Holding

The Court held that the newspaper business was not carried on in the course of the primary charitable purpose and therefore did not qualify for exemption under Section 13(1)(bb) or the original Section 11(4A), but the amended 1992 Section 11(4A) does permit exemption as the business is incidental to the Trust’s objectives.

Summary

The Thanthi Trust, created in 1954 to run a Tamil daily newspaper, claimed tax exemption under Section 11 of the Income Tax Act, 1961 for the newspaper's income, arguing that surplus earnings were used for charitable purposes such as education and relief of the poor. The Income Tax Officer disallowed the exemption for assessment years 1979-80 to 1991-92 on the basis of Section 13(1)(bb) and later Section 11(4A), and the High Court had upheld the Trust’s claim. The Supreme Court examined whether Section 13(1)(bb) applies to a business held in trust and whether the newspaper business was carried on in the course of the primary charitable purpose of the Trust. It held that the newspaper business was not a means of directly accomplishing the Trust’s charitable objectives and therefore did not qualify for exemption under Section 13(1)(bb) or the original Section 11(4A). However, the Court found that the amended 1992 version of Section 11(4A) permits exemption where the business is incidental to the Trust’s objectives, which applied to assessment years from 1992-93 onward. Consequently, the Court set aside the High Court judgments for the earlier years and dismissed the appeals for the later years.

Issues considered

Whether Section 13(1)(bb) of the Income Tax Act, 1961 applies to income from a business held in trust by a public charitable trust.
Whether the newspaper business carried on by the Thanthi Trust is 'in the course of the actual carrying on of a primary purpose' of the trust under Section 13(1)(bb).
Whether the original sub‑section (4A) of Section 11 (as enacted in 1984) excludes the newspaper income from exemption.
Whether the amended sub‑section (4A) of Section 11 (effective from 1 April 1992) allows exemption for income from a business that is incidental to the trust’s objectives.

Legislation cited

Income Tax Act, 1922s. 4(3)(i)
Income Tax Act, 1961s. 11, s. 11(4A), s. 13(1)(bb)

Subjects

Income tax exemptionCharitable trustSection 11Section 13(1)(bb)Business incomeNewspaperIncidental businessAmendment 1992

Judgment

THE ASSISTANT COMMISSIONER OF INCOME TAX, A
MADRAS, ETC. ETC.
v.
THANTHI TRUST ETC. ETC.

JANUARY 31, 2001
/' B
[S.P. BHARUCHA, N. SANTOSH HEGDE AND
Y.K. SABHARWAL, JJ.)

Income Tax:
c
Income Tax Act, 1961:

Sections 11, I 3(l)(bb)-Assessment years 1979-80 to 1983-84_!_,Trust
created for running a daily newspaper-Supplementary deed executed for
public charitable purposes-Tax exemption on income from running a
newspaper-Entitlement to-Held, exemption is not available to the assessee D
as the business carried on by the trust is not for the primary purpose of the
trust as required under Section 13 (l)(bb) of the Act.

Section //-Sub-section (4A) introduced w.ef 1.4. 1984-Assessment
years 1984-85 to 1991-92-Tax exemption on income from running a
newspaper-Entitlement to-Held, exemption is not available to the assessee E
as the exemption is available only to business carried on by trust wholly for
public religious and charitable pw1JOses.

'-- Section 1/-Sub-section (4A) amended w.e.f 1.4.1992-Assessment year
1992-93 onwards-Tax exemption on income from running a newspaper-· F
Entitlement to-Held, exemption is available to the assessee as the business
carried on by the assessee is incidental to the aflainment of the objectives
of the trust.

Assessee-trust was created in March 1954 for the purpose of
establishing a Tamil daily. In July 1957, founder of the trust executed a G
supplementary deed wherein the trust was declared an irrevocable trust. In
July 1961, by another supplementary deed, the founder of the trust directed
that the surplus income of the trust after defraying all the expenses should
be devoted for specified public charitable purposes which included, inter alia,
the establishment of schools and colleges for education and running of
727 I-I
728 SUPREME COURT REPORTS (2001] I S.C:.R.

