SOLE TRUSTEE LOKA SHIKSHANA TRUST versus COMMISSIONER OF INCOME TAX, MYSORE

---,.. __

SOLE TRUSTEE LOKA SHIKSHANA TRUST

COMMISSIONER OF INCOME TAX, MYSORE August 28, 1975

(fl. R. KHANNA, M. H. BEG AND A. C. GUPTA, JJ.]

lncon1e Tax Act, 19'61, Section 2(15)-Definition of 'Charitable purpose'-"The advancement of anv other object of f?eneral public utility not invof\·ing the carr;inR on of any activity for profit', n1eaning of-"Profit'' if confined onlv to private vrofit.

lnco111e Tax Act, 1961. Sections 2(15) and 11-"Education". 111eani11g a/-Appellant trust engaged in the business of printing and publication of newspaper and journals and making profits, if entitled to tax exe1nption.

Section 2(15) of the Income-tax Act provides that 'charitable purpose' in-cludes relief of the poor, education medical relief. and the advancement of any other object of general public nti.lity.

The appellant is sole trustee of the "1-0ka _shikshana ·Trust'', holding pro~ perties mentioned in schedule attached to deed of trust executed on 19-2-1962 by himself purporting to re-declare trust of 15-7-1935. The total assets of the earlier trust of 1935 consisted of sum of Rs. 4308.10.9 only. Under the pro-visions the earlier trust. the trustee had carried on lucrative business of pr~nt­ing at Bclgaum, and, thereafter, he started publishing daily newspaper. The value of the redeclared trust of 1962 stood at, Rs. 2,97,658/-. Clause 2 of the trust deed provided that the object of the Trust shall h~ to educate the people of India in general and of Karnatak in particular by

(a) establishing, conducting and helping directly or indirectly instiluiions calculated to edncate the people by spread of knowledge on all matters of general interest and welfare;

(b) founding and running reading rooms and libraries and keeping and conducting printing houses and publishing or aiding the publicat'.ion of books, booklets, leaflets, pamphlets, magazines etc., in Kannada and other languages, all these activities being started, conducted and carried on with the object of educating the people;

(c) supplyi.ng the Kannada speaking people with an organ or organs of educated public opinion and conducting journals in Kannada and other language for the dissemination of useful news and information and for the ventilation of public opinion on matters of general public ntiEty; and

(d) helping directly or indirectly societies and institutions which have all or any of the aforesaid objects in view.

The Income-tax Officer sent communication to the trust on April 27, 1963 to the effect that, s!.nce the only activity of the trust was printing. publication, and sale of newspaper, weekly and monthly journal, the trust carried on an activity for profit. The claim of the sole trustee was rejected, and, having been unsuccess-·,rut through ou~ the appellant has preferred thi5 appeal after certification of the case under section 261 of the Income-tax Act. J9()L

Dismissing the appeal,

HELD: (Per H. R. Khanna and A. C. Gu9ta, JJ.)

(I) It is not correct to say that the word "profit" in section 2(15) of the Act means private profit. The word used in the de:fin~tion provision is profit and not private profit and it \\-'Ould not be permissible to read in the definition the word 16-U39 Sup. 1/75

4 62 SUPREME COURT REPORTS 11976] I S.C.R.

"private" as q~alifying profit even though su::h word is not the:·e. There is al-....l no apparent justification or cogent reason for placing much construct:on on the word .. P ofit'". [47281

The words "general pµrpose are very .. wide. [public utility" contained ]These words exclede objects of [1n ][1he ][definition ]p:-1vale gain. [of ][charitaqle ]l472C] II India Sp/1111crs' Association v. Commissioner of I ncon1e·tax { 1944) 2 I.T.R. 482, relied on. '

lt. is also not correct to say that the newly added words "not involvincr the car~y.1ng on .of any. activity for profit" merely qualify and affirm what \Va~ the pos1tLon as It obtained under the _definition in the Act of .1922. Ji' the 1egis~ ]ature intended that the concept of charitable purpose should be the·sam~ under the Act of 196 l as it was in the Act of 1922, there was no necessitv for it to add the new words in the definition. The earlier definition did not' involve any ambiguity. and the position in law was clear and admitted of no doubt after the pronouncement of the Judicial Committee in the Tribune case ( 1939) 7 ITR 415 ~lnd in the case of Aft J11dia Spinners' Association. If despite that fact, the legislature added new words in th.e definition of charitable purpose, it would be contrary to all rules of construc:t!on to ignore lhe impact of the newly added words and to so construe the defintt1on as if 1he newly addeJ "'"ords were either not th~re or \Vere intendeJ to be otiose a-nd redundant. [47CC-E}

(ii) The sense in which the V.'ord "education" has been used in section 2(15) is the ~ystematic instruction, schooling, or training given to the young in preparation for the work of life. It also connotes the whole course of scholastic instruction which person has received. The word ''education'' has not been used in that wide and extended sense. according to which every acquisition of further knowledge cono;;titutes education. According to thi-s wide and extended sense. travelling is education. because as result of travelling you acquire fresh knOwledge. Likewise. if you read newspapers and magazines, see pictures. visit art galleries, museums and zoos, you thereby add to your knowledge. Ag:iin. when you grow up and have dealings with other people, some of whon1 are not straight. you learn by experience and thu..:; adJ to your ,knowledge of the ways of the world. lf )'OU are not careful. your wallet is liable to be stolen or you are liable to be cheated by some unscrupulous person. The thief who removes your wallet and the swindler \Vho che~ts you teach you le'.'6on and in the process make you wiser though poorer. If you visit night club. you get acquainted with and add to your knowledge about some of the not much revealed realities and mysteries of life. All this in way is education in the great school of life. But. that i.;. not the sense in which the word "education'' is used in clause ( 15) of section 2. \Vhat education connotes in that clause is the process of training and deve1oping the knowledge. skill. mind. and chara:ter of students by formal schooling. [469C-F]

(iii) The fact that the appellant trust is engaged in the busincs<:: of printing and publication of newspaper and journals and the further fact that the afore~ said activity vields or is one likely to yield profit and there are no re~trictions on the aotY."llant-trust earning profits in the course of its busin..:ss ·would go to show that the purpose of the appellant-trust does not satisfy the requirement that it should be one "not involving the carrying on of any activity for profit."

[471C·D]

Jn re The Trnstees of the 'Tribune (1939)7 ITR 415, State of· Gujorat v. M/s. Raipu.- Mff?. Co., [19671 1 S.C.R. 618, and Co111missioner of lrico1ne-tax v. Lahore Electric Supply Co. Ltd., [1966] 60 I.T.R. I, referred to.

Per M.H. Beg, J. (Concurring)

(i) It has been declared repeatedly by the Courts. even before the addition, -Of the words "not involving the carrying on of any activity for profit" to the definition of "charitable purpose'', that acthities motivated by private profit making fell outsi'de the concept of charity a1together. It is n1ore reasonable to infer that the words used clearly imposed new qualification on publtc utilities entitled to exemotion. It was obvious that, unless such limitation was introduced, the fourth and last category would become too wide to prevent

L-OKA SHIKSHANA TRUST v. C.I.T. (Khanna, J.)

its abuse. Wicle words so used could have been limited in score by judicial interpretations ejusdem generis so as to confine the last category to objects similar to those in the previous categories and also subject to dominant ccncept of charity which must govern all the four categories. But, the declaration of law by the Privy Council, in the Tribune case had barred this method of limiting an obviously wide category of profitable activities of general public utility found entitled to exemption. Hence, the only other way of cutting down the wide sweep of objects of ''general public utility" entitled to exemption was by legislation. This, therefore, was the method Parliament adopted as is clear from the speech of the Finance Minister who introduced the amendment in Parliament. r482F-Hl

