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The Income- Tax Act, 1995
Section 2(15) in The Income- Tax Act, 1995
Section 13(1) in The Income- Tax Act, 1995
Section 2 in The Income- Tax Act, 1995
Section 4(3)(i) in The Income- Tax Act, 1995
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Discipleship Centre, vs Department Of Income Tax on 14 September, 2007

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Income Tax Appellate Tribunal - Delhi
Modi Charitable Fund Society vs Income-Tax Officer on 28 December, 1982
Equivalent citations: 1983 5 ITD 151 Delhi
Bench: B Lal, R Segel

ORDER

R.L. Segel, Judicial Member

1. This appeal by the assessee, Modi Charitable Fund Society (Registered), Modi Nagar, Uttar Pradesh, assessed in the status of an 'association of persons', is directed against the order of the Commissioner (Appeals) upholding the assessment order by the ITO holding that since one of the main objects of the assessee-society was education, it (the assessee-society) was not entitled to the exemption in respect of its income for the accounting period relevant to the assessment year 1977-78 for which the previous year ended 31-3-1977. The Commissioner (Appeals) also agreed with the ITO that the assessee, as in the past, carried on the insurance agency business and other main object of the assessee-society was of general public utility. The activity for profit in the shape of the said business would come in the way of granting exemption to the assessee under Section 11 of the Income-tax Act, 1961 ('the Act').

2 to 5. [These paras are not reproduced here as they involve minor issues.]

6. Coming to the merits of the case Dr. Devi Pal took the Tribunal through the aims and objects for which the assessee-society was established and urged that these aims and objects have been duly considered not only by the Tribunal in the following appeals in the case of the assessee but also by the Allahabad High Court in Re. Modi Charitable Fund Society [Civil Writ Petition No. 366 of 1978, decided on 29-4-1982] and that the Hon'ble High Court as well as the Tribunal have unequivocally held that the aims and objects for which the assessee-society was established were for the advancement of the objects of general public utility not involving the carrying on of any activity for profit, reversing the view taken by the AAC in the appeal of the assessee for the assessment year 1973-74 holding that the assessee-society was established for the purpose of education as was the case of the assessee before the tax authorities in that year :

1. Delhi Bench 'B' New Delhi-IT Appeal Nos. 4624, 4625 and 4626 (Delhi) of 1977-78 (assessment years 1973-74 and 1974-75), decided on 17-4-1982 ;

2. Delhi Bench 'B' New Delhi-IT Appeal No. 2761 (Delhi) of 1980 (assessment year 1975-76)], decided on 20-7-1982 ; and

3. Delhi Bench 'B' New Delhi-IT Appeal Nos. 3751 and 4316 (Delhi) of 1980 (assessment year 1976-77), decided on 20-10-1982.

Since the said aims and objects for which the assessee-society was established have been the subject-matter of judicial review not only before the Tribunal but also before the Allahabad High Court, the findings recorded by the said judicial authorities that the assessee-society was established for the advancement of 'any other object of general public utility not involving the carrying on of any activity for profit', the words as used in Section 2(15) of the Act defining the expression 'charitable purpose', those very objects could not be interpreted by a subordinate authority like the ITO and the Commissioner (Appeals) once again to record a finding, contrary to the aforesaid findings of the Tribunal and the Hon'ble Allahabad High Court, more so based on the decision of the AAC for the accounting period relevant to the assessment year 1973-74 when that decision stands reversed by the Tribunal, that the assessee-society was established with the main object of education, merely because Section 13(1)(bb) of the Act was incorporated in the Act with effect from 1-4-1977. Such a review by a subordinate authority when the superior authorities like the Tribunal and the Hon'ble Allahabad High Court have held to the contrary that the assessee-society was established for the advancement of 'any other object of general public utility not involving the carrying on of any activity for profit' was abuse of the process of law, more so when the aforesaid decision of the Tribunal for the assessment year 1973-74 has, in view of the rejection of the application by the department under Section 256(1) of the Act vide order of the Tribunal dated 13-9-1982 in R.A. Nos. 868 and 869 (Delhi) of 1982, for the present become final. In support of his stand Dr. Devi Pal relied on the decision of the Patna High Court in CED v. Madan Lal Bhimsaria [1980] 121 ITR 482.