A orphanages. -tr-

Section 13(1)(bb) was introduced to the Act w.e.f. 1.4.1977 and omitted
w.e.f. 1.4.1984. For assessment years 1979-80 to 1983-84, the assessee
claimed tax exemption under Section I I of the Income Tax Act, I 961 in its
income--tax returns. The claim of the assessee for exemption was rejected
B by ITO on the ground of Section 13(1)(bb). The assessee filed Writ Petitions
and the High Court, relying upon its earlier decision in assessee's own case ~
which had become final and binding on the Revenue, upheld the contention of
the assessee.

c Section I 1(4A) was introduced in the Act w.e.f. 1.4.1984. The ITO
disallowed the tax exemption under Section I I of the Act claimed by the
assessee for assessment years 1984-85 to 1991-92 on the ground of Section
I I (4A) of the Act. The assessee filed Writ Petitions before High Court
challenging the rejection by ITO. The High Court upheld the claims of the
assessee.
D
Section II (4A) of the Act was amended w.e.f. 1.4.1992. The ITO rejected
the tax exemption under Section 11 of the Act for assessment years 1992-93,
1995-96 and 1996-97. The High Court allowed the Writ Petitions of the
assessee.
E
In appeal to this Court, Revenue contended that a business, to be excepted
from the clutches of Section 13(1)(bb), must be one carried on in the course
of actual carrying out of a primary purpose of a public charitable trust; that
a business carried on for generating revenue, which is used for furthering
the charitable purpose of the trust, is not an activity in the course of the ...J!
fi. primary purpose of the trust. With respect to the introduction of sub-section
(4A) to Section 11 of the Act, the Revenue contended that the income derived
from a business held under trust wholly for charitable or religious purposes
would not be included in the total income of the previous year only in the
cases of a business carried on by a trust wholly for public religious purposes
and the business consists of printing and publishing books or of a kind
G
notified in Official Gazette or a business carried on by an institution wholly ~
for charitable purposes and the work in connection with the business was
mainly carried on by the beneficiaries of the institution, provided that separate
books of accounts had been mainh1ined in respect of such business. Revenue
contended with respect to amendlment to sub-section (4A) of Section 11,
H that it had to be construed to mean that a trust or institution would not get
r

ASS. COMMR. OF INCOME TAX v. THANTHI TRUST. 729

the benefit of Section 11 unless the business was carried on in the course of A
:~ actual carrying out of a primary purpose of the trust or institution.

The assessee contended that Section 13(1)(bb) of the Act applied only to
business that was carried on by a trust and not held under trust; that Section
13(1)(bb) does not apply to a business that was held under trust; that the
Finance Bill which introduced sub-section (4A) into Section 11, sub-section B
(4) thereof had been proposed to be deleted, but it had been retained when the
-5 Bill was passed; that a business held under trust had, therefore, not been
intended to the excluded from the benefit of Section 11 by reason of the
enactment of sub-section (4A); that the amended sub-section (4A) of Section
11 was couched in wide language and a trust is entitled to the benefit if it C
utilised the income of its business for the purpose of achieving its objects.

Partly allowing the appeals, the Court

HELD: I.I. A public charitable trust may hold a business as part of its
corpus. 1t may carry on a business which it does not hold as a part of its D
corpus. The distinction has no consequence insofar as Section 13(1)(bb) of
the Act is concerned. Section 13(1)(bb) will apply to a public charitable trust
for the relief of the poor, eduction or medical relief, that carries on a business,
regardless of whether or not that business is held by the trust in trust, that
is, as a part of its corpus. Even a business that is held by such a trust as a
part of its corpus is carried on by the trust and, therefore, Section 13(1)(bb) E
will apply to such trust. 1737-F-G-H; 738-Al

1.2. The words used in Section 13(1)(bb) of the Act are wide enough to
control not only the profit from an activity carried on in the course of the
actual carrying out of the purpose of the trust or institution but also income
from the corpus of the trust property if the corpus of the trust includes a F
business. This is for the reason that a trust or institution carries on the
business that is part of its corpus just as much as a trust or institution
carries on a business that is not a part of its corpus and Section 13(1)(bb)
operates in respect of a charitable trust or institution for the relief of the
poor, education or medical relief, which carries on any business.1738-D-EI G
~ 1.3. The requirement of Section 13(1)(bb) is that the exemption under
Section 11 will not be available to such a trust that carries on any business
unless the business is carried on in the course of the actual carrying out of
the primary purpose of the trust. i.e., the business is carried on in the course
of actually accomplishing a primary purpose of the trust.1738-FI H
730 SUPREME COURT REPORTS [2001] l S.C.R.

