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What is charitable purpose!!!!

CA VINAY BANSAL (In job with KPMG) (289 Points)

21 June 2010

What do u mean by charitable purpose.

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4 Replies

Sunil Liladhar Kotak (Manager (F & A)) (2025 Points)
Replied 21 June 2010

Dear Vinay

Pls find the Reply

Section 2(15)

Charitable purpose

Charity

Statutory definition is not exhaustive - The statutory definition is not exhaustive or exclusive. Even if the object of purpose may not be regarded as charitable in its popular signification as not tending to give relief to the poor or for advancement of education or medical relief, it would still be included in the expression ‘charitable purpose’ if it advances an object of general public utility - CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC).

English decisions are not helpful guides - The Indian Act gives a clear and succinct definition which must be construed according to its actual language and meaning. English decisions have no binding authority on its construction and though they may sometimes afford help or guidance, they cannot relieve the Indian Courts from their responsibility of applying the language of the Act to the particular circumstances that emerge under conditions of Indian life - All India Spinners Association v. CIT [1944] 12 ITR 482 (PC).

Benefit must enure to others and not to self - They very concept of ‘charity’ denotes altruistic thought and action. Its object must necessarily be to benefit others rather than one’s self. The action which flows from charitable thinking is always directed at benefiting others. It is this direction of thought and effort and not the result of what is done in terms of financially measurable gain which determines that it is charitable - Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC).

Advancement of religion can be a charitable purpose - In some cases, even a religious activity by a particular sect would be a charitable activity; for some, supply of fodder to animals and catter is a religious object, while to others it may be a charitable purpose. According to the Hindu religious system, donations on some occasions would be considered to be a religious activity. Similarly, Khairat under the Mohammedan law would be considered to be a religious activity. The said activities may be for a charitable purpose to some. Hence, in many cases, both the purposes may be overlapping. The purposes may have both the elements, charity and religious. A trust can be either for religious purposes or for charitable purposes or it can be for both charitable and religious purposes. Hence, the words ‘trust for charitable purpose’ would include even a trust for advancement of religion - CIT v. Barkate Saifiyah Society [1995] 213 ITR 492 (Guj.).

Primary or dominant object - Where primary or dominant purpose of ‘institution’ is charitable and other objects which, by themselves, may not be charitable, but are merely ancillary or incidental to primary or dominant object, same would not prevent ‘institution’ from validly being recognized as a charity - Director of Income-tax v. Bharat Diamond Bourse [2003] 126 Taxman 365 (SC).

Education

Only systematic schooling/training is covered - The word ‘education’ has been used in section 2(15) in the sense of systematic instruction, schooling or training, and not in the wide and extended sense according to which every acquisition of further knowledge constitutes education. Thus, publishing newspapers and magazines is not ‘education’ - Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 (SC).

Benefit should not exclusively be for family members - A trust, the object and scope of which is limited to the education of the members of a family would not come within the definition of a charitable purpose contained in the Income-tax Act - D.V. Arur v. CIT [1945] 13 ITR 465 (Bom.).

Use of expression ‘search for truth’ is not a detrimental factor - Where the main objects of the assessee-company, which had obtained a licence, under section 25 of the Companies Act, were the promotion of search for truth, diffusion of useful knowledge and publication of books and journals, the objects were to be treated as directly related to education. Expressions of a wide and general character had been used apparently with a view not to restrict its scope, such as merely to start an educational school or college. Merely because an expression such as ‘search for truth’ was used, such user being of a hyperbolical nature, its meaning need not be restricted so as to exclude the notion of education - Ecumenical Christian Centre v. CIT [1983] 139 ITR 226 (Kar.).

Raising artistic tastes is educational purpose - Education, in the context of the law of charity, is not limited to teaching in the narrow sense. Raising the artistic taste of the country by public performance, of dramas, musical shows, etc., would be an educational purpose - CIT v. Sri Thyaga Brahma Gana Sabha (Regd.) [1990] 52 Taxman 396/[1991] 188 ITR 160 (Mad.).

Private coaching institutes are not covered - The running of a private coaching institute for the purpose of training the students to appear at some specified examinations upon taking specified sum from the trainees would not bring the petitioner running such institute within the provisions of section 2(15) - Bihar Institute of Mining and Mine Surveying v. CIT [1994] 208 ITR 608/76 Taxman 455 (Pat.).

Relief for the poor

Political connection is no deterrent - If an association is set on foot by a political organisation and is connected with it but still has for its real object the relief of poverty, its connection with the political organisation will not make its real object any the less charitable - All India Spinners’ Association v. CIT [1944] 12 ITR 482 (PC).

If the primary purpose is advancement of objects of general publicity, it would remain charitable even if there is an incidental entry into the political domain for achieving any purpose, namely, promotion of or opposition to legislation concerning that purpose was contemplated - CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC).

Preference to relatives is not relevant - Where the primary object was relief and benefit of the poor and indigent members of a particular community all over the world, a mere direction to give preference to the relations of the settlor will not affect the charitable nature of the trust- Trustees of the Charity Fund v. CIT [1959] 36 ITR 513 (SC).