7. Assuming, without admitting, that the stand taken by the assessee as stated hereinbefore was not correct, the assessee-society, as is clear from the aims and objects for which it has been established, is not a charitable trust for education as is the case of the tax authorities nor does it by working as an insurance agent carry on any business as sought to be made out by the tax authorities. In this connection, Dr. Pal took us through the aims and objects of the assessee-society. According to him, insofar as the aims and objects at (c)-reading 'to establish and maintain any dispensary or hospital for the benefit of the public'-of the aims and objects for which the assessee-society was established is concerned, the same is to be ignored as the assessee-society never engaged itself to establish and maintain any dispensary or hospital for the benefit of the public as also conceded by the ITO in the assessment order of the assessee-society for the year under consideration, in view of the ratio of the Supreme Court decision in CIT v. Dharmodayam Co. [1977] 109 ITR 527 and Dharmaposhanam Co. v. CIT [1978] 114 ITR 463. Insofar as the remaining aims and objects of the assessee-society at (a), (b) and (d) are concerned, Dr. Pal very strenuously urged, as is also not disputed by the tax authorities in the assessment order and the appellate order, that these objects are distributive in nature and that none of them in view of the trustees' discretion to apply the funds of the trust for either of those objects is a main or dominant object so as to urge, as is the case of the tax authorities in the present case, that the assessee-society is a trust for education.

8. Dr. Pal next took us through the report and annual accounts of the assessee-society for the year under consideration ending 31-3-1977 and urged that the assessee-society has given grant-in-aid to the four institutions known as 'Modi Science & Commerce College', Modinagar, 'Rukmani Modi Mahila Inter College', Modi Nagar, 'Pramila Modi Junior High School', Harmukhpuri and 'Gayatri Devi Junior High School', Kedarpuri, totalling Rs. 58,419 against charity and donations paid in the year totalling Rs. 3,15,177.

9. Dr. Pal next took us through the ratio of the decision of the Supreme Court in the case of Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 and of the Madras High Court in Addl. CIT v. Victoria Technical Institute [1979] 120 ITR 358 and urged that the sense in which the word 'education' stood used in Section 2(15), means the systematic instruction, schooling or training given to the young in preparation for the work in life. It also connotes the whole course of scholastic instruction which a person has received. 'Education' in Section 2(15) connotes the process of training and developing the knowledge, skill, mind and character of students by normal schooling. Since the assessee was not running the aforesaid educational institutions or any school or college and since those institutions, as required by Section 16A of the U.P. Intermediate Education Act, 1921, are run by the committee of management constituted thereunder or by the concerned managing committee of the school, as by way of illustration is the scheme of administration of 'Modi Science and Commerce College', Modinagar, at pages 25 to 42 of the second paper book filed by the assessee-society before the Tribunal and since five out of twelve trustees are members of the managing committee of 'Modi Science and Commerce College', five out of seventeen are members of the managing committee of 'Rukmani Modi Mahila Inter College' and two out of eight are members of the managing committee of each of 'Pramila Modi Junior High School' and 'Gayatri Devi Modi Junior High School' as is stated at page 18 of the second paper book filed by the assessee, the assessee-society was not running any of those educational institutions. The assessee-society was thus not a trust for education as sought to be made out by the tax authorities in the assessment order and the appellate order for the year under consideration.

10. Insofar as the activity of the assessee-society in the year under consideration as insurance agent is concerned, Dr. Pal took the Tribunal through the certificates at pages 3, 4, 5, 6 and 7 of the second paper book as also the proforma of the proposal form at pages 9 to 11 as also the letters addressed by Modi Spg. & Wvg. Mills Co. Ltd. dated 13-4-1974 at page 12 of the second paper book and the insurance policies by way of specimen at pages 13 to 17 of the second paper book and urged that the Modi group of companies were getting their properties insured with various insurance companies. All the insurance was handled by the officers and staff of the insurance and accounts of the respective Modi company (sic). Since commission on insurance premium was payable to an insurance agent under the Insurance Act as then in force, the assessee-society had taken a licence for insurance agency from the Controller of Insurance and was introduced in each of the proposals by the Modi group of companies as the insurance agent. The assessee-society was receiving commission from the insurance company for which the Modi group of companies did not have to pay any extra payment nor did the assessee-society have any staff for the purpose except one accountant. As such, it cannot be said to be carrying on the business of an insurance agent. The assessee-society was getting commission because of the aforesaid module followed by the Modi group of companies and not by its own exertion. The expression 'business' according to Dr. Pal in the taxing statute like the Income-tax Act is used in the sense of an occupation, or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive and not for sport or pleasure. Whether a person carries on business in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit motive. This was totally absent in the present case. In support of his arguments, Dr. Pal relied on the ratio of the following decisions : Lala Indra Sen, In re. [1940] 8 ITR 187 (All.), Narain Swadeshi Wvg. Mills v. CEPT [1954] 26 ITR 765 (SC), State of Gujarat v. Raipur Mfg. Co. Ltd. [1967] 1 SCR 618, Barendra Prasad Ray v. ITO [1981] 129 ITR 295 (SC) and Bharat Development (P.) Ltd. v. CIT [1982] 133 ITR 470 (Delhi).