A 1.4. The business that the assessee-trust carries on is that of running
a newspaper. That business, though it is held by the assessee as a poor of its ...,.
corpus, and, therefore, in trust, docs not directly accomplish, wholly or in
part, the assessee's objects of relief of the part and education. Its income
only feeds such activity. It cannot be held to be carried on in the course of the
B actual accomplishment of the assessee's objects of eduction and relief of the
poor. 1739-A-Bl

1.5. The earlier decision of th<e High Court in the assessee's own case
was not rendered in the context of Section 13(t)(bb) of the Act. That provision
was not on the statute book at that time. That the provision employs language
C akin to that employed in the earlier decision cannot mean th:it in a proceeding
directly related to that provision the Revenue is barred by reason of the
principles of resjudicata from contending that the income of the Trust is not
exempt under that provision. 1739-DI

Additional Commissioner of Income Tax, Gujarat v. Surat Art Silk Cloth
D Manufac/l/rers Association, 121 ITRI; Commissioner of Income Tax, Kera/a
and Coimbatore v. P. Krishna Warriar, 53 ITR 176 and Commissioner of
Income Tax, Kera/av. Dharmodavam Co., 109 ITR 527, referred to.

Adityan (S.B.) v. First Income Tax Officer, 52 ITR 453 Mad.; Than/hi
Trust v. Income Tax Officer, 91 ITR 261 Mad. and C/Tv. Thanthi Trust, 137
E ITR 735, Mad. referred to.

2. Trust and institutions are separately dealt with in the Act. The
expressions refer to entities differently constituted. The newspaper business
that is carried on by the assessee does not fall within sub-section (4A) of
Section 11 of the Act. The Trust is not only for public religious purposes and
F so it does not fall within clause (a). It is a trust not an institution; so it does
not fall within clause (b). Therefore, for the assessment years in question the
Trust was not entitled to the exemption contained in Section 11 in respect of
the income of its newspaper. (740-E-Fl

G 3. The scope of amended sub-section (4A) to Section 11 is more
beneficial to a trust or institution than was the scope of sub-section (4A) as
originally enacted. The substituted sub-section (4A) gives a trust of institution
greater benefit than was given by Section 13(1)(bb). If the object of Parliament
was to give trusts and institutions, no more benefit than that given by Section
13(l)(bb), the language of Section 13(1)(bb) would have been employed in the
H substituted sub-section (4A). As it stands, all that it requires for the business
ASS. COMMR. OF INCOME TAX v. THANTlll TRUST [BHARUCHA, J.] 73 J

income of trust or institution to be exempt is that the business should be A
incidental to the attainment of the objectives of the trust or institution. A
•• business whose income is utilised by the trust or the institution for the
purposes of achieving the objl!ctives of the trust or the institution is, surely,
a business which is incidental to the attainment of the objectives of the trust.
In any event, ifthere be any ambiguity in the language employed, the provision B
must be construed in a manner that benefits the assessee. The Trust, therefore,
is entitled to the benefit of Section 11 for the Assessment Year 1992-93 and
thereafter. It is not in dispute that the income of its newspaper business has
been employed to achieve its objectives of education and relief to the poor and
that it has maintained separate books of account in respect thereof.
(741-B-C-D( C

Than/hi Trust v. Central Board of Direcl Taxes & Ors. , 213 ITR 639
Mad. and Thanthi Trust v. Asst., CIT 213 ITR 626 Mad, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 4406-4410
of 1996.
D
From the Judgment and Order dated 19.12.94 of the Madras High Court
in W.P. Nos. 198-202of1989.

With

C.A. Nos. 4759-4761/98, 4395-4402/96, 497-499/2000 & 5772/2000. E
Harish N. Salve, M.L. Verma, K.N. Shukla, Nikhil Sakhardande, K. Misra.
Ms. Sushma Suri and T.C. Shanna for the Appellants.

Dr. Debiprasad Pal, Tripurari Ray, Ms. Priya Hingorani and Vineet Kumar
for the Respondents. F
S. Prasad for the Respondent in C.A. Nos. 4759-61 /98.

The Judgment of the Court was delivered by

BHARUCHA, J. One S.K. Adityan founded a daily newspaper called G
the "Dina Thanthi" in 1942. On 1st March, 1954 he created a trust called the
"Thanthi Trust". The property that he settled upon trust was the business
of the said newspaper as a going concern. The objects of the Trust were to
establish the said newspaper as an organ of educated public opinion for the
Tamil reading public and to disseminate news and to ventilate opinion upon
all matters of public interest through it. On 9th July, 1957 Adityan executed H
732 SUPREME COURT REPORTS [200 I] I S.C.R.

