Our trust runs a business and puts the profit into its objects. Does s.11(4A) still deny the exemption?
No, on this decision. The Supreme Court read the substituted s.11(4A), in force from 1 April 1992, as more beneficial to a trust than the sub-section it replaced, and held that a business whose income is used by the trust to achieve its objectives is a business incidental to the attainment of those objectives. The trust ran a newspaper, applied the income to education and relief of the poor, and kept separate books, and was held entitled to s.11 from assessment year 1992-93 onwards. Read the disposal whole: for the earlier years, decided under s.11(4A) as it stood before that substitution, the exemption for the newspaper income was refused.
Decided by the Supreme Court (Supreme Court of India; S.P. Bharucha, N. Santosh Hegde and Y.K. Sabharwal JJ) on 2001-01-31, reported as (2001) 247 ITR 785 (SC) / [2001] 115 Taxman 126 (SC) / [2001] 165 CTR 681 (SC) - Civil Appeal Nos. 4406-4410 of 1996 with 4395-4402 of 1996, 4759-4761 of 1998, 497-499 and 5772 of 2000. It bears on section 11, section 11(4), section 11(4A), section 13(1)(bb), section 2(15) of the Income Tax Act 1961, in Charitable Trusts & Exemption and Capital Gains Exemptions matters.
This is the authority a trust reaches for when the officer says the business itself has nothing to do with the objects. On this reading the connection required by s.11(4A) is one of destination rather than of subject matter. Two things limit it. The separate books condition is independent and is not satisfied by application of income, and for a trust whose object is the advancement of general public utility the s.2(15) proviso, with both of its conditions, now sits on top of s.11(4A) after Ahmedabad Urban Development Authority.
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S.K. Adityan founded the Tamil daily Dina Thanthi in 1942 and on 1 March 1954 created the Thanthi Trust, settling the newspaper business on trust as a going concern. The object was to establish the newspaper as an organ of educated public opinion for the Tamil reading public. A supplementary deed of 9 July 1957 declared the trust irrevocable, and a further supplementary deed of 28 July 1961 directed that the surplus income, after expenses, be devoted to establishing and running a school or college of journalism, schools and colleges of arts and science, scholarships, hostels, orphanages and other educational purposes. On 2 March 1962, on an originating summons, the Madras High Court upheld the validity of that supplementary deed and held the trustees bound to devote the surplus income to those purposes. Three separate controversies came to the Supreme Court, each from a decision of the Madras High Court in the trust's favour: exemption for assessment years 1979-80 to 1983-84, when s.13(1)(bb) was on the statute book; exemption for 1984-85 to 1991-92, under s.11(4A) as originally enacted from 1 April 1984; and exemption for 1992-93, 1995-96 and 1996-97, under s.11(4A) as substituted from 1 April 1992.
Mixed, on three separate periods. (1) For assessment years 1979-80 to 1983-84 the trust was not entitled to exemption. Section 13(1)(bb) applies to a charitable trust for relief of the poor, education or medical relief that carries on any business, whether or not the business is held by it in trust as part of its corpus, and denies exemption unless the business is carried on in the course of actually accomplishing a primary purpose of the trust. The newspaper business did not itself accomplish education or relief of the poor; its income only fed those activities. (2) For assessment years 1984-85 to 1991-92 the trust was not entitled to exemption either, but for a different reason: s.11(4A) as originally enacted allowed business income only where the business was carried on by a trust wholly for public religious purposes and consisted of printing and publishing books or a notified kind, or by an institution wholly for charitable purposes with the work mainly done by its beneficiaries. The trust was not only for public religious purposes, and it was a trust and not an institution, so it fell within neither clause. (3) For assessment year 1992-93 and thereafter the trust was entitled to the benefit of s.11: the substituted s.11(4A) requires only that the business be incidental to the attainment of the objectives and that separate books be kept, and it was not in dispute that the newspaper income had been used for the trust's objects of education and relief to the poor and that separate books were maintained. Disposal (para 19): the revenue's appeals were allowed so far as they relate to 1979-80 to 1991-92 and the two Madras High Court judgments reported at [1995] 213 ITR 626 and [1995] 213 ITR 639 were set aside; Civil Appeal Nos. 497-499 of 2000, against the third Madras decision, were dismissed; no order as to costs.