11. Dr. Pal further basing himself on the decisions of the Tribunal and the Hon'ble Allahabad High Court detailed in paragraph 6 above, very strongly urged that the assessee-society was not hit by Section 13(1)(bb) and that keeping in view the aims and objects of the assessee-society, it was a trust established for the purpose of advancement of 'any other object of general public utility not involving the carrying on of any activity for profit'.

12. In the alternative, Dr. Pal urged that in case the assessee-society is held to be carrying on the business as an insurance agent, then the said business in view of the aims and objects at serial No. (k), which was in force in the year under consideration though it stands deleted with effect from 4-12-1976, was property held in trust for charitable purposes inasmuch as the income therefrom was to be applied for the objects at serial numbers (a), (b) and (d). The income from the business was thus exempt from income-tax. In support of these arguments, Dr. Pal has relied on the ratio of the following decisions : J.K. Trust v. CIT [1957] 32 ITR 535 (SC), CIT v. P. Krishna Warrior [1964] 53 ITR 176 (SC) and Dharmodayam Co.'s case (supra).

13. Dr. Pal lastly urged that if none of the above arguments were accepted by the Tribunal, then only the aforesaid sum of Rs. 58,419, the amount given in grant-in-aid to the aforesaid institutions, was not exempt from tax. It may be added at this stage that Dr. Pal took us through the report and annual accounts of R.B. Multanimal Modi Charitable Trust, Patiala, as Annexure 'B' to the first paper book, the aims and objects of the said trust at pages 2 and 3 of the first paper book as also the assessment of the said trust for the year under consideration at page 35 and highlighted the fact that the income of the said Trust has not been brought to tax and Section 13(1)(bb) was not applied there.

14. These arguments are controverted by the departmental representative, who has relied on the orders of the tax authorities. Mr. J.S. Rao, the departmental representative, in support of his arguments has also urged that there was no estoppel in law. Every year was a separate year of the assessment and any finding recorded by the ITO in earlier year is not binding on him while making the assessment for the subsequent year. According to Mr. Rao, the departmental representative, the view taken by the tax authorities finds support not only from the language of Section 13(1)(bb) but also by the commentary at pages 260, 271, 286 to 294, 881 and 896 of Sampath lyengar on Income-tax, 7th edition.

15. We have given consideration to the above arguments. As is clear from the memorandum of association and rules and regulations of the assessee-society on the record before the Tribunal, it was established on 5-7-1940 and was duly registered with the Registrar of Societies and Firms, Lucknow. The aims and objects for which the assessee-society was established as on the last date of the year under consideration read as under :

(a) With a view to promote commerce, art and science, to establish and maintain or to give aid to institution or institutions : (i) for giving training in commerce, trade, industries and vocational lines in general and insurance line in particular to the youngmen of all castes and creeds ; and (h) for imparting moral and physical education to the children, boys, girls and youngmen of all castes and creeds.

(b) To establish and maintain or to give aid for a Dharamshala, Widow Home or any other such charitable institution for the benefit of all classes.

(c) To establish and maintain any dispensary or hospital for the benefit of the public.

(d) To establish and maintain or to give aid to any charitable institution with a philanthropic purpose which may be in the general interest of the poor of all classes and creeds.

(e) To acquire by purchase or otherwise any movable or immovable property for the proper carrying out of the objects of the society.

(f) To sell, mortgage, lease or otherwise dispose of any property movable or immovable for the better management of the society.

(g) To erect, repair or alter any existing or future building for the purpose of the institution.

(h) To advance by way of loan for proper investment thereof for the trust fund.

(i) To do all such things either by itself or in conjunction with the bodies with similar objects as may be necessary for a proper carrying out of the objects of the society.

(j) To acquire financial assistance from Government and other bodies, private or public, or private charity in order to efficiently carry out the objects of the society.

(k) To work and establish agencies and depots for the purchase and sale of goods of all descriptions, borrow money and to get insurance agencies of the different companies and to do insurance work for the purpose of applying the income therefrom for objects mentioned above.

It may be added that item (k) reproduced above was deleted vide resolution of the assessee-society dated 4-12-1976.

16. Coming to the aims and objects of the assessee-society detailed in paragraph 15 above, it may be stated that the ITO in the assessment of the assessee-society for the year under consideration has at page 4 stated that object (c) thereof though falling within the category of medical relief was never implemented by the assessee-society. As already stated, the assessee-society was established in 1940. The year under consideration is the financial year 1977. Since the said object (c) was not implemented for over 37 years, it can be safely assumed that the assessee-society had no intention of implementing it. As already stated, the assessee-society never implemented this object. That being the position, as laid down by the Supreme Court in Dharmaposhanam Co.'s case (supra), which in turn is based on another decision of the Supreme Court in Dharmodayam Co.'s case (supra), we have to ignore this object (c) of the assessee-society and to proceed to consider the case as if it did not exist for the moment. We hold likewise.