A a supplementary deed of trust that declared that the Trust was irrevocable.
On 28th July, 1961 Adityan executed another s•1pplementary deed of trust.
Thereby he directed that the surplus income of t!1e Trust, after defraying all
expenses, should be devoted to the following purposes :

- establishing and running a school or college for the teaching of
B journalism;

- establishing and/or running or helping to run schools, colleges or
other educational institutions for teaching arts and science;

- establishing of scholarships for students of journalism, arts and
C science;

- establishing and/or running or helping to run hostels for students;

- establishing and/or running or helping to run orphanages; and

D - other educational purposes.
On 6th November, 196 I the Income Tax Officer proposed to disallow the
claim of the Trust for exemption under Section 4(3)(i) of the Income Tax Act,
1922 forthe Assessment Years 1955-56 to 1961-62. The Trust challenged the
correctness of the tentative decision by filing a writ petition in the High Court
E of Judicature at Madras. On 25th June, 1961 the trustees of the Trust took
out an originating summons in the High Court and therein, on 2nd March,
1962, the High Court upheld the validity of the supplementary deed of trust
and held that the trustees of the Trust were bound to devote the surplus
income of the Trust to the purposes mentioned therein. On 4th October, I 963
the High Court allowed the writ petition filed by the Trust and quashed the
F ITO's tentative decision (52 l.T.R. 453). The claim for exemption made by the
Trust under Section 4(3)(i) of the 1922 Act for the Assessment Years I 955-
56 to 1961-62 was thereafter allowed.

For the Assessment Years 1962-63 the claim made by the Trust for
G exemption under Section 11 of the Income Tax Act, 1961 ('the Act') was
allowed on 28th February, 1969. The ITO then impounded the books of
accounts of the Trust relevant to the Assessment Years 1965-66 to 1967-68
and he demanded the production of books of account relevant to the
Assessment Years 1962-63 to 1964-65. This was the subject matter of challenge
in a writ petition filed by the Trust. On 23rd March, 1969 the Trust was issued
H three notices under .Section 148 of the Act to reopen its assessments for the
ASS. COMMR. OF INCOME TAX 1•. TllANTHI TRUST lBllARUCHA . .I.] 733
Assessmeill Years 1965-66 to 1967-68. These notices were challenged in a writ A
petition filed by the Trust. Notices were, thereafter, issued to the Trust to
reopen its assessment for the Assessment Years 1956-57 to 1961-62 and these
were the subject matter of a writ petition filed by the Trust. On 21st December,
1972 a Division Bench of the High Court of Madras quashed the notices for
reopening the assessments for the Assessment Years 1956-57, 1958-59,
1960-61 and 1961-62. It upheld the notices that related to the Assessment B
Years 1957-58, 1959-60, 1965-66, 1966-67 and 1967-68 (911.T.R. 261).

On 29th January, 1981 a Division Bench of the High Court dismissed
references under the Act in respect of the assessment of the Trust for the
Assessment Years 1968-69 and 1969-70 (1371.T.R. 735). The High Court held: C

"The founder of the trust clearly evinced an intention to create public
charitable trust as seen from the preamble and clause 3(k) of the
original trust deed and the charitable objects referred to in the schedule
to the decree in C.S. 90 of 1961 have to be fulfilled from and out of
the income from the business which is directed to be held under trust D
or other legal obligation. Those charitable objects fall within the first
2 categories referred to in Section 2( 15) viz. Relief of the poor and
education. It is to carry out and fulfill those objects the business is
carried on. Thus, the primary purpose is to carry out the charitable
objects and the business is carried on as a means in the course of the
actual carrying out of that primary purpose and not as an end in itself. E
While the predominant object of the trust is the carrying out of the
charitable objects referred to in two of the three categories of charitable
purposes referred to in Section :2(15), the carrying on of the business
which is actually the property held under trust or other legal obligation
is incidental and the profit resulting from the business can be taken F
to be a by-product."