lncon;e Tax Co1111nissioners v. Pe111se/, [1891] A.C. 531, 583; A1orice v. Bishop of Durhan1. (1805) 10 Ves. 522: All Jndia Spinners' Association v. Co1n1nfasioner of J11co111e Tax, Bon1bay, 1944(1:2) ITR 482, 486; Con1missioner of Jncon1e-Tax, Madras v. Andhra Chanzber of Conunerce, 1965(55) I.T.R. 722, 732; /11 re Gro11e-Gredy [l929J 1 Ch. 557, 582; Cape Brandy Syndicate v. I.R.C, [1921] 1 K.B. 64, 71; Rt. Hon'ble Jerald Lord Strickfand v. Carn1elo Mifud Bonnici, A.J.R. 1935 P.C. 34; The Englislunan Ltd. v. Laipat Rai, l.L.R. 37 Cal. 760; Anandji Hasidas & Co. P1·t. Ltd. v. E11gineeri11R Afa;.donr Sangh &: A.nr., A.LR. 1975 S.C. p. 946 @ 949; Co111111issio11er of lnconw-1ax Gujarat v. Vadi!al Lallubhai, 1972 (86) I.T.R. p. 2; Connnissioner of l11con1e-tax v. Sadora Devi, 1957 (32) I.T.R. 615 @-627 [1958] I. S.C.R. I and In re the Tribune, (19319) 7 J.T.R. 415, referred to. (ii) If the profits must ne::essarily feed charitable purpose, under the terms of the trust, the mere fact that the ac ivities of the trust yield profit will not alter the charitable character of the trust. The '.est is the genuineness of the purpose tested by the obligation created to spend the money exclusively or essentially on ·:charity", If that obligation is there. the income beC'omes entitled lo exemption. That is the most reliable test. The governine idea of charity must qualify purpose of every category enumerated in :-;ectiOn 2(15) of the Act of 1961. [483-C-D](iii) Although the term 'education', as used in section 2(15) of the Act, seem'> wider and more comprehensive than education through educational institu\.ions. such as Universitie-s, whose income is given an exemption fron1 income tax separately :under section 10(22) of the Act, provided the educa:ional institution concerned does not exist "for purposes of profit", ye\ the edu:ational effects cf newspaper or publishing business are only indirect, proble'matica1. and quite incidental so that, without imposing any condition or qualification upon the nature of information to be disseminated or ma-terial to be published, the mere pr;blication of news or views cannot be said. to serve purely or even predon1inantly educational purpose in its ordinary and l!&ual sense. Judging from the facts set out in the trust deed itself, the sole trustee had managed to mak~ the satisfaction of the needs mentioned in clause 2(c) hi2hly prOfit-able business. The deed puts no condition upon the [0]::onduct of the - newspaper and publishing business from which one could infer that it v.'as to be on "no profit~and no lq..;;s" basis. The High Court was right in coming to the conclu-sion that the appellant is not entitled to claim exemption from income-tax. [485-E-G, 486-D]

EaSJ India !nduMrie$ (Madras) Pvt. Ltd. v. Comniissioner of l11con1e.tax, !vludra<>, 1967 (65) I.T.R. 611; Commissioner of Income-tax, Madras v. Andhra C!wnzber of Commerce, 1965 (55) I.T.R. 722; Md. I(Jrahim Rizo v. Co1n1nis-sioner of Income-tax, Nagpur, (1930) L.R. 57 I.A. 260 and Co1nnd.uionet of lncon1e-1ax, West Bengal II v. Indian Chamber of Commerce, 1971 (81) r.T.R. 147.

_,_. __ _

t!RGUMENTS

for the appellant

( 1) Tue objects clause of the Trust is so worded as to make it clear that 1he whole and sole object of the Trust is education of the people of India

in general and of Karnatak in particular by the four means or modes set out in that clause. Those four means or modes are not separate objects of the Trust but are merely the instrumentalities prescribed by the Settler for achiev-ing the specified object of education. Even assuming for the purpose of argu-ment that sub-clauses (a) to (d) of clause 4 of the Trust Deed are separate and distinct objects of the Trust, clause ( c) which covers newspaper or journal is itself an object falling within the category of "education".

(2) The words added in the 1961 Act "not involving the carrying on of any activity for profit" go only with the last head viz. ''any other object of general public utility" and not with the first three heads. This is put beyond doubt by the comma which appears after each of the first three heads, there being no comma after the fourth head.

(3) The present case falls within the second head of "charitable purpose", 1:;z. education. The rulin.g of the Privy Council in the Tribune case 1939 J.T.R. 415 does not apply to the facts of the present case.

( 4) Assuming that the case does not fall within the categol_ry of "education'"' it falls within the last head "any other object of general public utility, and the qualifying words "not involving the carrying on of any activity for profit'' are satisfied. First the word "profit" means private gain, and the qualifying words merely say expressly wha.t v:.·as implicit in the 1922 Act (1939 I.T.R. 415 at 423, and 1944 l.'f.R. 482 at 488). Even assuming the word "profit" covers prdfit for the Trust, involving no private gain, the qualifying words are still satisfied. They require that the object of the Trust should not involve, i.e. entail, that the trustees should carry on the activity for profit. No su::h condition about making profit is imposed by the trust deed. That profit may result from the activities of the Trust in particular year is wholly irrelevant. Profit making is not the motive of the Trust.

(5) Provisions of section 11 of the Act clearly reveal that it is implicit in the very scheme of the Act that business undertaking can be held in trust for an object of general public utility.

For the respondent

(i) The decision of the Privy Council in the Tribune r.:ase squarely applies to[1 ]the facts of the present case; (ii) For ascertaining that true meaning of the expression "not involving the carrying on of an activity for profit" it was not only permissible but only proper for the Courts to refer to parliamentary debates and other proceedings of the legislature; (iii) Where business under-taking is held as property of the Trust and income resulting therefrom is wholly applied for charitable purposes such as education, medical relief of the poor, or for any other object Qf. general public utility but with which object the production of income i~ not linked it would be still exempt. But it that income is utilised only for the purposes of advancing the very object from the advancement of which it is derived it would cease to be exempt. The means and processes adopted by the Trustee for the advancement of the object were such as rendered the object itself as non-charitable; (iv) The expression· "activity for profit" was much wider in scope than merely business activity. The legislature had intentionally used the expression "activity" instead of business because in some cases the income produced from the activity may not be 1ega11y assessable under the provisions of the Income-tax Act, 1961 under the head "Income, profits and gains of business'• (Section 28). The expression 'activity for profit" in the context meant activity for profit making; (v) Since the advancement of .e~ucation was being achieved by ~eans invo!v-ing the carrying on of an activity for profit, the Trust would still be denred exemption. In other words, the qualifying words a-dded to the definition at the end did not govern merely the last category of charity i.e. the object of general public utility but equally governed the earlier three well known cate-gories namely n1edical relief, relief of the poor, and• education. The effect of the qualifying words "not involving the carrying on an activity for profit" w_as to deny exemption to trusts which carried On profit-making activity for advancing the object of general public utility.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2130 and 2131 of 1970.

From the Judgment and Order dated the .12th February, 1970 of the Mysore High Court in I.T.R.C. Nos. 5 and 6 of 1968.

N. A. Palkhivala, and Vi~et Kumar, for the appellant.

G. S. Sharma and S. P. Nayar for the respondent.

N. A. Palkhivala, S. T. Desai, A. G. Meneses, Mrs. A. K. Venna, P. N. Monga, J. B. Dadachanji for the Intervener-Tribunal Trust Chandigarh.

V. S. Desai and J. Ramamurthi for Intervener-Saiurashtra Trust, Bombay.

The Judgment of H. R. Khanna and A. C. Gupta, JJ, was delivered by Khanna, J. M. H. Beg, J. gave separate Opinion.

KHANNA, J.-The detailed facts of this case have been given in the judgment of our learned brother Beg J. and. need not be repeated. The question of law which was referred to the High Court and which has been answered in, the negative against the assessee appellant i~ as follows :

"Whether on the facts and in the circumstances of the case, the income lo! the Lok Shikshana Trust was entitled to exemption under section 11 of the Income-tax Act, 1961, read with section 2(15) of the same Act, for the assessment year 1962-63-?"

"Charitable purpose" was defined in section 4 ( 3) of the Indian In-come-tax Act, 1922 was as under :

"In this sub-section 'charitable purpose' includes relief of the poor, education, medical relief, -and the •acfvanceme>,1t of any other object of general public utility." ·

The definition of "charitable purpose" as given in section 2(15) oi the Income-tax Act, 1961 (hereinafter referred to as the Act) with which we are concerned reads as under :

"(15) 'Charitable purpose' includes relief of the poor, education, medical relief, and the advanceme11t of any other object of general public utility not involving the carrying on of any activity for profit."

It would appear from the above that in the definition of "charitable purpose" as given in the Act the words "not involving the carryrag on of any activity for profit" have been -added at the end of the defini-tion as given in the Act of 1922. We shall see as to what is the effect of the above addition.

[1976] 1 S.C.R.