Object of general public utility

Burden of proof - The onus is on the assessee to prove that objects are of a charitable nature - Indian Chamber of Commerce v. CIT [1975] 101 ITR 796 (SC).

Eleemosynary element is not essential - The element of providing something for nothing or for less than it does or for less than the ordinary price need not necessarily be present in any purpose of general public utility. An eleemosynary element is not essential - Trustees of the ‘Tribune’, In re [1939] 7 ITR 415 (PC).

Object of private gain is excluded - The word ‘general public utility’, though very wide, would exclude the object of private gain, such as an undertaking for commercial profit though all the same it would serve general public utility - All India Spinners Association v. CIT [1944] 12 ITR 482 (PC).

Entire mankind need not be benefited - An object beneficial to a section of the public is an object of general public utility. To serve a charitable purpose, it is not necessary that the object should be to benefit the whole of mankind or all persons in a particular country or State. It is sufficient if the intention to benefit a section of the public as distinguished from a specified individual is present. However, the section of the community sought to be benefited must be sufficiently defined and identifiable by some common quality of a public or impersonal nature - Ahmedabad Rana Caste Association v. CIT [1971] 82 ITR 704 (SC).

Institutions held to be charitable :

u Bar Councils - CIT v. Bar Council of Maharashtra [1981] 130 ITR 28 (SC).

u Chambers of Commerce - CIT v. Federation of Indian Chambers of Commerce & Industry [1981] 130 ITR 186 (SC).

u Promotion of trade & Commerce - by bourse of diamond exporter - Director of Income-tax (Exemptions) v. Bharat Diamond Bourse [2003] 126 Taxman 365 (SC).

u Stock Exchanges - Hyderabad Stock Exchange Ltd. v. CIT [1967] 66 ITR 195 (AP).

u State Road Transport Corporations - CIT v. Andhra Pradesh State Road Transport Corporation [1986] 159 ITR 1 (SC).

u Association formed to promote, encourage and protect the interests of the banking and pawnbroking trade - CIT v. A. P. Bankers & Pawnbrokers Association [1988] 170 ITR 476 (AP).

u An association whose objects were to encourage and develop automobile movement in southern India and to protect and extend privileges to its members - Addl. CIT v. Automobile Association of Southern India [1981] 127 ITR 730 (Mad.).

u An association whose activities were mainly to promote commerce, art, science or any other useful object connected with photographic and allied trade and to promote and protect interest of traders in that field - CIT v. South Indian Photographic & Allied Trades’ Association [1987] 166 ITR 166 (Mad.).

u An association formed to promote brick kiln trade - Addl. CIT v. Delhi Brick Kiln Owners’ Association [1981] 130 ITR 55 (Delhi).

u An association formed mainly to encourage and develop the film industry - CIT v. South Indian Film Chamber of Commerce [1981] 129 ITR 22 (Mad.).

u An association whose object was to promote and protect textile industry - Southern India Millowner’s Association v. CIT [1977] 110 ITR 871 (Mad.); CIT v. Textile Mfrs. Association [1972] 83 ITR 247 (Punj. & Har.); CIT v. Cotton Textiles Export Promotion Council [1968] 67 ITR 539 (Bom.)

u A company whose objects were to promote commerce and trade in silk yarn/cloth and to carry on business on behalf of its members - Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 1 (SC).

u An association whose main object is promotion, protection, etc., of persons and bodies engaged in the business of hire-purchase - Addl. CIT v. South India Hire Purchase Association [1979] 116 ITR 793 (Mad.).

u An organisation or club intended to promote the social and physical well-being of persons to enable them to participate in games - CIT v. Ootacamund Gymkhana Club [1977] 110 ITR 392 (Mad.)

u A society whose dominant object was to safeguard and further the interests of the press in general - CIT v. Indian & Eastern Newspaper Society [1982] 136 ITR 81 (Delhi)(Appendix).

u A trust for the benefit of the satsangis who are followers of the Radhaswami faith - CIT v. Radhaswami Satsangh Sabha [1954] 25 ITR 472 (All.)

u A society set up for the propagation of artistic principles which underlie industrial and commercial occupations - Addl. CIT v. Victoria Technical Institute [1979] 120 ITR 358 (Mad.).

u A corporation engaged in advancement of Scheduled Tribes - Girijan Co-operative Corporation Ltd. v. CIT [1989] 76 CTR (AP) 44.

u A trust engaged in and assisting/promoting rural reconstruction work, cottage industry and all other incidental matters - Thiagarajar Charities v. Addl. CIT [1978] 114 ITR 699 (Mad.).

u Society of Chartered Accountants being engaged in activities of general public utility, is a charitable society - CIT v. Jodhpur Chartered Accountants Society [2002] 258 ITR 548 (Raj.).