The Revenue preferred a petition for special leave to appeal against the
judgment of the High Court on the said references. In so far as it related to
the eligibility of the Trust to claim the exemption under Section 11 of the Act,
leave was declined. G
Having set out the background, we now come to the first of the three
. --t--
controversies before us. It relates to Section 13( I )(bb ), which was introduced
into the Act with effect from Ist April, 1977 and remained on the statute book
until omitted with effect from I st April, 1984. The relevant portions of Section
11 and Section 13(1)(bb) then read as follows: H
734 SUPREME COUIU REPORTS 12001] I S.C.R.

A ···section I I

Income fi"om property held jiir charitable or religio11s p11rpose.

(I) Subject to the provisions of sections 60 to 63, the following
income shall not be included in the total income of the previous
B year of the person in receipt of the income.
(a) income derived from property held under trust wholly for
charitable or
religious purposes, to the extent to which such income is applied
to such purposes in India; ............... ..
c Sect ion 11 (-/)

For the purposes of this section ··property held under trust" includes
a business undertaking so held, ........................ .

Section I 3( /)(bb)
D
Nothing contained in section 11 or section 12 shall operate so as
to exclude from the total income of the previous year of the person
in receipt thereof -

In the case of a charitable trust or institution for the relief of the ).
E poor. education or medical relief, which carries on any business, any
income derived from such business, unless the business is carried on
in the course of the actual carrying out of a primary purpose of the
trust or institution."

The claim of the Trust for exemption for the Assessment Years 1979- 80
F to 1983-84 was rejected, having regard to the provisions of Section 13(l)(bb).
The rejection was challenged in a writ petition filed by the Trust in the High
Cou1t. The High Court upheld the contention of the Trust (213 l.T.R. 626).
This is the first decision of the High Court that is under appeal by the
Revenue.
G
The High Court relied upon its earlier decision in the case of the Trust.
reported in 137 l.T.R. 735, which had become final and binding on the Revenue.
na1;1ely, that the primary purpose of the Trust was to carry out its charitable
objects and "that the business is carried on only as a means in the course
of the actual carrying on purpose of the Trust". It said that it had, therefore,
H "no hesitation in holding that the requirement of the last portion of Section
ASS. COMMR. OF INCOME TAX v. THANTHI TRUST [BHARUCllA . .I.] 735

13(1)(bb) namely unless the business is ca·rried on in the course of the actual A
carrying out of a primary purpose of the trust or institution is satisfied
.............................. We must also point out here that though the decision in CIT
v. Thanthi Trust, (1982] 137 l.T.R. 735 (Mad) was rendered by the Division
Bench with regard to the assessment years 1968-69 and 1969-70 and Section
13(J)(bb) of the Act was introduced with effect from April I, 1977, inasmuch B
as the finding rendered by the Division Bench in the said decision is in
express language of Section 13( I)(bb) of the Act, it is not open to the
Revenue to contend that the decision in C!Tv. Thanthi Trust, (1982])137 l.T.R.
735 (Mad) will not be applicable to the petitioner's case in respect of the
assessment years in question, after the introduction of Section 13(l)(bb) of
ilieAct." C
Section I 1(4A) was introduced into the Act with effect from 1st April,
1984. So far as it is relevant, Section 11 then read thus :

"Section 11

Income from property held for charitable or religious purpose. D

(I) Subject to the provisions of sections 60 to 63 the following income
shall not be included in the total income of the previous year of the
person in receipt of the income.
(a) income derived from property held under trust wholly for E
charitable or religious "purposes, to the extent to which such
income is applied to such purposes in India; .................... ..
(4) For the purposes of this section "property held under trust"
includes a business undertaking so held and where a claim is made
that the income of any such undertaking shall not be included in the F
total income of the persons in receipt thereof, the Income Tax Officer
shall have power to determine the income of such undertaking in
accordance with the provisions of this Act relating to assessment and
where any income so determined is in excess of the income as shown
in the accounts of the undertaking, such excess shall be deemed to
be applied to purposes other than charitable or religious purposes. G

(4A) Sub-Section (I) or sub-section (2) or sub-section (3) or sub-
section (3A) shall not apply in relation to any income, being profits
and gains of business, unless -
(a) the business is carried on by a trust wholly for public religious H
736 SUPREME COURT REPORTS 12001 J I S.C.R.

A purposes and the business consists of printing and publication
of books or is of a kind notified by the Central Government in
this behalf in the Official Gazette; or
(b) the business is carried on by an institution wholly for charitable
purposes and the work in connection with the business is mainly
B carried on by the beneficiaries of the institution;
and separate books of accounts are maintained by the trust
or institution in respect of such business."