In order to see as to whether the appellant-trust is for charitable purpose, we may first go into the question as to what is the object of the apipellant-trust. According to Mr. Palkhivala, learned counsel for the appellant, the object of the appellant-trust is education, while the· staud of Mr. Sharma on behalf of the revenue is that not education but the last mentioned category in section 2(15), viz., the advance-ment of any other object of general public utility, is the object of the appelJoant-trust. The reason for the above divcrge·acc in the stands of Mr. Palkhivala and Mr. Sharma is that according to Mr. Palkhivala, the concluding words of the definition in section 2(15) of the Act "not involving the carrying on of any activity for profit" do not qualify the first three categories of relief of the poor, education, or medical relief but qualify only the fourth category of "advancement of any other object of general public utility". Once the object of the appellant-trust is held to be education, the word trust would, according to Mr. Palkhivala, be held to be for public purpose as defined in section 2(15) of the Act. In such an event, it would be immaterial whether the object of the trust involves or does not involve the carrying on of any activity for profit. As against that, Mr. Sh>arma has co>,1troverted the submission that the concluding words of the definition, viz., "not involving the carrying on of any activity for profit" qualify only the fourth category of "advancement of any other object of general public utility". According to Mr. Sharma, the cd,1cluding words qualify the first three categories of relief of the poor, education and medical relief also. In any case, submits Mr. Sharma, the object of tbe appellant-trust falls in the fourth category of the definition, namely. "any other object of general public utility." It is, in my opinion, not necessary to express opinion i>,1 this case on the question as to whether the words "not involving the carrying on of any activity for profit" qualify the fourth object, viz., the advancement of any other object of general public utility, or whether they also qualify the other three objects of relief of the poor, education and medical re lief, because we are of the view that the object of the appellant-trust was not education but any other object of general public utility. Clauses 2, 6, 10, ·14, 16 and 18 of the trust deed of the appellant read as under :

"2. The object of the Trust shall be to educate the people of India in general and of Karnal'ak in particular by

(a) establishing, conducting aud helping directly or indi-rectly institutions calculated to educate the people by spread of knowledge ou all matters of ge+,1eral interest and welfare :

( b) founding and running reading rooms -and libraries and keeping and conducting printing houses and publish-ing or aiding the publication of books, booklets, leaf-lets, pamphlets, magazines etc., /,, Kannada and other languages, all these activities being started, conducted and carried on with the object of educating the people:

(c) supplying the Kannada speaking people with an organ or organs of educated public opinicu and conduct-ing journals ill' Kannada and other language for the dissemination of useful news and information and for the ventilation of public opinicia on matters of general public utility; and

(d) helping directly or indirectly societies and institutions which have all or any of the aforesaid objects in view."

6. The Original Trustee shall have power and authority to spend and utilise the money and the property of the Trust for any of th~ purposes of this Trust in such manner as to him may appear proper. The Original Trustee shall be entitled to operate all the Banking accounts of the Trust.

10. The Original Trustee shall have full power to, take over on such terms as he may deem fit such concern or con-cerns, or undertakings as, in his opinion, are congenial or conducive to any of the purposes of the Trust.

14. The Original Trustee shall be entitled to appoint Manager or Managers of institutions of the Trust, Editor or Editors and other subordinates for the purposes of carrying out the printing and p,ublication of any newspaper or news-papers, weeklies, monthlies, magazines, books or other publi-cations, and shall have power from time to time to delegate to any one or more persons by Power of Attorney or other-wise any one or more of the following powers.

(a) To open one or more banking accounts, to operate the same and to deposit and withdraw mo;,1eys from the same;

(b) To give receipts or discharges for money or property received by them or any one of them in the course of business carried on by the Trust;

( c) To buy or sell paper, irik, machines, books and mate-rials required for the purposes of the business of the Trust;

( d) To enter into contracts With agents, dealers and others in the course of the business of the Trust; .

( e) To employ or remove subordinates and workers neces-· sary for the work;

(f) and generally to do all things necessary and expedient in carrying out the business entrusted to him or them.

16. The Original Trustee or Trustees shall not take any remuneration for discharging his or their duties as Trustee or Trustees provided that this provision shall not preclude

Trustee or .Trustees from being paid out of the Trust fund such remuneration as may be deemed proper for carrying out any work and duty in connection with the conduct or manage-ment of institutions of the Trust, or with the business of printing, publishing or other activities carried on by the Trust. Trustee shall be entitled to be paid all expenses that may be incurred by him in connection with his duties as Trustee including trave!Jing and other expenses.

18. The Original Trustee or other Trustees shall not be responsible for any loss occasioned to the Trust in respect of any business or dealings carried on on behalf of-the Trust unless the sal)le is due to his own fraud or misappropriatioB or breach of trust and every trustee shall be indemnified by and out of the funds and moneys of the Trust against any loss or damage which the Trustee might suffer in regard to any act, deed, or omission of his in the performance of his duties as Trustee, including any fines or penalities imposed under the Factory Act or any Labour Legislation or Press Act or any other similar enactment."

The income-tax officer sent communication to the trust on April 27, 1963 to the effect that since the only activity of the trust was printing, publication and sale of newspaper, weekly and monthly journal, the trust carried on an activity for profit and was not entitled to exemption. In reply to that notice the Sole Trustee stated that the above mentioned activities of the trust were covered by clause (c) of the objects clause of the trust deed. It was added that the above object did not involve the carrying on of any activity for profit. In further communication dated June 26, 1964 the Sole Trustee wrote :

"The Trust has four objects in its objects clause one of which is to supply the Kannada speaking people with an organ or organs of educated public opinion etc. (clause 2(c) of Trust Deed). Under this clause we conduct the publication of newspapers. This has not been agreed upon by yol11' honour as Charitable purpose and we have accordingly pre-ferred appeals for relief.

The main object of the Trust is education and this mzy be achieved by conducting and helping educational institu-tions having the similar objects as of our Trust. These are all charitable objects. In case the Trust bas surplus income it cannot be spent on any object other than the objects of the Trust. For the present we have been educating the Kannada speaking people through newspapers and journals and we shall be taking up the other ways and means of education as noted in our trust deed as and when it is possible for Trust. We have no option at al! except to spend our income on the ob-jects of our Trust which are all charitable without any doubt or ambiguity."

We have set out above the relevant clauses of the trust deed and the material part of the communications sen~ by the Sole Trustee. It would

appear therefrom that though number of objects, including the setting up of educational institutions, were mentioned in the trust deed as the objects ot the trust, supplying the Kannada speakin!l people with an organ of educated public gpinion was al§O one of those objects. The communication sent by the Sole Trustee to the income-tax officer shows that the trust at present is carrying out only the last mentioned object of the trust, namely, supplying the Kannada speaking people with an organ or organs of educated public opinion. The concentration so far of the activities of the trust only on that object is in pursuance of clause 6 of the trust deed, according to which original trustee shalf have power and authority to spend and utilise the money and the property of the trust for any of th"'-purposes of the trust in such manner as to him may appear proper.The sense in which the word "education" has been used in section 2( 15) is the systematic instruction, schooling or training given to the young in preparation for the work of life. It alw connotes the whole course of scholastic. instruction which person has received. The word "education" has not been used in that wide and extended sense, accord-ing to which every acquisition of fnrther knowledge constitutes educa-tion. Accord.ing to this wide and extended sense, travelling is educa-tion, because as result of travelling you acquire fresh kuowledge. Like-wise, if you read newspapers and magazines, see pictures, visit art gal-leries, museums and zoos, you thereby add to your knowledge. Again, when you grow up and have dealings with other people, some of whom are not straight you learn by experience and thus add to your know-ledge of the ways of the world. If you are not careful, your wallet is liable to be stolen or you are liable to be cheated by some unscrupulous person. The thief who removes your wairet and the swindler who cheats you teach you lesson and in the process make you wiser though poorer. If you visit night club, you get acquainted witli and add to your know-ledge about some of the not much revealed realities and mysteries of life. All this in way is education in the great school of life. But that is not the sense in which the word "education" is used in clause (15) of section 2. What education connotes in that clause is the process . of training and developing the knowledge, skill, mind and character of students by' formal schooling.