17. It is now well established from the aforesaid decisions of the Tribunal and the decision of the Hon'ble Allahabad High Court, detailed in para 6 above, that the aforesaid aims and objects of the assessee-society, detailed in paragraph 15 above, were the subject-matter of consideration both by the Tribunal and the Hon'ble Allahabad High Court. In those proceedings before the Tribunal, as is clear from the order of the AAC for the accounting period relevant to the assessment year 1973-74 reproduced in the assessment order by the ITO for the year under consideration, the case of the assessee was that the assessee-society was established for education and so the purpose of the assessee-society was covered by the first limb of Section 2(75), defining 'charitable purpose'. This stand was not accepted by the ITO in the assessments of the assessee for the assessment years 1973-74 to 1976-77. In the assessment order for 1973-74 the ITO had observed as under :

The objects to my mind are of public utility and are not at any rate exclusively of education...

The fact, however, is that the objects of the society were public utility objects and even if Clause (a) envisages education as one of its objects, this object is inextricably inter-woven with public utility objects.

In the assessment order for the assessment year 1974-75 the ITO in paragraph 13 at page 4 has observed that : 'It is, therefore, clear that the society's dominant object is advancement of an object of general public utility.' When we come to the assessment order for the assessment year 1975-76, the ITO in para 4 at page 5 has observed that : 'In the light of discussion made above, it is certain that the dominant object of the trust during the year was advancement of an object of general public utility covered by the last category of charitable purposes defined in Section 2(15) of the Income-tax Act.' In his assessment order for the assessment year 1976-77, the ITO in para 6 at page 3 has held that :'Further, as discussed in the assessment orders of past years, the society is not entitled for exemption under Section 11(1) of the Income-tax Act as the conditions of Section 2(15) as well as Section 13(1)(c) of the Income-tax Act are not statisfied this year also.' To put in other words, the stand of the ITO in all these assessments was that the dominant object for which the assessee-society was established, was advancement of an object of general public utility covered by the second limb of Section 2(75), defining 'charitable purpose'.

18. It may be added at this stage that the assessee being aggrieved against the assessment order for the accounting period relevant to the assessment year 1973-74, brought the matter by way of appeal before the A AC, who vide his order dated 29-11-1977 agreed with the assessee. The observations of the AAC in this behalf have been reproduced by the ITO at page 4 of the assessment order for the year under consideration. This order of the AAC was challenged by the department before the Tribunal in IT Appeal Nos. 4624 to 4626 (Delhi) of 1977-78, decided on 17-4-1982. Therein the Tribunal has agreed with the ITO that the assessee-society was established for 'advancement of any other object of general public utility' but at the same time agreed with the assessee's stand of 'not involving the carrying on of any activity for profit'. For so holding the Tribunal relied on the decision of the Supreme Court in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1. This view was followed by the Tribunal in the appeals for the subsequent two years, namely, the assessment years 1975-76 and 1976-77, copies whereof are at pages 16 to 19 and 20 to 22 of the first paper book filed by the assessee.

19. The above view of the Tribunal has been approved by the Allahabad High Court in the writ petition filed by the assessee-society bearing Civil Misc. Writ Petition No. 366 of 1978. The said writ was filed for quashing the notice dated 25-3-1977 issued under Section 148 of the Act for reopening the assessment of the assessee-society for the accounting period relevant for the assessment year 1960-61. A copy of the decision of the Hon'ble High Court is at pages 25 to 34 of the first paper book filed by the assessee. The observations of the Hon'ble High Court approving the aforesaid decision of the Tribunal dated 17-4-1982 for the assessment years 1973-74 and 1974-75 are at pages 32 and 33 of the first paper book filed by the assessee.