The Trust claimed the benefit of the exemption under Section 11 in
respect of the Assessment Years 1984-·85 to 1991-92. The !TO rejected the
c claim. The Trust filed writ petitions challenging the rejection. The High Court
upheld the claim of the Trust (213 I.TR. 639). It held that inasmuch as the
business that was carried on by the Trust was itself held under trust for
public charitable purposes and it was carried on only for the purposes of
carrying out the charitable objects of the Trust. as had been found in the
D earlier judgment, the provisions of Section l 1(4A) had no application. This
is the second decision of the High Court under appeal by the Revenue.

Section l 1(4A) was substituted with effect from 1st April, 1992 and it
now read thus :

E "Section I !(4A)

Sub-Section (I) or sub-section (2) or sub-section (3) or sub-section
(3A) shall not apply in relation to any income of a trust of an institution,
being profits and gains of business, unless the business is incidental
to the attainment of the objectives of the trust or, as the case may be,
F institution and separate books of accounts are maintained by such
trust or institution in respect of such business."

The ITO rejected the claim of the Trust for exemption under the amended
Section I l(4A). A writ petition was filed in the High Court, and, relying upon
the ~arlier d~cision, the High Court quashed the orders of assessment for the
G Assessment Years 1992-93, 1995-96 and 1996-97 (238 l.T.R. 635). This is the
third decision under appeal by the Revenue.

In so far as Section 13( I)(bb) is concerned, the learned Solicitor General
appearing for the Revenue, submitted i:hat a business, to be excepted from
the clutches of Section 13( I )(bb ), must be one carried on in the course of the
H actual carrying out of a primary purpose of a public charitable trust. In other
ASS. COMMR. OF INCOME TAX v. TllANTHI TRUST [BHARUCHA . .I] 737

words, it must be a business carried on in the course of actually carrying o·ut A
the work of relief of the poor, education and medical relief. Any business
carried on for generating revenue, which revenue is used for furthering the
charitable purpose for which the trust was established, is not an activity in
the course of the primary purpose of the trust and does not fall within this
exception.
B
Dr. Pal, learned counsel for the Trust, drew a distinction between a
business that was held under trust and a business that was carried on by a-
trust. He submitted that there was a difference between income derived from
a business that was a property or part of the corpus of a public charitable
trust and income derived from a business which was carried on by such a C
trust but which was not held under trust; in other words, there was a legal
obligation to use the income for the public charitable purpose of the trust in
the first case and not in the latter. This Court had noted the distinction in
Addilional Commissioner of Income-Tax, Gujaral v. Sura/ Ari Silk Clolh
Manufacturers Associalion, ( 121 l.T.R. 1); Co111111issioner of Income-Tax, Kera/a
and Coimbatore v. P. Krishna Warrior, (53 l.T.R. l 76); Commissioner of D
Income-Tax, Kera/av. Dharmodayam Co., (1091.T.R. 527). The provisions of
Section l 3(1 )(bb) applied only to a public charitable trust which carried on a
business that it did not hold in trust. They did not apply to a public charitable
trust, such as the Trust, wh{ch held the business in trust.
E
No judgment of this Court has been pointed out to us in which the
provisions of Section 13( l )(bb) have been interpreted. Only passing references
thereto are to be found in some of the judgments aforementioned.

A public charitable trust may hold a business as part of its corpus. It
may carry on a business which it does not hold as a part of its corpus. But F
it seems to us that the distinction has no consequence insofar as Section
13( l )(bb) is concerned. Section 13( I)(bb) provides, so far as is relevant to this
case, that the provisions of Section I I shall not operate so as to include in
the total income of the previous year of a public charitable trust for the relief
of the poor, education or medical relief which carries on any business, any G
income derived from such business unless the business is carried on in the
course of the actual carrying out of a primary purpose of the trust. Section
13( I )(bb), therefore, will apply to a public charitable trust for the relief of the
poor, education or medical relief that carries on a business, regardless of
whether or not that business is held by the trust in trust, that is,, as a part
of its corpus. Even a business that is held by such a trust as a ~'art of its H
738 SUPREME COURT REPORTS [2001] I S.C.R.

A corpus is carried on by the trust and, therefore, Section 13(1 )(bb) will apply -4-
to such trust.