The question as to whether trust the object of which is to supply the people with an organ of educated public opinion should be con-sidered (o be one for education or for any other object of public utility was considered by the Judicial Committee in the case of In re The Trustees·of the 'Tribune'('). In that case person who owned press and newspaper created by his will by which his property in the stock and goodwill of the press and newspaper was made to vest permanently in committee of certain members. It was the duty of the said com-mittee of trustees under the W'i]] "to maintain the said press and news-paper in an efficient c?ndition, and to.keep up the liberal policy of the said newspaper, devot1!1g the surplus mcome of the said press and newspaper a.fter defraymg all current expenses in improvin.g the said """····-·-newspaper and placing it on footing of permanency." -····--Ii was· also

(!) (1939) 7 I. T. R. 415.

provided. by an arrangement made subsequently that in case the paper ceased to function or for any other reason the surplus of the income could not be applied to the object mentioned above, the same should be applied for the maintenance of college which had been established out of the funds of another trust created by the same .testator. There was surplus income in the hands of the trustees after defraying the expenses of the press and the newspaper. Question arose as to whether that income was liable to be assessed in the hands of the trustees. The Judicial Committee held that the object of the settlor was to supply the province of the Punjab with an organ of educated public opinion and this was prima facie an object of general public utility. Their Lordships un-~quivocally expressed the view that they were not prepared to hold that the property referred to in the various paragraphs o( the will was held for the purpose of "education" in the sense that word was used in section 4 of the Indian Income-tax Act of 1922. The above decision of the Judicial Committee applies directly to the present case and in view of this decision, we would hold that the object of the appellant-trust was '"the advancement of any other object of general public utility".It has been poiuted out in the earlier part of the judgment that in the. definition of charitable purpose as given in section 2(15) of the Act the words "not involving the carrying on of any activity for profit" have been added at the end of the definition as it was given in section 4(3) of the Indian Income-tax Act, 1922. The position as it existed under the Act of 1922 was that once the purpose of the trust was reliet of the poor, education, medical relief or the advancement of any other object of general public utility, the trust was considered to be for charitable purpose. As result of the addition of the words "not involving the carrying on of any activity for profit" at the end of the definition in section 2 ( 15) of the Act even if the purpose of the trust is "advance-ment of any other object of general public utility", it wo~ld not be con-sidered to be "charitable purpose" unless it is shown that the above purpose does not involve the carrying on of any activity for profit. The result thus of the change in the definition is that in order to bring case within the fourth category of charitable purpose, it would be necessary to show that ( 1) the purpose. of the trust is advancement of any other object of general public utility, and (2) the above purpose docs not involve the carrying on of any activity for profit. Both the above con-ditions must be fulfilled before the purpose of the trust can be held to be charitable purpose. It is not necessary for the decision of this case, as already mentioned above, to go into the question as to ·whether the words "not involving the carrying on of any activity for profit" also qualify the first three categories of charitable purpose, namely, relief of the poor, _education and medical relief.

Question then arises as to whether the purpose of the appellant-trnst can be considered to be one not involving the carrying on of any activity for profit. So far as this question is concerned, we find that the appel-lant-trust started with sum of Rs. 4.308, 10 As. 9 Pies. The schedule attached to the trust deed dated April 10, 1947 shows that the assets of the trust consisted of printing machines, accessories, motor-cars, build-ing, stocks of paper and other miscellaneous things. The total value of

the assets was Rs. 2,97 ,658, out of which the value of the building sites. and the buildings was Rs. 47,500. As against that, the liabilities of the trust amounted to Rs. 1,24,086. The net value of the assets of the trust rose in 1947 to figure of Rs. 1,73,571, 14 As. 4 Pies. For the assess-ment year 1962-63, which is the year under appeal, the total receipts of the trust were of the amount of Rs. 22,55,077. The main sources of these receipts were sales of newspapers and magazines through agents, receipts on account of advertisements, receipts for job printing bills be-sides son1~ other rrtinor items. "As against t~e reCeipls, th~ n:ajor ite~ of expenditure were the purchase of newsprmt, paper, pnntmg type5" printing and other material, the salaries and allowances of the staff,. remuneration to news agencies and railway freight. There can, there-fore, be no doubt that the trust bas been carrying on the busi11ess of publishing newspaper and weekly and monthly magazines. The profits. from the aforesaid business would also apparently account for the mani-fold increase in .the value of the assets of tlle trust. The emphasis on business activity of the trust is also manifest from clauses 6, 10, 14, 16-and 18 of the trust deed reproduced above. The fact that the appellant-trust is engaged in the business of printing and publication of newspaper and journals and the further fact that the aforesaid activity yields or is one likely to yield profit and there are no restrictions on the appel\ant-trust earning profits in the course of its business would go to show that the purpose of the appellant-trust does not satisfy the requirement that it should be one "not involving the carrying on of any activity for profit".

It is true that there are some business activities like mutual insu-ra,1ce and co-operative stores of which profit making is not an essential ingredient, but that is so because of self-imposed and innate restric-E tion on making profit in the carrying on of that particular type of. busi-ness. Ordinarily profit motive is normal incidence of business activity and if the activity of trust consists of carryi•ag on of business and there are no restrictions on its making profit, the court would be well justified in assuming in the absence of some indication to the con•· trary_ that the object of the tn~st involves the carrying on of an• act•vtty tor profit. The expresswn "business", as observed by Shah J'. spe_aking for the Court in the case of State of Gujatat v. M / s. Raipur Mfg. Ci; .• C') though extensively used in taxing statutes, is word of mdefimte import. In taxing statutes, it is. used in the sense of an <>ccupa!Ion, or profession which occupies the time, attention and labour of p;:rson, noi;mally with the object of making profit. To regard an act~v1ty as busmess there must be course of dealings, either actually contmued or contemplated to be continued with profit motive, a?d not fo: sport or pleasure. Whether person carries on bus1.1ess m i:ar~1cular commodity must depend upon the volume, frequency, contmmty and regularity of transactions of purchase and ?ale m. class of goo~s and the transactions must ordinarily be entered ~nto with profit motive. By the·use of the expression "profit mot;ve"· 1t is" n~t intended that profi~ must in fact be earaed. Nor does· the expLss1?n cover mere ~estre to make some monetary gain out of tr~sact1on or even senes of transactions. It predicates motive which pervades the whole series of transactions effected by the person irr

(I) [1967] l s. c. R. 618.

the course of his activity. In the case of Commissioner of I ncomc-tux v. Lahore Electric Supply Co. Ltd.([1]), Sarkar J. speaking for the majo-rity observed that business as contemplated by section 10 of the Indian Income-tax Act, 1922, is an activity capable of producing profit 11 hich can be ta;;ed. In the case of the appellant-trust the activity of the 1rust, as already observed earlier, has in fact been yielding profits and that apparently accounts for the increase ia the value of its assets.

We are not impressed by the submission of the learned counsel for 1he appellant that ,Profit under section 2(15) of the Act means private profit. The word used in the definition given in the above providon is profit and 110t private profit and it would not be permissible to read in the above definition the word "private" as qualifying profit even 1hough 'such word is not there. There is also no apparent justifica-tion or cogent reason for placing such construction on the word "profit". The words "general public utility" contalaed in the definition of charitable purpose are very wide. These words, as held by the Judicial Committee in the case of All India Spinners' Associaricn v. Commissioner of Income-tax(2), exclude objects of private gain. It is also difficult to subscribe to the view that the newly added words "not involving the carrying on of any activity for profit" merely qualify and affirm what was the positio'a as it obtained under the definition given in the Act of 1922. If the legislature intended that the concept of charitable purpose should be the same under the Act of 1961 as it was in the Act of 1922. there was no necessity for it to add the new words in the definition. The earlier definition did not involve any ambiguity and the position in law was clear and -admitted of no doubt after the pronouncement of the Judicial Committee in the cases of Tribune aad All India Spinners' Association (supra). If despite that fact, the legislature added new words in the definition of charitable purpose, it would be contrary to all rules of construction to ignore the impact of the newly added words and to so construe the definition as if the newly added words were either not there or were intended to be otiose and redundant.

The appeals fail and are dismissed but in the circumstances without costs.

BEG, J. The question, answered in the negative in this case by the Mysore High Court, which is now before us after certification of the ease under Section 261 of the Income tax Act, 1961 (hereinafter referred to as 'the Act'), was framed by the Income-tax Tribunal as follows:-

"Whether on the facts and in the circumstances of the case, the income of the Loka Shikshana Trust was entitled to exemption under Sec. 11 of the lncome tax Act, 1961 read with Sec. 2(15) of the same Act., for the assessment year 1962-63''.

The appellant is sole trustee of the "Loka Shikshana Trust", hold-ing properties mentioned in schedule attached to deed of trust exeeu-1ed on 19-2-1962 by himself purporting to re-declare trust of 15-7-1935. The total assets of the earlier trust of 1935, known as the

(2) (1944) 12 I. T. R. 482.

(1) (1966) 60 I. T. R. I.