20. When both the Tribunal and the Allahabad High Court have taken the above view that though the assessee-society trust was covered by the second limb of Section 2(15), defining the expression 'charitable purpose' and more so when the order of the AAC for the assessment year 1973-74 treating the assessee-society to be covered by the first limb of the said definition was reversed by the Tribunal as brought above, was it permissible for the ITO, who is a subordinate quasi-judicial authority, to take the view and that too based on the aforesaid order of the AAC for the assessment year 1973-74, that the assessee-society was established for education. We, after deliberation, though agree with the departmental representative that there is no estoppel in law in income-tax proceedings, yet as rightly argued by the learned counsel for the assessee, Dr. Pal, it would tantamount to abuse of process of law if a subordinate quasi-judicial authority while interpreting the aims and objects of the assessee-society which have already been interpreted by the Tribunal and the High Court should record a finding contrary to those recorded by the Tribunal and the Hon'ble High Court. It would be nothing but a process which will lead to endless litigation which ought to be avoided and should not be permitted. In Madan Lal Bhimsaria's case (supra) the Patna High Court was concerned with a matter arising under the Estate Duty Act, 1953. The facts in that case were that the WTO in the assessment of the executor of the will of the deceased had recorded a finding that the Dharamshala involved over there was an endowment of public charitable nature and so was to be treated to be one of a public religious and charitable nature. At the same time, the Assistant Controller in the estate duty assessment of the deceased, with which the Appellate Controller also agreed, held to the contrary. In the appeal filed, the Tribunal on the basis of the"wealth-tax assessment order held the Dharamshala to be one of a public religious and charitable nature not includible in the estate of the assessee passing on his death. When the matter was taken to the Hon'ble High Court. Their Lordships have observed as under : It is true that while dealing with this question the Tribunal has relied mainly upon the wealth-tax assessment order. I do not, however, think that the finding of the Tribunal relating to the public charitable nature of the endowment gets vitiated in any way. The Tribunal's finding is after due consideration of the matter considered in the wealth-tax assessment. The wealth-tax assessment can form a good basis for finding the nature of a particular property. In my opinion, the Tribunal's finding is neither perverse nor unreasonable having been based upon the order of the WTO. The said dharamshala has been treated to be one of a public, religious and charitable nature. The character of the said property cannot deviate for the purpose of estate duty assessment. The character of the property will always remain the same, notwithstanding the Act under which duty was to be levied on it. ..." (p. 486)

The Tribunal and the High Court having interpreted the aims and objects of the assessee-society trust in the manner indicated above and the aims and objects of the assessee-society having remained the same not only in the earlier years but in the year under consideration, the ITO assessing the assessee cannot record a finding contrary to the ones recorded by the Tribunal and the Hon'ble High Court, more so when the basis of the assessment order by the ITO for the year under consideration is the order of the AAC for the assessment year 1973-74, which no longer holds the field, in view of the decision of the Tribunal in IT Appeal Nos. 4624 to 4626 (Delhi) of 1977-78. We, therefore, agree with the learned counsel for the assessee, Dr. Devi Pal, that the ITO in the assessment of the assessee for the year under consideration was not competent to record a finding contrary to the ones recorded by the Tribunal and the Hon'ble High Court as brought out above, in the matter of the dominant purpose of the aforesaid aims and objects of the assessee-society.