A judgment of this Court which comes closest to putting a meaning to
Section 13(1 )(bb) is the concurring judgment of R.S. Pathak, J. (as he then
was) in Additional Commissioner of Income-tax, Gujarat v. Surat Art Silk
B Cloth Manufacturers Association, ( 1980) 121 ITR I. He said, "When it was
found that judicial decisions had held the restrictive clause ("not involving
the carrying on of any activity for profit") in Section 2( 15) to control the
fourth head ("the advancement of any other object of general public utility")
only, and not also the first three heads ("relief of the poor, education and
C medical relief') in the definition, Parliament attempted to secure its original
intent by enacting section 13( I)(bb). The two provisions represent the mode
of funding finance for working out the purpose of the trust or institution, by ~-
deriving income from the corpus of the trust property and also from an
activity carried 011 in the course of actual carrying out of the purpose of the
trust or institution." The learned Judge did not, it will be seen, analyse
D Section 13(l)(bb), nor, in the context of the case before him. was he required
to. Upon analysis, it appears to us that the words used in Section 13(1 )(bb)
are wide enough to control not only the profit from an activity carried on in
the course of the actual carrying out of the purpose of the trust or institution
but also income from the corpus of the trust property if the corpus of the trust
E includes a business. This is for the reason that a trust or institution carries
011 the business that is part of its corpus just as much as a trust or institution

carries on a business that is not a part of its corpus, and Section 13( I )(bb)
operates in respect of "a charitable trust or institution for the relief of the
poor, education or medical relief which carries on any business."
(Emphasis supplied)
F
The requirement of Section 13( I )(bb) is that the exemption under Section
11 will not be available to such a trust that carries on any business unless
the business is carried on "in the course of the actual carrying out of the
primary purpose of the trust", that is to say, unless the business is carried
G on in the course of actually accomplishing a primary purpose of the trust; the
business must, therefore, be carried on in the course of the actual
accomplishment of relief of the poor, education or medical relief. As an
example, a public charitable trust for the relief of the poor. education and
medical relief that carries on the business of weaving cloth and stitching
clothing by employing indigent women carries on the business in the course
H of actually accomplishing its primary object of affording relief to the poor and
ASS. COMMR. OF INCOME TAX'" TllANTHI TRUST [BHARUCHA. J] 739
it would qualify for the exemption under Section 11: A
The business that the Trust carries on is that of running a newspaper.
That business, though it is held by the Trust as a part of its corpus, and,
therefore, in trust, does not directly accomplish, wholly or in part, the Trust's
objects of relief of the poor and education. Its income only feeds such
activity. It cannot be held to be carried on in the course of the actual B
...... accomplishment of the Trust's objects of education and relief of the poor. It
is, therefore, not possible. to accept the argument on behalf of the Trust that
it is entitled to the exemption under Section 11.

The High Court, in the first judgment under appeal, held that it was not C
open to the Revenue to contend that the earlier decision (in 137 ITR 735)
would noi apply to the case of the Trust for the assessment years in question
after the introduction of Section 13( I )(bb) of the Act because the finding
rendered in that decision was in the express language of Section 13( I )(bb ).
We are unable to agree. The earlier decision was not rendered in the context
of Section 13(1)(bb). That provision was not on the statute book at that time. D
That the provision employs language akin to that employed in the earlier
decision cannot mean that in a proceeding directly related to that provi.sion
the Revenue is barred by reason of the principles of res j11dica1a from
contending that the income of the Trust is not exempt under that provision.

This brings us to the second controversy, relevant to the Assessment E
Years 1984-85 to 1991-92 during which period of time sub-section (4A) of
Section 11, as originally enacted, was in operation. It was contended by the
learned Solicitor General that by reason of sub-section (4A) the income
derived from a business held under trust wholly for charitable or religious
purposes would not be included in the total income of the previous year in F
the case only of (a) a trust for public religious purposes, if the business was
of printing and publishing books or of a notified kind; or (b) an institution
wholly for charitable purposes, if the work in connection with the business
was mainly carried on by the beneficiaries of the institution, provided that
separate books of accounts had been maintained in respect of such business.
G
Learned counsel for the Trust laid emphasis on the fact that in the Bill
to introduce sub-section (4A) into Section 11, sub-section (4) thereof had
been proposed to be deleted, but it had been retained when the Bill was
passed. A business held under trust had. therefore, not been intended to be
excluded from the benefit of Section 11 by reason of the enactment of sub-
section (4A). This was also evident from the fact that sub-section (4A) did H
740 SUPREME COURT REPORTS [2001] I S.C.R.

