(Appeal from the judgment dated April 12, 1978, of the Madras High Court in Tax Cases Nos.383 of 1974 and 780 to 789 of 1976. The judgment of the Madras High Court is reported as Addl. C.I.T. v. Victoria Technical Institute (1979) 120 ITR 358).

Income-tax---

----Charitable purpose---Object of assessee society to impart or assist in imparting education in scientific or artistic principles and instructions in manual and other practice in the application of such principles and to assist persons engaged in artistic, industrial or commercial occupations is an object of general public utility---One of the means to carry out object, to buy and sell or sell on commission articles produced by handicraftsmen---Primary object does not involve activity for profit ---Assessee qualifies for exemption.

The object of the appellant, a society registered under the Societies Registration Act, 1860, was to impart or to assist in imparting instructions to persons of either sex in scientific or artistic principles which underlie the industrial and commercial occupations of the people (including especially handicraft manufacturers and agricultural labour) as well as instruction in the manual and other practice involved in the application of such principles; and to assist persons of either sex who were engaged in artistic, industrial or commercial occupations. One of the means of carrying out the object was "(f) buying and selling or selling on commission articles produced by handicraftsmen or otherwise." The question was whether the income of the society was exempt from tax under section 11 of the Income-tax Act, 1961. On a reference, the High Court found that the society's object was one of general public utility; but mainly relying on the decision in Indian Chamber of Commerce v. C.I.T. (1975) 101 ITR 796 (SC), the High Court held that its advancement was linked or connected with an activity for profit, and, therefore, the income of the society did not qualify for exemption. On appeal to the Supreme Court:

Held, reversing the decision of the High Court, that there was nothing to show that the function of "buying and selling or selling on commission articles produced by handicraftsmen" was otherwise than in the carrying out of the primary purpose. The requirement of the definition of charitable purpose would be fully satisfied even if an activity for profit was carried out in the course of the actual carrying out of the primary purpose of the society. So long as the purpose did not involve the carrying on of an activity for profit, it was immaterial how the moneys for achieving or implementing such purpose are found, whether by carrying on an activity for profit or not. The income of the society was, therefore, exempt under section 11 of the Act.

Decision of the Madras High Court in C.I.T. (Addl.) v. Victoria Technical Institute (1979) 120 ITR 358 reversed.

C.I.T. (Addl.) v. Sur at Art Silk Cloth Manufacturers Association (1980) 121 ITR 1 (SC) applied.

Indian Chamber of Commerce v. C.I.T. (1975) 101 ITR 796 (SC) referred to.

TA. Ramachandran, Senior Advocate (Mcs. Janaki Ramachandran, Advocate, with him) for Appellant.

B.B. Ahuja and Ms. A. Subbashini, Advocates, for Respondents.

ORDER

This appeal by certificate is from the judgment and order of the Madras High Court in Tax Cases Nos.383 of 1974 and 780-789 of 1976, reported in (1979) 120 ITR 358. The following two questions of law were referred for the opinion of the High Court (at p. 360):

"(1) Whether the income derived by the assessee from its General Fund and South Indian Women Workers Executive Committee Fund is entitled to exemption under section 11 of the Income-tax Act, 1961, for the assessment years 1962-63 to 1971-72?

(2) Whether, on the facts and in the circumstances of the case, the income from the purchase and sale of handicrafts, without setting up educational institutions or training centres for advancement of studies would constitute charitable purpose and would, as such, qualify for exemption?"

By a common judgment dated April 12,1978, the Madras High Court held that the advancement of the object of general public utility was linked or connected with an activity for profit and that the object of the assessee ways not a "charitable purpose" within the meaning of section 2(15) of the Act. In arriving at the judgment the High Court mainly relied on a decision of this court in Indian Chamber of Commerce v. C.I.T. (1975) 101 ITR 796 which has subsequently been explained by this court in C.I.T (Addl.) v. Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1.

It is contended for the appellants that the objects of the assessee, Victoria Technical Institute, are "charitable purposes" and the mere fact that under objects sub-clause (f) "buying and selling or selling on commission articles produced by handicraftsmen or otherwise" will not disentitle the assessee from the exemption. Learned counsel for the Revenue submits that it would depend on the scale or magnitude of such operation of buying and selling or selling on commission articles and, therefore, this case is distinguishable. But there is nothing to show that this function is. otherwise than in the carrying out of the primary purpose. In C.I.T. (Addl.) v. Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1 (SC), it has been held that the words "not involving the carrying on of any activity for profit" qualify or govern only the last head of charitable purpose and not the earlier three heads. Where, therefore, the purpose of a trust or institution is relief of the poor, education or medical relief, the requirement of the definition of "charitable purpose" would be fully satisfied, even if an activity for profit is carried on in the course of the actual carrying out of the primary purpose of the trust or institution. When the purpose of a trust or institution is the advancement of an object of general public utility, it is that object of general public utility and not its accomplishment or carrying out which must not involve the carrying on of any activity for profit. So long as the purpose does not involve the carrying on of any activity for profit, the requirement of the definition would be met and it is immaterial how the monies for achieving or implementing such purpose are found, whether by carrying on an activity for profit or not. The instant case is accordingly found to be squarely covered by the decision in C.I.T. (Addl.) v. Surat Art Silk Cloth Manufacturers Association (1980) 121 ITR 1 (SC) and the questions have to be, and are answered in favour of. the assessee and against the Revenue.

These appeals are accordingly allowed. There will be no order as to costs.

1243/TAppeals allowed.