21. Assuming without admitting that the ITO could go into the aims and objects of the assessee-society afresh as he has done in the assessment of the assessee for the year under consideration, we like to find out if it was established for advancement of education, keeping in mind the aforesaid aims and objects as also the rules and regulations of the assessee-society vide para 3 of the rules and regulations of the assessee-society, its affairs were to be managed by the managing committee consisting of not more than 11 members elected by the society in the manner detailed therein. Para 8 of the said rules and regulations has laid down the manner in which meetings of the managing committee should be convened and held. Para 12 thereof lays down the powers and duties of the office bearers of the assessee-society. According to para 12(1)(d), the President has a general control over the officers of the society and the institutions under it. The secretary, according to para 12(3)(6), has to carry on the correspondence on behalf of the society and the institutions run by the society. According to para 12(5), the managing committee has the power to appoint one or more managers and/or assistant managers for each institution under the society. The manager/assistant manager so appointed has to look after the finance of the institution by collecting donations and raising subscriptions. According to para 13, the managing committee has to carry on the day-to-day administration of the institutions run by the society ; it has got the power of appointment, dismissal and leave, etc., to the employees of the institution ; it shall have the entire management and control of the institutions ; the income from the institutions and all funds raised by the committee or the office bearers which will be exclusively devoted to the bonafide purposes of the institution for which fund has been collected and it shall have the right to frame rules and regulations for the routine and guidance of the working of the respective institutions and the office routine of the committee. Vide para 14(1) every kind of property and funds belonging to the society or any institution under it shall vest in the society. Though under the rules and regulations of the assessee-society the managing committee and the office bearers of the assessee-society had been empowered to control and manage the institutions, yet insofar as the management and control of the 'Modi Science & Commerce College', Modi Nagar and 'Rukmani Modi Mahila Inter College' are concerned, the same, as we are going to state hereinafter, does not vest in the managing committee of the assessee-society and/or any office bearers of the assessee-society. In this connection, we will refer to Section 16A(1) and (5) of the U.P. Intermediate Education Act, 1921. Sub-section (i) of Section 16A lays down that notwithstanding anything in law, document or decree or order of a court or other instrument, there shall be a scheme of administration for every institution, whether recognised before or after the commencement of the Intermediate Education (Amendment) Act, 1951-The scheme of administration shall amongst other matters provide for the constitution of a committee of management vested with authority to manage and conduct the affairs of the institution. The head of the institution and two teachers thereof, who shall be selected by rotation according to seniority in the manner to be prescribed by regulations, shall be exofficio members of the committee of management with a right to vote. Sub-section (5) of Section 16A lays down that the scheme of dministration of every institution shall be subject to the approval of the director and no amendment to or change in the scheme of administration shall be made at any time without the prior approval of the director. The proviso is not relevant in the present case. Pursuant to these provisions of the U.P. Intermediate Education Act, 1921, the scheme of administration by way of illustration in the case of 'Modi Science and Commerce College', Modi Nagar, was drawn up and the same was got approved from the director of the Education Department of the Government of U.P. The said scheme of administration pursuant to Section 16A of the U.P. Intermediate Education Act, 1921, in the case of 'Modi Science and Commerce College', Modi Nagar, is at pages 25 to 42 of the second paper book. According to para 4 of the said scheme, the authority to manage and conduct the affairs of the said college vests in the committee of management which alone is responsible for proper running of the institution in accordance with the provisions of the U.P. Intermediate Education Act, 1921 and the regulations and instructions issued from time to time by the authorities of the Education Department of Uttar Pradesh Government. Para 5 thereof lays down the constitution of the committee. Para 12 thereof lays down the powers, duties and functions of the committee which, inter alia, include control and management of all moneys, securities, property and endowments of the institution, excluding the boys funds and taking of necessary measures for their safe custody, investment, repair, maintenance and legal protection. Para 13 lays down the powers, duties and functions of the principal. The paragraphs following that lay down the powers and duties of other office bearers. As such, insofar as the 'Modi Science & Commerce College' and 'Rukmani Modi Mahila Inter College' are concerned, the management and control thereof vest in the respective committee of management established under Section 16A of the U.P. Intermediate Education Act, 1921 and not with the managing committee of the assessee-society. Same, it appears, is the position of the other two schools as is clear from the statement at page 18 of the second paper book filed by the assessee. It is worthwhile to mention here that only five each out of fifteen members in the case of 'Modi Science and Commerce College' and 17 members in the case of 'Rukmani Modi Mahila Inter College', are the trustees of the assessee-society and the other members of the managing committees of those colleges are persons other than the trustees of the assessee-society. In the case of 'Pramila Modi Junior High School' and 'Gayatri Devi Modi Junior High School' only two each out of 8 each of the members of the managing committee of those schools are the trustees of the assessee-society, the other six members in the case of each of said schools are persons other than the trustees of the assessee-society. That too shows that in fact also the trustees being in minority in the managing committees of each of the said institution are not in a position to control those managing committees and so the management and control of those institutions is not with the trustees of the assessee-society.

22. We will also like to mention as is clear from the balance sheet of the assessee-society as on 31-3-1977 that the assessee-society has invested a substantial sum totalling Rs. 14,62,809 on the buildings and boarding houses and other buildings and furniture and fixtures of the aforesaid four educational institutions. This is clear from the particulars of buildings and other assets as on 31-3-1977 and the report and annual accounts of the assessee-society as on 31-3-1977 given in Annexure 'A' in the first paper book filed by the assessee-society.

23. The above facts, therefore, would show that though the assessee-society has expended over Rs. 14 lakhs in the construction of the buildings, boarding houses and other buildings, furniture and fixtures in the aforesaid four institutions, the management and control of each of those institutions vests not in the assessee-society but in the respective managing committee for each of those institutions. The authority to control and manage each of such institutions vests in the respective committee of management of the said institutions which alone is responsible for properly running the institution in accordance with the provisions of the U.P. Intermediate Education Act, 1921 and the rules and instructions issued by the authorities of the Education Department, U.P.