On s.13(1)(bb) the Court rejected the distinction counsel drew between a business held under trust as part of the corpus and a business merely carried on by a trust: a trust carries on a business that is part of its corpus just as much as one that is not, and the words of the provision are wide enough to control income from the corpus where the corpus includes a business (paras 10 and 11). The exception requires the business to be carried on in the course of actually accomplishing a primary purpose, and the Court gave its own illustration - a trust for relief of the poor that weaves cloth and stitches clothing by employing indigent women is within the exception, because the business is itself the relief (para 12). A newspaper whose income merely feeds the charity is not (para 13). The Court also held that the earlier decision in the trust's own case, CIT v. Thanthi Trust [1982] 137 ITR 735 (Mad.), rendered before s.13(1)(bb) existed, did not bar the revenue by res judicata from arguing the point under that provision merely because the earlier finding used similar language (para 14). On s.11(4A) as originally enacted, s.11(4) remained on the statute book and continued to define property held under trust to include a business, but s.11(4A) independently restricted the benefit to the two narrow classes; trusts and institutions are separately dealt with throughout the Act and refer to differently constituted entities, so the trust satisfied neither clause (paras 16 and 17). On the substituted s.11(4A) the Court compared it with what it replaced and with s.13(1)(bb): had Parliament meant to give no more than s.13(1)(bb) gave, it would have used that language, so the substituted provision is the more beneficial, and all it requires is that the business be incidental to the attainment of the objectives; a business whose income is used to achieve the objectives is such a business, and in any event ambiguity is to be resolved in the assessee's favour (para 18).
A business whose income is utilised by the trust or the institution for the purpose of achieving the objectives of the trust or the institution is, surely, a business which is incidental to the attainment of the objectives of the trust.
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Handle my notice → Ask a CA on WhatsAppNo, on this decision. The Supreme Court read the substituted s.11(4A), in force from 1 April 1992, as more beneficial to a trust than the sub-section it replaced, and held that a business whose income is used by the trust to achieve its objectives is a business incidental to the attainment of those objectives. The trust ran a newspaper, applied the income to education and relief of the poor, and kept separate books, and was held entitled to s.11 from assessment year 1992-93 onwards. Read the disposal whole: for the earlier years, decided under s.11(4A) as it stood before that substitution, the exemption for the newspaper income was refused. This was decided by the Supreme Court (Supreme Court of India; S.P. Bharucha, N. Santosh Hegde and Y.K. Sabharwal JJ) and bears on section 11, section 11(4), section 11(4A), section 13(1)(bb), section 2(15) of the Income Tax Act 1961. It is reported as (2001) 247 ITR 785 (SC) / [2001] 115 Taxman 126 (SC) / [2001] 165 CTR 681 (SC) - Civil Appeal Nos. 4406-4410 of 1996 with 4395-4402 of 1996, 4759-4761 of 1998, 497-499 and 5772 of 2000. This is the authority a trust reaches for when the officer says the business itself has nothing to do with the objects. On this reading the connection required by s.11(4A) is one of destination rather than of subject matter. Two things limit it. The separate books condition is independent and is not satisfied by application of income, and for a trust whose object is the advancement of general public utility the s.2(15) proviso, with both of its conditions, now sits on top of s.11(4A) after Ahmedabad Urban Development Authority. If it applies to you, the first step is this: Establish the trail from the business profit to the objects, because on this decision that is what makes the business incidental.
S.K. Adityan founded the Tamil daily Dina Thanthi in 1942 and on 1 March 1954 created the Thanthi Trust, settling the newspaper business on trust as a going concern. The object was to establish the newspaper as an organ of educated public opinion for the Tamil reading public. A supplementary deed of 9 July 1957 declared the trust irrevocable, and a further supplementary deed of 28 July 1961 directed that the surplus income, after expenses, be devoted to establishing and running a school or college of journalism, schools and colleges of arts and science, scholarships, hostels, orphanages and other educational purposes. On 2 March 1962, on an originating summons, the Madras High Court upheld the validity of that supplementary deed and held the trustees bound to devote the surplus income to those purposes. Three separate controversies came to the Supreme Court, each from a decision of the Madras High Court in the trust's favour: exemption for assessment years 1979-80 to 1983-84, when s.13(1)(bb) was on the statute book; exemption for 1984-85 to 1991-92, under s.11(4A) as originally enacted from 1 April 1984; and exemption for 1992-93, 1995-96 and 1996-97, under s.11(4A) as substituted from 1 April 1992. The matter was decided on 2001-01-31 by the Supreme Court (Supreme Court of India; S.P. Bharucha, N. Santosh Hegde and Y.K. Sabharwal JJ). On those facts the Supreme Court held as follows. Mixed, on three separate periods. (1) For assessment years 1979-80 to 1983-84 the trust was not