Definition of term "Charitable Purpose" under section 2(15) of Income Tax Act

TRUSTEE OF SAURASHTRA TRUST vs. DIT 

Question of law decided: From Assessment Year 1941-­42 till Assessment Year 1961-­62 the income of the assessee/Trust was exempted under Section 4(3)(i) of the Income   Tax   Act,   1922,   (hereinafter   I T.Act)   as   publishing   of newspapers falls under the definition of General Public Utility. Subsequently, in the I.T.Act, 1961, the term “Charitable Purpose” came to be defined in Section 2(15) which included relief of poor, education, medical relief and the advancement of any other object of general public utility not involving carrying on of activity of profit...

Some notes and significant findings (summarized)-

1- A trust was involved in the publishing newspapers & periodicals and it was claiming its acitivites as exempt from tax sine 1941 (year of formation),

2- Trust assessee was using a reference of the case law Surat Art Silk Cloth   Manufacturers   Association where learned court has observed the definition of charitable purpose and defined that merely if an instance there was some excess income over expenditure would not necessarily be construed as an indication for such business as it runs for profit making activities and hence Quantum of its income is not  the test to determine whether the trust was created for  a charitable purpose, what is relevant is the object and purpose of creation of the trust,

3- "The learned ITAT further held that even if the claim is for an exemption being a charitable society, the society is bound to file its return under section 139(4)(a), if its income without  taking into account the provisions of Sections 11 and 12 is above the taxable limit"

4- There were many assessment years under which the assessee was relying on the judgement of Surat Art Silk however subsequent to the enactment of Income tax act in 1961  it was held that held that the assessee/Trust is not covered by the provisions of Section 2(15) of the I.T.Act, 1961 and hence the return cannot be considered as one filed under Section 239 of the I.T.Act, 1961,

5- It was further noted by the learned court that "It   cannot   be   said   that   the   assessee/Trust   was under bonafide belief that its activities were nontaxable and therefore there was no reason for it to believe that its estimate of advance tax was untrue or that it was under bonafide and reasonable belief that its income is exempt,

6- "In the light of foregoing discussion, we hold that the ITAT was justified in allowing the appeals of the Revenue and confirming   penalty   levied   on   the   assessee/Trust   under   Section 273(2)(a) and under Section 140A(3) of the I.T.Act, 1961.

For full text of the judgement please follow the link https://www.taxpundit.org/phocadownload/Taxpundit_Reporter/Taxpundit_Reporter_2017/August_2017/817Taxpundit10.pdf

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