"National Literature Publications Trust", consisted of sum of Rs. 4308.10.9 only. It appears that, under the provisions of the earlier trust the trustee had carried on lucrative business of printing, under the ~ame of "Karnatak Prakashana Manda!", at Belgaum, and, there-after, it was shifted to Hubli where be started publishing daily news-pap~r called "Samyukt!' Karnatak". The print in~ business m;ist have been lucrative because mvestments of profits from It, together w.1th some possible "donations", expanded the assets ofi the redeclared trust of 1962 so much that the schedule attached to the trust deed of 1962 shows their value to be Rs. 2,97,658/-. After deducting the total liabilities of the trust, shown as Rs. 1,24,086.10 annas, the net value of the assets is given as Rs. 1,73,571.14.4 .

Even if the obvious inference from statements found in the trust deed of 1962, which is part of the statement, of the case, show.ing the assets ofl the trust of 1953 as well as of the re-declared trust of 1962, that the trustee was carrying on fairly Iucratjve business, the profits of which had been utilised for building up its assets, could possibly be· ignored, we find, from the statement of the accounts submitted by the appellant trustee himself to the Income-tax Department for the assess-ment year 1962-63, with which we are concerned, that the trust had" made quite cons.iderable profits from various activities carried on as part of its ordinary and regular .. business. Here, gross income of Rs. 22,55,077.46 nP is shown. This Included Rs. 12,31,954.54 from sales of newspapers and magazines through agents, Rs. 7,29,249.27 from adtertisements and notices alone, Rs. 1,27,422.53 as payments of "job· printing bills". The sales of its newspapers and journals through retail-ers brought in Rs. 66,010.68 np. The subscribers of newspapers, and journals contributed Rs. 51,8Q3.74. "Profits" from sales of other pubJ.i-cations are shown as Rs. 5040.05 np. Income from "sundry receipts" is given as Rs. 2964.57 np. "Profits from the,,ale of van and machinery .are shown as Rs. 4829.83. Some other income is shown as Rs. 2337.95. Interest on investments is shown as Rs. 1762.71. glance at items of expenditure shows that nothing was spent for which deduc-tion could not be claimed by any private concern carrying on profit-able business. These .items of expense consisted of money spent on repairs of buildings, payments of taxes, purchases of newsprint and· other kinds oE paper, ink, photographic materials, blocks, binding, stit-ching and packing materials, payments of salaries, wages and allowances to the staff. After deducting the total expenditure of Rs. 4,92,246.81 from the gross income, the net income for the year is shown as Rs. 30,376.80 np. for which exemption from Income-tax is claimed by the appellant on the ground that it is protected from taxation by Sea-tion 11 read with Section 2(15) of the Act.

The trust deed of 1 ?62, which, as already stated, is part of the statement o~ the case, gives the past history of the trust in the course ?fa fairly long .P'.t;amble. It contains the following pass;ge g;iving some idea of the actml!es, of the trust, the composition of its present assets as well as of utilisation of its income since 1935:

"AND WHEREAS in furtherance of the objects contain-ed in the sajd deed of Trust. dated 15th July, 1935, I took

[1976) 1 S.C.R.

over on 17-7-1935 concern called the Karnatak Prakashana Manda!, Belgaum, and conducted printing Press fior some time at Belgaum, and, thereafter, at Hubli, and printed aml published daily paper "Samyukta Karnatak", and weekly paper called "Weekly Samyukta Karnatak", which was later called "Karmaveer", and also published certain books, pam-phlets, and other literature, as result whereof the property of the trust increased from time to time, and the said property is today comprised of printjng presses, buildings, land and other property which is set out in the schedule hereunder written".

The trust deed also contains reference to what necessitated re-·~eclaration of the trust. An amended meaning of "charitable purpose", -given in Section 2 ( 15) of the Act of 1961, must have given rise to some ·doubts in the minds of the maker of the trust about the taxability of the income of the trust which was exempted from payment of income-tax Jn the pasL He said :

"And" whereas doubts have arisen regarding the legal vali-dity of the Trust declared in the aforesaid Deed of Trust dated 15th July 1935.

AND whereas it became necessary to· take steps to remove the said doubts and to prevent similar doubts arising .in future, I, Ranganath Ramachandra Diwakar, who has been the only Trustee of the National Literature Publication Trust declared .as aforesaid, have obtained legal opinion in the matter of the said Trust and I am desirous, with view to carry.ing out pub-lic purposes ofi charitable nature, of re-declaring the Trusts. in accordance with the legal opinion clbtained by me as afore-said, on which I hold and shall continue to hoid the original Trust amount of Rs. 4,308.10.9, and all contributions, additions. accumulations, and acquisitions to the same which are now comprised in the Schedule hereunder written and all the properties, funds, assets, and any conversions or reconver-sions thereof and the investment in which the same mav from time to time be held". ·

The objects of the trust arc set out as follows :

"2. The object of the Trust shall be to educate the people of India in general and of Karnatak in particular by, .

(a) establishing, conducting and helping directly or in-directly institutions calculated to educate the people by spread ·of knowledge on all matters of general interest and welfare:

(b) founding and running reading rooms and libraries and keeping and conducting printing houses and publishing or aiding the publication of books, booklets, leaflets, pam~ phlets, magazines ets. in Kannada and other languaoes. all these activities being started, conducted, and carried ~n with the object of ooucating the people;

'.:¢.._

(c) supplying the Kannada speaking people w.itb an organ or organs of educated public opinion and conducting journals in Kannada and other languages for the dissemination of use-. ful news and information and for the ventilation of public opinion on matters of general public util,ity; and

( d) helping di;ectly or indirectly societies and institutions which have all or any of the aforesaid objects in view".

In addition to the power which _the sole trustee bad to collect dona· tions and subscript.ions for the trust, he had all the powers which the sole manager of busine-ss may have in order to carry it on profitably. He had the power of transferring trust properties and funds if he thought "it expedient in the interest of the objects of the Trust, to transfer the assests and !iahilities of this Trust to any other Charitable Trust or institution conducted by such Trust, which, in the opinion pf the origi-nal Trustee or the Board of Trustees, has objects similar to the objects of this Trust and is capable of carrying out the objects and purposes of this Trust either fully or part.ially". (Paragraph 17 of the Trust deed). Although, the "original trustee" w"' not "to take any remune-ration" for discharging his duties as trustee, yet, he was not precluded "from being paid out of the Trust fund such remuneration as may be deemed proper for carrying out any work and duty in connection with the conduct or management of inst,itutions of the Trust, or with the business of printing, publishing or other activities carried on by the Trust". He was to be paid expenses incurred in travelling or otherwise in connection with his duties as trustee (paragraph 16 of the Trust deed).

The "original trustee" could invest trust monies and profits "in any investment authorised by law for the investment of Trust fur.ds or in shares, or securities or debentures of Limited Companies· in India or outside" (para 4 of the Trust deed). He had the "power to mortgage, sell, transfer and give on lease or to otherwise deal with the Trust property or any portion thereQf for the purpose of the· Trust and to borrow monies or raise Joans for the purpose of the Trust whenever he may deem it necessary to do so" (para 8 of the Trust deed). FUP-thermore, the Trustee had the "power and authority to spend and utilise the money and the property of the Trust for any of the purposes of this Trust in such manner as to him may appear proper".

It appears to us that, with this profit making background of the trust, its loosely stated objects, the wide powers of the sole trustee, and the appar.ently profitable mode of conducting business, just like any commercial concern, disclosed not only by the terms of the trust but · by the statement of total expenditure and income by the trustee, it is very difficult to see what educational or other charitable purpose the trust l;Y~S serving unless the di~se~ination of information a'nd expression of opm10ns through the publications of the trust was in itself treated as the really educat.ional and charitable purpose.

The principal arguments advanced on behalf of the appellant-trustee ·:are: firstly, paragraph 2(c) of the Trust deeil only enables the trustee

to supply the Kannada speaking people with organs or means for ex-pressing educated public opinion as mode of serving the real and expressly mentioned purpose of "education" wh.ich must control and determine the t.rue nature of the activities of the trust so that prnfit making, as an incidental consequence of these activities, was quite im-material; .and, secondly, even if the activitJe$ of the trust did not fall within the separate category ofi "education" as such, in which case profit yielding became quite irrelevant, but fell under the more general or the 4th and last category o~ purposes of general public utility specified in Sect.ion 2(15) of the Act, the mere fact that the conduct of the printing h&.siness was profitable sometimes or even constantly was not enough to make it an activity carried on "for profit". The first contention rests on the assumption that an express mention of dominant though general purpose of "education" will enable the Courts to supervise the execu-tion of such trust as one intended solely for educational purposes. The six:ond submission, accepted by the Income-tax Tribunal but rejected by the High Court, implies that the profit-making motive must be specifically and express'ly made the object of an activity which is of obvious utility to the public before exemption from taxation can be denied to such an activity. In other words, the added qualification or condition imposed upon work of "general public utility", before it could pass the test of charitable purpose, made no difference to the law. According to learned Counsel for the appellant, the amendment was meant to make explicit what was previously only implicit in the law as it stood. The argument thus is that the amendment only clar.ified without actually changing the law on the subject.

