeals, the Court 
HELD: I. It is not only clear from Sections 11(4) and 13(1) (bb) of 
the Income Tax Act, 1961 but also well settled that business is 'property' within 
the meaning of Section 11 (I )(a) of the Act. 
[I033F] 
Comn1issioner of lncome Tax v. Krishna Worrier, 53, I.T.R. 176 (SC); 
referred to. 
F 
2. Section 2(15) of the Income Tax Act, 1961 defines the expression .. charit· 
G 
H 
able purpose" as iP.:cluding relief r.f the poor, education and medical relief and 
the advancement of any other object of general public utility noi involving-the ~ 
carrying of any activity for profit. The residual general head in the definition 
of S. 2(15) viz. "the advancement of any other object 
of 
general 
public 
,_ , 
utility." 
is qualified by the restrictive words "not involving the carrying on 
......... 
any activity for profit". [1034 C, DJ 
3. Ordinarily profit is a normal incident of business activity and if the activity 
of a trust consists of carrying on of a business and there are no restrictions on 
its making profits, the Court would be well justified in assuming in the absence 
of some indication to the contrary that the object of the trust involves the carry· 
ing on of an activity for profit. [1034 H, 1035 A] 
Sole Trustee, Loka Sikshana Trust v. Commissioner of Income Tax, 101, 
J.T.R. 234(SC) and Commissioner of Income Tax, Kerala v. Cochin Chamber 
of Commerce and lndustry, IOI I.T.R. 796; followed. 
4. Whether a trust is for charitable purposes fa11s to be determined 
by 
reference to all the objects for which the trust has been brought into existerice. 
If the settlor reserves to himself the power of appointment under which he might 
appoint to non-ch&ritable purposes, the trust cannot claim exemption even though 
( 
-
... 
• 
DHARMAPOSHANAM v. C.J.T. KER·\LA 
l 0 3 l 
the power of appointment is in fact exe-rcised in favour of ~ charitabl~ obje~t. 
lt would be a different c<isc where one er n1orc of the objects 111ent1oned tn 
the Mcmorandutn of Association, although included therein \'!ere never intended 
to be undertaken. 
If there is evidence pointing to that conclusion clearly the 
Courj \Vill ignore the object and proceed to consider the case as if it did not 
exist in the 1'vie1norandum. In C.l.T .. Kera/a v. Dharn1odaya1n Co., 109 l.T.R. 
527 (SC) it \vas that basis on which this Couit proceeded when it observe~ 
that the asscssee had never engaged itself in any industry or in any other act1· 
vity of public interest. 
[1036 F,G, 1037 A-BJ 
A 
B 
Tennent Plays Ltd., v. Conunissioner of Inland Revenue 30, Tax Cases 107, 

Excerpt shown. Read the full judgment & AI analysis in Lexace.