24. Can we on the facts as found out by us and stated above hold that the assessee-society has been established for education as was the case of the departmental representative before us? This takes us to the aims and objects of the assessee-society reproduced in para 15 above. As brought out in paragraph 16 above, we have to ignore object (c). On perusal of the rest of the aims and objects of the assessee-society, we find that Sub-clauses (e), (f), (g), (h), (i) and (j) in the aims and objects clauses of the assessee-society, do not represent the aims and objects for which the assessee-society was established. These provisions are ancillary to and to give effect to the aims and objects at Sub-clauses (a), (b), (d) and (k) of Clause 2 detailing the aims and objects of the assessee-society. By Sub-clause (k) of Clause 2 detailing the aims and objects, the assessee-society has been empowered to hold the insurance business as property in trust for charitable purposes by applying the income therefrom wholly for charitable purposes detailed at (a), (b) and (d). Reading Sub-clauses (a), (b) and (d) of Clause 2 detailing the aims and objects of the assessee-society with the rest of the memorandum of association and rules and regulations of the assessee-society, we find that the said aims and objects are distributive in the sense that the trustees of the assessee-trust have the discretion to apply wholly or any part of its income for one of those objects to the exclusion of the other(s). That being the position, it cannot be said that either of these objects detailed in Sub-clauses (a), (b) and (d) represents the dominant object of the assessee-society. It will, therefore, not be correct, as sought to be made out by the ITO in the assessment order that the dominant purpose for which the trust was established was for the object detailed in Sub-clause (a) of Clause 2, detailing the aims and objects of the trust.

25. If the view taken by us towards the end of the immediately preceding paragraph is correct, than we have three objects each of which stands on equal footing. Since two of those objects are objects for advancement of an object of general public utility, then the dominant object of the assessee-society trust is for the advancement of any other object of general public utility and not for 'education' as sought to be made out by the ITO in the assessment order. This view of ours finds support from the aforesaid decisions of the Tribunal in* the case of the assessee and of the Hon'ble Allahabad High Court detailed in para 20 above.

26. Assuming without admitting that our finding in the immediately preceding paragraph is not correct and the object in Sub-clause (a) of Clause 2 detailing the aims and objects of the assessee-society is the main object for which the assessee-society trust has been established, can we say, as posed by us in paragraph 21 above, that the assessee-society trust was established for education? This takes us to the decision of the Supreme Court in the case of Sole Trustee, Loka Shikshana Trust (supra). Therein, the object of that assessee was to educate the people of India in general and of Karnataka in particular by : (a) establishing, conducting and helping, directly or indirectly, 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, 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) supplying the Kannada speaking public with an organ or organs of educated public opinion and conducting journals in Kannada and other languages, for the dissemination of useful news and information and for the ventilation of public opinion 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. In 1935 the assets of the trust were of the value of Rs. 4,308. The trustee carried on a business of printing and by 1962 the net value of the assets of the trust had risen to Rs. 1,73,571. The question was whether the income of the trust, which at the relevant time was publishing newspapers and journals pursuant to Clause 2(c), was exempt from tax under Section 11 read with Section 2(75). The Supreme Court while deciding this question has observed as under : ...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 sense in which the word 'education' has been used in Section 2(15) in the systematic, instruction, schooling or training given to the young is preparation for the work of life. It also connotes the whole course of scholastic instruction which a person has received ... what education connotes in that clause is the process of training and developing the knowledge, skill, mind and character of students by normal schooling." (pp. 240-41)

Having so observed the Supreme Court has held that the object of the trust over there was not 'education' within the meaning of Section 2(15) but 'the advancement of any other object of general public utility'. In view of this decision, which has been affirmed by the subsequent decision of the Supreme Court in Dharmodayam Co's case (supra) and the fact that the assessee-society trust in the present case is itself not running any educational institution like a school or college but has only constructed the building therefor retaining its ownership thereof and by giving the grant-in-aid, we, on the facts and circumstances of the case as brought out above, are of the considered view that the object contained in Sub-clause (a) of Clause 2, detailing the aims and objects of the assessee-society trust on the facts as existing in the year under consideration, cannot be treated as one established for 'education'. The activity of the assessee in providing grant-in-aid and school building, etc., would fall only under the head 'advancement of any other object of general public utility'. Regarding this aspect, the Supreme Court has observed in the aforesaid decision-Sole Trustee, Loka Shikshana Trust's case (supra) thus : ...The position as it existed under the Act of 1922 was that once the purpose of the trust was relief of the poor, education, medical relief or the advancement of any other object of general public utility, the trust was considered to be for a charitable purpose. As a 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 trust is 'advancement of any other object of general public utility', it would not be considered 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 a 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 does not involve the carrying on of any activity for profit. Both the above conditions must be fulfilled before the purpose of the trust can be held to be charitable purpose. ..." (p. 242)

Our above view in the present case is also supported by the decision of the Madras High Court in Victoria Technical Institute's case (supra). We, therefore, hold that the assessee-trust has not been established for 'education'. Further for the reasons stated by the Tribunal in the aforesaid decision and by the Hon'ble Allahabad High Court as detailed in paragraphs 18 and 19 above, with which we agree and which we respectfully follow, we hold that the assessee-society trust has been established for 'advancement of any other object of general public utility not involving the carrying on of any activity for profit'.