The last paragraph of clause (3) of Section 4 of the Indian Income-tax Act of 1922 (hereinafiter referred to as 'the Act of 1922') laid clown:

" 'charitable purpose' includes relief of the poor, educa-tion, medical relief and the advancement of any other object of general public utility, but nothing contained Jn clause (i) or clause (ii) shall operate to exempt fr_om the provisions of this Act that part of the income from property held under trust or other legal obligation Jlor private religious purposes which does not enure for the benefit of the public''.

It will be notJccd that the provision set 'Out above did not really define "charitable purpose" but purports only to indicate concept of charity which would include the four categories of objects mentioned there. The four-fold classification of charitable purposes has history in English law. statute of Elizabeth I which "was not directed so much to the definition of charity as to the correction ofi abuses which had grown up in the administration of trusts of charitable nature" (See : Tudor on "Charities" six End. p. 2) had preamble containing an illustrative list of charitable objects which was never treated as ex-ha!11Stive. It, however, became the practice of Courts "to refer to the preamble as sort of index or chart in order to determine whether or not given purpose was charitable". Thus, nurpose was considered, in the eye of law, to be charitable only if it came within the letter or the spirit and intendment of the preamble of the statute of E\J,zabeth.

To give semblance of order to the rather confusing mass of case law which had accumulated on the subject, attempts were made to classify purposes which had obta.ined recognition by Courts as charitable. Lord Macooghten, in Income Tax Commissioners v. Pemsel(') adoptOO aJour-fold classification of charitable purposes which had been first put forward in the course of an argument by Sir Samuel Romilly in Morice v. Bishop of Durham([2]). These were: {l) Relief of poverty, (2) advancement of education; (3) advancement of religion; ( 4) other purposes beneficial to the community not falling under any of the pre-ceding heads.

The last or the residuary category seemed very wide and general. Properly speaking, such wide category would be .interpreted, if it were found in statute, ejusdem generis with the previous three cate· gories, which were less wide and more ·specific. The framers of our· Act of 1922 must have been attracted by this classification which they adopted with some modilicaitions, "Medical relief" was apparently sub-stituted for "advancement of religion". In All India Spinners' Associa-tion v. Commissioner of Income-tax, Bombay('), Lord Wright, while considering the meaning of Sec. 4( 3) of the 1922 Act, observed (at p. 486) :

"The Acr of 43 Elizabeth (160 I) contained in preamble list of charitable objects which fell within the Act, and this was taken as sort of chart or scheme which the Courts adopted as groundwork for developing the law, in doing so they made liberal use of analogies so that the modern English law can only be ascertained by considering mass of particular decisions often difficult to reconcile. It iB true that Section 4 ( 3) of the Act has largely been influ-enced by Lord Macnaghten's definition of charity in Pemsel v. Commissioners for Special purposes of Income·tax (1891) A.C. 531 at p. 583, but that definition has no statutory authority . and is not precisely followed in the most material particular; the words of the section are 'for the advance-ment of any other object of general public utility',. whereas Lord Macnaghten's words were 'other purposes beneficial to the community'. The difference in language, particularly the inclusion in the Indian Act of the word 'public' is of importance.''

The trend of judicial pronouncements was to construe the words "general public utility", in Section 4(3) of the Act of 1922, very widely. The only serious limitation put on the character of "general public utility" seems to have been that it clearly excluded the object of private profit making. Thus, in the All India Spinners' Association case (supra), the Privy Conncil, while holding that the "primary ob-ject" of the Association appeared to be "the relief of the poor", said (n~ 488): ·

, (1) [18911 A. C. 531, 583. (2) (1805) 10 Yes. 522.

(3) (1944)121.T.R.p.482 at 486.

17-L839SupCT/75

"That would be enough prima facie to satisfy the sta-tute. But there is good ground for holding that the pur-poses ol' the Association included the advancement of other purp0ses of general public utility. These last are very wide words. Their exact scope may require on other occasion very careful consideration. They were applied in the Tribune Press case (1939) 66 I.A. 241; 7 I.T.R. ( 415) without any very precise definition to the pro-duction of the newspaper in question under the conditions fixed by the testator's will. The Board stated (at p. 256) that

'the object of the paper might be described as the ob-ject of supplying the province with an organ of edu-cated public opinion'.

and that it should prima facie be held to be an object of gelileral-public utility. These words, their Lordship think, would exclude the object of private gain, such as an under-takiRg for commercial profit though all the same it would subserve general public utility. But private profit was eli-minated in th~s case".

In Commissioner of Income-Tax, Madras v. Andhra Chamber of <;ommerce('), this Court interpreting 'Section 4(3) of the -1922, Act, !1eld (at p. 732) :

"The expression 'object of general public utility' in sec-tion 4 ( 3) would prima facie include all objects which promote the welfare of the general public". ·

Decision of some cases seems to have revolved round the question whether the body of beneficiaries was large enough to constitute the purpose one of "public utility".

Some of the decisions on income for which exemption was claimed on the ground th.at it was meant for charitable purpose falling with-in the wide residuary class perhaps travelled even beyond the "burst-ing point" to which, according to Lord Rirn;sell of Killowen, Englislo. Courts had stretched . the concept of charity [See : In re Grove-Grady(') ]. At any rate, the reason which induced our Government to make an amendment by Section 2(15) of the Act of 1961 was thus stated by the Finance Minister, Shri Morarji Desai, in the course of his speech in Parliament explaining the proposed amendment (see : Lok Sabha Debate date_d 18-8-1961) (') :

"The other objective of the Sekel Committee, limiting the exemption only to trusts and institutions whose object is genuine charitable purpose has been achieved by amending the definition in clause 2 ( 15). The definition of 'charitable' purpose in that clause is at present so widely worded that

---~.--(!) [1965] 551. T. R. p, 722 at 732. (2) [1929] 1 Ch. 557, 582. (J) Lok Sabha Debates, TTnd Ser. Vol. LVI dt. 18-8-61. p. 2819 at p, 3674.

it c,an be taken advantage of even by commercial concerns which, while ostensibly serving public purpose, get fully paid for the benefits provided by them, namely, the news-paper industry which while running its concern on commer-cial lines can claim that by circulating newspapers it was improving the general knowledge of the public. In order ) . to prevent the misuse of this definition in such cases, the 'J' Select Committee felt that the words 'not involving the carrying oii. of any activity for profit' should be added to the definition". ( p. 307 4).

Mr. Palkh\vala objected strongly to any reference to the speech of the Finance Minister, who proposed the amendment, for the purpose of finding cut the object of the amendment He contended that speech es made by Members of Parliament in the course of debates on pro- . visions enacted were not to be looked at for interpreting the language of the enactment to which we should confine ourselves. He relied on the well known dictum of Rowlatt J., in Cape Brandy Syndicate v. l.R.C.('), when that learned Judge said :

"In taxing Act one has to look at what is clearly said ...... One can only look fairly at the language used".

It was contended that, as the meaning of words used in Section 2(15) was very clear we need go no further. I am not able to accept this over-simplification of the problem before us. To say that the concept of charitable purpose, either before or after the amendinent we are considering, was at all clear or free from considerable ambi· guity and difficulty would be to ignore the plethora of not always consistent case law which one can find on the subject and to minimize the difficulties of Courts. "Charitable purpose" has never been at all clearly defined or ex,haustively illustrated. We have, therefore, to discover the mischief aimed at by the amendmentIt is true that it is dangerous and may be misleading to gather the meaning of the words used in an enactment merely from what was said by any speaker in the course of debate in Parliament on the subjeet Such speech cannot be used to defeat or detract from meaning which clearly emerges from consideration of the enacting words actually used. But, in the case before us, the real meaning and purpose of the words used cannot be understood at all satisfactorily without referring to the past history of legislation mt the subject and the speech of the mover of the amendment who was, undoubtedly, in the best position to ex.plain what defect in the law the amend-ment had sought to remove. It was not just the speech of any member in Parliament It was the considered statement of the Finance Minister who was proposing the amendment for particula.: reason which he clearly indicated. If the reason given by him only elucidates what is also deducible from the words used in the amend-ed provision, we do not see why we should refuse to take it into

(I) [1921] 1 K. B. 64,71.