A . not mention in its non obstante clause sub-section (4).

Sub-section (4) of Section 11 remains on the statute book, and it
defines property held under trust for the purposes of that section to include
a business so held. It then states how such income is to be determined. Ir:
B other words, if such income is not to be included in the income of the trust,
its quantum is to be determined in the manner set out in sub-section (4 ).

· Sub-section (I )(a) of Section 11 says that income derived from property
held under trust only for charitable or religious purposes, to the extent it is
used in the manner indicated therein, shall not be included in the total income
C of the previous year of the trust. Sub-section (4) defines the words "'property
held under trust'' for the purposes of Section 11 to include a business held
under trust. Sub-section (4A) restricts the benefit under Section 11 so that it ~-
is not available for income derived from business unless (a) the business is
carried on by a trust only for public religious purposes and it is of printing
and publishing books or any other notified kind or (b) it is carried on by an
D institution wholly for charitable purposes and the work in connection with the
business is mainly carried on by the beneficiaries of the institution, provided,
in both cases, that separate books of account are maintained by the trust or
the institution in respect of such business. Trusts and institutions are
separately dealt with in the Act (Section 11 itself and Sections 12, I 2A and
E 13, for example). The expressions refer to entities differently constituted. It is
thus clear that the newspaper business that is carried on by the Trust does
not fall within sub-section (4A). The Trust is not only for public religious
purposes so it does not fall within clause (a). It is a trust not an institution,
so it does not fall within clause (b ). It must, therefore, be held that for the
assessment years in question the Trust was not entitled to the exemption
F contained in Section 11 in respect of the income of its newspaper.

We now address the third controversy, which relates to sub-section
(4A) of Section 11 as substituted with effect from Ist April, 1992. The learned
Solicitor General submitted that while the substituted sub-section (4A) gave
G trusts and institutions a wider latitude than the earlier sub-section (4A), it had
still to be construed to mean that a trust or institution would not get the .__... -
benefit of Section 11 unless the business it carried on was carried on in the.
course of the actual carrying out of a primary purpose of the trust or institution.
Dr. Pal, on the other hand, submitted that the substituted sub- section (4A)
was couched in wide language and a trust was entitled to the benefit of
H Section 11 if it utilised the income of its business for the purposes of achieving
/\SS. COM MR. OF INCOME TAX 1•. THi\NTl-ll TRUST [llHARlJCHA. J] 741

its objects. A
The substituted sub-section (4A) states that the income derived from
a business held under trust wholly for charitable or religious purposes shall
not be included in the total income of the previous year of the trust or
institution if "the business is incidental to the attainment of the objective of
the trust or, as the case may be, institution" and separate books of account B
are maintained in respect of such business. Clearly, the scope of sub-section
(4A) is more beneficial to a trust or institution than was the scope of sub-
section (4A) as originally enacted. In fact, it seems to us that the substituted
sub-section (4A) gives a trust or institution a greater benefit than was given
by Section 13(1)(bb). If the object of Parliament was to give trusts and C
institutions no more benefit than that given by Section 13( I )(bb ), the language
of Section 13( I)(bb) would have been employed in the substituted sub-
section (4A). As it stands, all that it requires for the business income of a
trust or institution to be exempt is that the business should be incidental to
the attainment of the objectives of the trust or institution. A business whose
income is utilised by the trust or the institution for the purposes of achieving D
the objectives of the trust or the institution is, surely, a business which is
incidental to the attainment of the objectives of the trust In any event, if there
be any ambiguity in the language employed, the provision must be construed
in a manner that benefits the assessee. The Trust, therefore, is entitled to the
benefit of Section 11 for ihe Assessment Year 1992-93 and thereafter. It is, we E
should add, not in dispute that the income of its newspaper business has
been employed to achieve its objectives of education and relief to the poor
and that it has maintained separate books of account in respect thereof

Accordingly, Civil Appeals 4406-4410of1996, 4395-4402of1996, 4759-
4761 of 1998 and 5772 ;if 2000 are allowed in as much as they relate to the F
Assessment Years 1979-80 to 1991-92 and the two judgments of the Madras
High Court relating thereto (reported in 213 I.T.R. 626 and 213 l.T.R. 639) are
set aside. Civil Appeals 497-499 of 2000 are dismissed.

There shall be rio order as to costs.
G
B.S. Appeals partly allowed.