27. We now come to. the question as to whether the assessee in the year under consideration, in view of Sub-clause (k) of Clause 2 detailing the aims and objects of the assessee-society, was carrying on the business as an insurance agent. The stand of the assessee, in this behalf as brought out by the learned counsel for the assessee, Dr. Pal and as stated above, is that the assessee-society was not carrying on the business as an insurance agent. This stand as brought out above has been controverted by the departmental representative. We after deliberation agree to disagree with the learned counsel for the assessee, Dr. Pal. The expression 'business', as brought out in the decisions relied upon by Dr. Pal as used in the Act, is a word of indefinite import. In the Act, it is used in the sense of an occupation or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as 'business' there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive and not for sport or pleasure. Whether a person carries on business in a particular commodity must depend upon the volume, frequency, continuity and regularity of transactions of purchase and sale in a class of goods and the transactions must ordinarily be entered into with a profit motive. By the use of the expression 'profit motive' it is not intended that profit must in fact be earned. Nor does the expression cover a mere desire to make some monetary gain out of a transaction or even a series of transactions. It predicates a motive which pervades the whole series of transactions effected by the person in the course of his activity. In actual practice, the profit motive may be easily discernible in some transactions ; in others it would have to be inferred from a review of the circumstances attendant upon the transaction.

28. Keeping in view the above test, if we come to the facts of the above case, we find that one of the aims and objects as detailed in Sub-clause (k) of Clause 2, detailing the aims and objects, is 'to work and establish agencies and depots for the purchase and sale of goods of all descriptions, borrow money and to get insurance agencies of the different companies and to do insurance work for the purpose of applying the income therefrom for objects mentioned above'. It was pursuant to this that the assessee-society trust obtained the licence as early as on 17-1-1958 from the Government of India, Department of Insurance. The licence to act as an insurance agent under Part II of the Insurance Act, 1938 was for general insurance business only. The said certificate was valid from 1-9-1957. Pursuant to this, the assessee for all these years up to the year under consideration was working as an insurance agent. May be for carrying on the activity as an insurance agency the assessee-society had one employee. Yet the assessee-society every year up to the year under consideration was involved in a number of transactions indicating volume, frequency, continuity and regularity of transactions for earning insurance commission. May be the Modi group of companies nominated the assessee-society as the commission agent and would have paid the same commission whether the assessee-society was nominated as a commission agent or not and whether each of those companies had their separate insurance department which was looking after the insurance business, yet keeping in view the volume, frequency, continuity and regularity of the insurance transactions with a profit motive shows nothing but the carrying on of the business by the assessee-society as an insurance agent. We hold likewise.

29. At the same time, the said business carried on by the assessee is 'property' as held by the Supreme Court in J.K. Trust's case (supra) and P. Krishna Warriar's case (supra) and the said property in view of Sub-clause (k) of Clause 2, dealing with the aims and objects of the assessee-society trust, has been held for charitable purposes within the meaning of Section 2(15).

In view of what we have held above, the whole of its income is to be applied for the purposes at (a), (b) and (d). As such, the said business is wholly held in trust and is outside the purview of Section 13(1)(bb). This view of ours finds support from the ratio of the decision of the Supreme Court in P. Krishna Warrior's case (supra) and Dharmodayam Co.'s case (supra). In the former case the testator, who was carrying on the business of making and selling ayurvedic medicines under the name of Arya Vaidyasala, by his will, vested the business on trustees directing them to apply 60 per cent of the income thereof to charitable purposes and 40 per cent for the benefit of his family. The question was whether 60 per cent of the income which was to be applied for charitable purposes was liable to tax under proviso (b) to Section 4(3)(i) of the Indian Income-tax Act, 1922, akin to Section 13(1)(bb) of the 1961 Act, on the ground that the entire income was not applied for charitable purposes. On these facts, the Supreme Court held that the business was 'property' held in trust partly for charitable purposes within the meaning of the main part of Section 4(3)(i). Clause (b) of the proviso did not apply to a business held in trust. Therefore, 60 per cent of the income from the business was exempt from income-tax under Section 4(3)(i) of the 1922 Act. Respectfully following the said decision as also the decision in Dharmodayam Co.'s case (supra), we hold that since the business of insurance agency was held on trust, the income whereof was to be wholly applied to the charitable purposes detailed in Sub-clauses (a), (b) and (d) of Clause 2, detailing the aims and objects of the assessee-society trust, the entire income from the insurance business was exempt under Section 11. We hold likewise.

30. Having come to the above conclusion, we need not go into the other arguments of the learned counsel for the assessee.

31. In the result, the appeal by the assessee is allowed.