(1976] 1 S.C.R.

consideration as an aid to correct interpretation. with and clarifies the real intent of the words nsed. such circumstances, ignore it?

It harmonises Must we, in

We find that Section 57, sub-s. (4J of the Evidence Act not (!nly enables but enjoins Courts to take judicial notice of the course qf proceedings in Parliament assuming, of course, that it is relevant. It is tune that the correctness of what is stated on question of fact, in the course of Parliamentary proceedings, can only be proved by somebody who had direct knowledge of the fact stated. There is, however, distinction between the (act that particular statement giving the purpose of an enactment was made in Parliament, of which judicial notice can be taken as part of the proceedings, and the truth of disputable matter of fact stated in the course of proceedings, whieh has to be proved aliunde, that is to say, apart from the fact that statement about it was made in the course of proceedings in Parlia-ment (See; Rt. Hon"b/e Jerald Lord Strickland v. Carme!d Mifud Bonnici([1]), The Englishman Ltd. v. Lajpat Rai([2]).

In the case before us, reference was made merely to the fact that certain reason was given by the Finance Miniser, who pro-posed an amendment, for making the amendment. What we can take judicial notice of is the fact that such statement of the reason was given in the course of such speech. The question whether the ob-ject stated was properly expressed by the language of Section 2(15) of the Act is matter which we have to decide for ourselves as question of law. Interpretation of statutory provision is always question of law on which the reasons stated by the mover of the amendment can only be used as an aid iu interpretatfon if we think, as I do in the instant case, that it helps us considerably in under-standing the meaning of the amended law. We find no bar against snch use of the speech.

In An.andji Haridas & Co. Pvt. Ltd. v. Engineering Mazdoor Sangh & Anr.('), Division Bench of this Court observed (at p.949)

"As general principle of interpretation, where the words of statute are plain, precise, and unambiguous, the inten-tion of the Legislature is to be gathered from the language of the statute itself and no external evidence such as Parlia-mentary Debates, Reports of the Committees of the Legisla-ture or even the statement made by the Minister on the in-troduction of measure or by the framers of the Act is ad-missible to construe those words. It is only where statute is not exhaustive or where its language is ambiguous, un-certain, clouded or susceptible or more than one meaning or shades of meaning, that external evidence as to the evils, if any, which the statute was intende~ to remedy, or of the circumstances which led to the passmg of the statute may

(!) AIR 1935 P. C. 34. (3) A. I. R. 1975 S. C. 946 at 949.

(2) I. L. R. 37 Cal. 760.

·-....;,,

·. "( "' \

LOKA S!!IKSHANA TRUST v. C.l.T .. (Beg, !.) 481

be looked into for the purpose of ascertaining the object which the Legislature had in view in using the words in ques-tion".

The Finance Minister's speech tells us that the Government was accepting the recommendations of the Select Committee to which the Bill which became the Act of 1961 had been referred. One of the re-commendations was :

"The Committee is of the opinion that the advancement of an object of general public utility which involves the car-rying on of ,any activity for profit should not come within the ambit of charitable purpose".

[See Gazette of India Extraordinary Part II, Section 2, p.677 ( 4) ] .

In Commissioner of Income-tax, Gujarat v. Vadila/ La/lubhai([1]), this Court, following its earlier decision in Commissioner of Income-tax v. Sadora Devi([2 ]) did not consider it at all inappropriate to refer to Select Committee's Report for finding out the reason behind an ambiguous provision so as to be able to apply the Mischief Rule. It is too late in the day for Mr. Palkhivala to object to the adop-tion of such course in an attempt to apply the Mischief Rule to fiud out the reason behind an .amendment of the law.

The case on which Mr. Palkhivala, the learned Counsel for the appellant, relies most strongly for support to his client's case on merits is : In Re the 'Tribune'('), where the Privy Council, allowing an appeal from Full Bench decision of the Lahore High Court, held that the income Trust, the object of which was des-cribed as "supplying the province with an organ of an educated public opinion", was entitled to exemption on the ground that it was trust for purpose of "General public utility" and not just for pro-pagating any political views. It was also held there that such trust would not fall within the category of Trusts for education in the sense in which that term appears in Section 4 of the Act of 1922. The PriVy Council, after observing that the Chief Justice and Addison, J ., of the Lahore High Court, had laid some stress on the fact "that the Tribune newspaper charges its readers and advertisers at ordinary commercial rates for the advantages wltich it affords", said (at p. 422) :

"As against this the evidence or finding do not dis-close that any profit was made by the newspaper or press before 1918 and it is at least certain that neither was founded for private profit whether to the testator or any other person. By the terms of the trust it is not to be carried on for profit to any individual. . It cannot, in their

(1) (1972) 86 I. T. R. p. 2.

(2) (1957) 32 I.T.R 615 at 627-[1958] 1 S. C. R.1.

(3) (1939) 7 I. T. R. 415.

(1976] 1 S.C.R.

Lordships' opinion, be regarded as an element necessarily pt'esent in any purpose of general public utility, that it should provide something for nothing or for less than it costs or for less than the ordinary price. An elemosynary eleme1~t is not essential even in the strict English view of charitable uses (Commissioners v. University College of North Wales (1909) 5 Tax Cas. 408, 414)".

It seems clear to us that the amended provisions, Section 2 ( 15) in the Act of 1961, was directed at change of law as it was de-clared by the Privy Council in the Tribune case (supra). The amended provision reads as follows :

"S. 2 ( 15) 'charitable purpose' includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit;" It is apparent that, even now, charitable purpose has not been defined. The four-fold classification, which was there in the Act of 1922, is there even in the amended provision, but the last or general category of objects of "general public utility" is now qualified by the need to show that it did not involve profit making, The question before us, therefore is : What is the meaning or purpase of introducing the limitation" not involving the carrying on of any activity for profit" ? The contention of Mr. Palkhivala is that it merely indicates that, as was held in the Tribune case (supra) and other cases, the purpose must not be private profit making, or, in other words, the benefit must be to an object of "general public utility". This involves ·reading of the word "private" before "profit" which is quite unjustifiable. Furthermore, if that was the sole pur-pose of the amendment, we think that the amendment was not necessary at all. It had been declared repeatedly by the Courts even before the amendment that activities motivated by private pro-fit making fell outside the concept of charity altogether. We think that it is more reasonable to infer. that the words used clearly im-posed new qualification on public utilities entitled to exemption. It was obvious that, unless such limitation was introduced, the fourth and last category would become too wide to prevent its abuse. Wide words so used could have been limited in scope by judicial · interpretations ei,usdem generis so as to confine the last category to objects .similar to those in the previous categories and also subject to dominant concept of charity which must govern all the four categories. But, the declaration of law by the Privy Council, in the Tribune case (supra), had barred this method of limiting an obviously wide category of profitable activities of general public utility found entitled to exemption. Hence, the only other way of cutting down the wide sweep of objects of "general public utility" entitled to exemption was by legislation. This, therefore, was the method Parliament adopted as is clear from the speech of the Finance Minister who introduced the amendment in Parliament.

The word "involve" does not, it seems to me, necessitate the bring-ing out of the, profit motiv~ of an activity expressly in the deed of trust as was suggested by the learned Counsel for the appellant. The dic-tionary meaning of the word 'involve' is : "to entangle; to include; to contain; to imply" (see; The Shorter Oxford English bictionary-111 Edn. p. 1042). All profit making, even as mere by-product, would have been covered by the word "involving", which is of wide import, if this word had stood alone ar1'c! by itself without further qualifications by the context. The use of the- words "for profit", however, shows that the involvement of profit making should be of such degree or to such an extent as to enable us to infer it to be the real object. As rule, if the terms of the trust permit its operation "for profit", they be~ come prima facie evidence of purpose falling outside charity. They would indicate the object of profit-making unless and until it is shown th at terms of the trust compel the trustee to utilise the profits of busi-ness also for charity. This means that the test introduced by the amendment is : Does the purpose of trust restrict spenlding the in-come of profitable activity exclusively 6r primarily upon what is , "charity" in law ? If the profits must necessarily feed charitable purpose, nnder the terms of the trust, the mere fact that the activities of the trust yield- profit will not alter the charitable character of the trust. The test now is, more clearly than in the past, the genuineness of the purpose tested by tlie obligation created to spend the money ex-clusively or essentially on "charity". If that obligation is there, the income becomes e~itled to exemption. That, in our opinion, is the most reliable test.