Institutions held to be not charitable

u A trade union - CIT v. Indian Sugar Mills Association [1974] 97 ITR 486 (SC). The income of a trade union is however exempt under section 10(24).

u An association of hotel proprietors formed for procuring articles on permit and supplying them to the members, and for protecting the business interests of the members - Madras Hotels Association v. CIT [1978] 111 ITR 241 (Mad.).

u A race club - Bangalore Race Club v. CIT [1970] 77 ITR 435 (Mys.).

u An institution or trust whose dominant object is political in character - Lokamanya Tilak Jubilee National Trust Fund, In re [1942] 10 ITR 26 (Bom.); CIT v. All India Hindu Mahasabha [1983] 140 ITR 748 (Delhi).

u An association/club formed for the development or promotion of sports or games, or entertainments - Cricket Association of Bengal v. CIT [1959] 37 ITR 277 (Cal.); South Indian Athletic Association Ltd. v. CIT [1977] 107 ITR 108 (Mad.); CIT v. Andhra Pradesh Riding Club [1987] 168 ITR 393 (AP).

u Delhi stock exchange - Delhi Stock Exchange Association Ltd. v. CIT [1997] 91 Taxman 273 (SC).

u An association formed for the benefit of cement traders, though its object was not to make any profit, when there is no provision for any relief of the poor or for education or for medical relief or the advancement of any other object of general public utility, and there is no intention to benefit the general public or any section of the general public - CIT v. Ernakulam District Cement Dealers Association [2002] 253 ITR 198 (Ker.).

Objects held to be charitable

u Benefit and welfare of police personnel and their families - CIT v. Andhra Pradesh Police Welfare Society [1984] 148 ITR 287 (AP).

u Raising of moral, intellectual, economic, social and political conditions of people - Ganga Prasad Varma Memorial Society v. CIT [1982] 134 ITR 421 (All.).

u Running a newspaper which is not a mere vehicle of political propaganda, but is aimed at dissemination of news and ventilation of opinion upon all matters of public interest, so as to serve as an organ of educated public opinion - Trustees of the Tribune, In re [1939] 7 ITR 415 (PC); Pratap Press v. CIT [1961] 41 ITR 577 (All.).

u Development of village industry of hand-spinning and hand-weaving - All India Spinners’ Association v. CIT [1944] 12 ITR 482 (PC).

u Protecting, safeguarding, guiding and furthering the interest of bullion merchants, as well as promoting the standards of their behaviour towards the general public - Addl. CIT v. Madras Jewellers & Diamond Merchants Association [1981] 129 ITR 214 (Mad.).

u Providing refuge for domesticated animals and birds - CIT v. Shri Shaila Industrial & Spiritual Colony Charities [1973] 87 ITR 175 (Ker.).

u Providing for constructing colonies for poor workmen - CIT v. Kamla Town Trust [1996] 84 Taxman 248 (SC).

u Supply of fodder to cattle and animals - Vallabhdas Karsondas Natha v. CIT [1947] 15 ITR 32 (Bom.).

u Installation of a Pathshala to which admission is open to the public, even if only Brahmin boys were factually the students - Smt. Ganeshi Devi Rami Devi Charity Trust v. CIT [1969] 71 ITR 696 (Cal.).

u Repairing and maintaining the samadhies of the ancestors of the family guru and holding annual melas in commemoration of the guru - CIT v. Guryani Brij Balabh Kaur Trust [1980] 125 ITR 381 (Punj. & Har.).

u Erection of a memorial hall (Shaheed Samarak Bhavan) - Mahakoshal Shaheed Samark Trust v. CIT [1983] 140 ITR 795 (MP).

u Giving medical aid, social welfare and uplift of poor members of a particular community, and giving financial and other help on the occasion of marriage of the members of that community - CIT v. Surji Devi Kunji Lal Jaipuria [1990] 53 Taxman 112 (All.).

u Providing monetary help for marriages or sacred thread ceremonies - CIT v. Anand Swarup Brijendra Swarup Charitable Trust [1991] 187 ITR 656 (All.).

u Imparting training (teaching) in arts and handicrafts to unemployed men and women, even if it involved payment to them for work done - CIT v. J.K. Charitable Trust [1991] 59 Taxman 602 (All.)

u Spending money on the marriages of girls belonging to a particular community - CIT v. Bhartiya Khatri Sewa Trust [1992] 65 Taxman 531 (All.).

u Assessee-bourse whose principal object was to facilitate diamond trade so that maximum revenue could be earned by way of foreign exchange and also to make diamond trade more competitive at international level, is an institute established for charitable purpose - Director of Income-tax v. Bharat Diamond Bourse [2003] 126 Taxman 365/259 ITR 280 (SC).

Objects held to be non-charitable

u Regulating terms and conditions of employment in the mills and factories, to promote good relations between the employers and employees, to adjudicate internal controversies, and to establish just and equitable principles in trade and impose restrictive conditions on the conduct of trade and business - CIT v. Indian Sugar Mills Association [1974] 97 ITR 486 (SC).

u Encouraging and promoting the scientific breeding and training of race horses - Hyderabad Race Club v. CIT [1985] 153 ITR 521 (AP)(FB).

u Providing for the welfare of the employees of a trust - Zenith Tin Works Charitable Trust v. CIT [1976] 102 ITR 119 (Bom.).

u Providing for constructing colonies for workmen in general and in particular settlor company’s workmen - CIT v. Kamla Town Trust [1996] 84 Taxman 248 (SC).

Regards,

Sunil