The difficult question, however, still remains : what is the mean ing of "charitable purpose" which is only indicated but not defined by Section 2(15) of the Act? It seems to me that common concept or element of "charity" is shared by each of the four different cate-gories of charity. It is true that charity \loes not necessarily exclude carrying on an activity w~ich yields profit, provided that profit has to be used up for what is recognised as charity. The very concept of charity denotes altruistic thought and action. . Its object must neces-sarily be to benefit others rather than one's self. Its essence is self-lessness. In truly charitable activity any possible benefit to the person who does the charitable act is merely incidental or even acci-dental and immaterial. The action which flows from charitable thinking is not directed towar'ds benefitting one's self. It is always directed at benefitting others. It is this direction of thought and effort and not the result of what is dop.e, in terms of financially measurable gain, which determines that it is charitable. This direction must be evident and obligatory upon the trustee from the terms of deed of trust before it can be held to be really charitable.

We think that this governing idea of charity must qualify purpose . . of every category enumerated in Section 2(15) of the Act of 1961. We think that the words introduced by the Act of 1961 to qualify the last and widest category of objects of public utility were really in-tended to bring out what has to be the dominant characteristic of

each and every category of charity. They were intended to bring the last and most general category in line with the nature of activjties con-sidered truly charitable and mentioned in the earlier categories.

They were intended to bring the

Coming now to the deed of trust before us, we find that the word "education" is mentiof(ed by the maker of the trust in rather cere-monial or ritualistic fashion as label for what he considers to be charitable object. The third set of objects, in clause 2 of the deed does not appear to be stated there merely as means of serving the general purpose of "education" separable from these objects in clause ( c). On the other hand, there are strong grounds for believing, in the light of other provisions and profit making activities and background 0f the trust, that the object of education was mentioned in the deed only as convenient cloak to conceal and serve the real and dominant purpose of clause 2 ( c) which was to run profitable newspaper and publishing business without paying the tax on it. Just as mere mak-ing of profit as consequence or incident of altruistic activity is not decisive of the real purpose or object of the activity, so also the carrying on of business for profit does not cease to be so merely because losses are actually incurred in certain years or because those who carry it on call it "education". It would be difficult to find any commercial activity which makes profits always or which expressly gives out that its existence depends upon profit making although, in practice, and, ultimately, its continuance may depend on profit making. newly started business may, initially, have to run at. loss; but, at later stage, it may earn magnificient profits. Therefore, test of the real character or purpose of an activity cannot be whether its continuance is made to depend upon profits resulting from it or not. Such test would be artificial and specious. I do not think that the qualification introduced by Section 2(15) of the Act of 1961 was intended to compel Courts to look for the conditions Ol'l which continuance of activities of public utility is made to depend. If profit making results from them and these profits can be utilised for non-charitable purposes the trust which makes this possible would not be exempt from paying income-tax. In the trust deed before us, as we have already indicated, the trnstee had not only wide powers of utilisation of trust funds for pur-poses of the trust but could divert its assets as well as any of the funds of the Trust to other institutions whose objects are "similar to the objects" of the trust and of "carrying out the objects and purposes of this trust either fully or partially". The whole !deed appears to me to be cleverly drafted so as to make the purpose of clause 2 ( c) re-semble the one which was held to be protected from income-tax in the Tribune case (supra) . Indeed the very language used by the Privy Council in the Tribune case (supra), for describing the objects of the Trust in that case, seems to have been kept in view by the draftsman of the trust deed before ns. And, we find that the power "f diverting the assets and income of the Trust, although conched in language which seems designed to counsel their real effect, is decisive on the question whether the trust is either wholly or predominantly for charitable purpose or not. The trustees is given the power of deciding what

purpose is allowed to or like an object covered .by the trust and how it is to be served by diversion of trust properties and funds. ~ the trustee is given the power to determine the prol?°rtion of such dwe:-sion, as he is given here, the. trust could_ not be said to be wholly chari-table. He could divert as much as to make the chant.able part or aspect, if any, purely illusory. Indeed, this was the law even befo~e the qualifying words introduced by the 1961. Act. [See : East India Industries (Madras) Pvt. Ltd. v. Commzsswner of Income-tax, Madras('•), Commissioner of Income-tax, Madras v. Andhra Chamber of Commerce(2), Md. Ibrahim Riza v. Commissioner of Income-((41c, Nagpur(')]. Such "trust" would be of doubtful validity, but I refrain from further comment or any pronouncement upon the validity of such trust as that was neither question referred to the High Court in this case nor argued anywhere.

The mnendment of the 1961 Act col)Sidered by us compels closer scrutiny of deeds of ostensibly charitable trusts with view to dis-covering their real purposes by analysing the effects of their terms and what they permit. It narrows the scope of exemption from income-tax granted at least under the last and widest category of charitable trusts mentioned in Section 2(15) of the Act as was held in Com-missioner of Income-tax, West Bengal ll v. Indian Chamber of Com-merce(•).

We are in agreement with the view expressed in the Tribune case (supra) to the extent that we think that trust such as the one con-sidered there does not, just like the trust before us, fall within th.e category of education, as snch, mentioned in the statutory elucitlation of charity, which was repeated in the 1961 Act, with an added qualifi-cation of the last and widest category. Although the term "educa-tion", as used in Section 2(15) of the Act, seems wider and more comprehensive than education through educational institutions, such as Universities, whose income is given an exemption from income-tax separately under Section 10(22), provided the educational institution concerned does not exist "for purposes of profit", yet, it seems to me that the educational effects of newspaper or p1ublishing business are onlr indirect, problematical, and quite incidental so that, without im-posmg any condition or qualification upon the nature of information to be diss~minatetl or material to be published, the mere publication of news or views cannot be said to serve pnrely or even predominantly educal!onal purpose in its ordinary and usual sense. ·

Th~ PDrJX>ses with which we are concerned no doubt parade under · the guise or caption. of "education". They are found stated in clause 2(c) of th~ tlee?-. ~his clause speaks of supply of "organs of edu-cated pubhc op1ruon to Kanada speaking people and of presumed need f~ "u~~fu!:' info~ation and "ventilation" of views on "matters of publ~c .t;1tihty . ,~t IS left to the Ti:ustee to decide which class of people 1s educate~ so as to !J:e penrutted to voice its views through these organs .. He IS also to decide what is "useful" anl:I what is harm-ful and what is matter of "general public utility". If, as it seems to

(1) (1967) 65 I. T. R. 611

(3) (1930) L. R. 57 I. A. 260 (4) (1971) SJ I. T. R. 147. .

(2) (1965) 55. I. T. R. 722

us to be Ille position here, the Trustee is the sole judge of how these presumed ~s are to be satisfied, he could certainly cater for them in manner which could be considered debased or offensive by people of good tll\Ste with proper sense of values. I do not mean t@ cast the slightest reflection on the manner in which the appellant trustee conducts bis business or on the quality or value of materials found in his newspapers or other publications. We have no evidence and no finding on these aspects of the case Defore us. All I would like to point out here is that the trust deed leaves it entirely to the sweet will of the sole trustee to decide all questions relating to policy or the way in which the needs mentioned in clause 2(c) are to be met. Pro-vision for their satisfaction could be made in manner which could be very lucrative. This is the most relevant consideration in ascertain-ing the purpose of the trust from the point of view of profit making.

Judging from the facts set out in the trust deed itself, the sole trustee had managed to make the satisfaction of the needs mentioned above highly profitable business. The deed puts no condition upon the conduct of the newspaper at!d publishing business from which we could infer that it was to be on "no profit and no loss" basis. I men-tion this as the learned C9unsel for the appellant repeatedly asserted that this was the really basic purpose and principle for the coaduct of the business of the trust before us. This assertion seems to be based on nothing more substantial than that the trust deed itself does not expressly make profit making the object of the trust. But, as I have already intlicated, the absence of snch condition from the trust deed could not determine its true character. That character is determined for more certainly and convincingly by the absence of terms which could eliminate or prevent profit making from becoming the real or dominant purpose of the trust. It is what the provisions of the trust make possible or permit coupled with what had been actually done as without any illegality in the way of profit making, in the case before us, under the cover of the provisions of the dee\!, which enable us to decipher the meaning and determine the predominantly profit-making character of the trust.

For the reasons given above, I think that judgment of the Mysore High Court must be and is affirmed, but, in the circumstances of the case, the parties will bear their own costs.

Appeals dismissed.