entitled to exemption. Section 13(1)(bb) applies to a charitable trust for relief of the poor, education or medical relief that carries on any business, whether or not the business is held by it in trust as part of its corpus, and denies exemption unless the business is carried on in the course of actually accomplishing a primary purpose of the trust. The newspaper business did not itself accomplish education or relief of the poor; its income only fed those activities. (2) For assessment years 1984-85 to 1991-92 the trust was not entitled to exemption either, but for a different reason: s.11(4A) as originally enacted allowed business income only where the business was carried on by a trust wholly for public religious purposes and consisted of printing and publishing books or a notified kind, or by an institution wholly for charitable purposes with the work mainly done by its beneficiaries. The trust was not only for public religious purposes, and it was a trust and not an institution, so it fell within neither clause. (3) For assessment year 1992-93 and thereafter the trust was entitled to the benefit of s.11: the substituted s.11(4A) requires only that the business be incidental to the attainment of the objectives and that separate books be kept, and it was not in dispute that the newspaper income had been used for the trust's objects of education and relief to the poor and that separate books were maintained. Disposal (para 19): the revenue's appeals were allowed so far as they relate to 1979-80 to 1991-92 and the two Madras High Court judgments reported at [1995] 213 ITR 626 and [1995] 213 ITR 639 were set aside; Civil Appeal Nos. 497-499 of 2000, against the third Madras decision, were dismissed; no order as to costs.
On s.13(1)(bb) the Court rejected the distinction counsel drew between a business held under trust as part of the corpus and a business merely carried on by a trust: a trust carries on a business that is part of its corpus just as much as one that is not, and the words of the provision are wide enough to control income from the corpus where the corpus includes a business (paras 10 and 11). The exception requires the business to be carried on in the course of actually accomplishing a primary purpose, and the Court gave its own illustration - a trust for relief of the poor that weaves cloth and stitches clothing by employing indigent women is within the exception, because the business is itself the relief (para 12). A newspaper whose income merely feeds the charity is not (para 13). The Court also held that the earlier decision in the trust's own case, CIT v. Thanthi Trust [1982] 137 ITR 735 (Mad.), rendered before s.13(1)(bb) existed, did not bar the revenue by res judicata from arguing the point under that provision merely because the earlier finding used similar language (para 14). On s.11(4A) as originally enacted, s.11(4) remained on the statute book and continued to define property held under trust to include a business, but s.11(4A) independently restricted the benefit to the two narrow classes; trusts and institutions are separately dealt with throughout the Act and refer to differently constituted entities, so the trust satisfied neither clause (paras 16 and 17). On the substituted s.11(4A) the Court compared it with what it replaced and with s.13(1)(bb): had Parliament meant to give no more than s.13(1)(bb) gave, it would have used that language, so the substituted provision is the more beneficial, and all it requires is that the business be incidental to the attainment of the objectives; a business whose income is used to achieve the objectives is such a business, and in any event ambiguity is to be resolved in the assessee's favour (para 18). In the words reproduced by the source cited on this page: "A business whose income is utilised by the trust or the institution for the purpose of achieving the objectives of the trust or the institution is, surely, a business which is incidental to the attainment of the objectives of the trust."
It was decided by the Supreme Court on 2001-01-31 and is reported as (2001) 247 ITR 785 (SC) / [2001] 115 Taxman 126 (SC) / [2001] 165 CTR 681 (SC) - Civil Appeal Nos. 4406-4410 of 1996 with 4395-4402 of 1996, 4759-4761 of 1998, 497-499 and 5772 of 2000. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 11, section 11(4), section 11(4A), section 13(1)(bb), section 2(15), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. Mixed, on three separate periods. (1) For assessment years 1979-80 to 1983-84 the trust was not entitled to exemption. Section 13(1)(bb) applies to a charitable trust for relief of the poor, education or medical relief that carries on any business, whether or not the business is held by it in trust as part of its corpus, and denies exemption unless the business is carried on in the course of actually accomplishing a primary purpose of the trust. The newspaper business did not itself accomplish education or relief of the poor; its income only fed those activities. (2) For assessment years 1984-85 to 1991-92 the trust was not entitled to exemption either, but for a different reason: s.11(4A) as originally enacted allowed business income only where the business was carried on by a trust wholly for public religious purposes and consisted of printing and publishing books or a notified kind, or by an institution wholly for charitable purposes with the work mainly done by its beneficiaries. The trust was not only for public religious purposes, and it was a trust and not an institution, so it fell within neither clause. (3) For assessment year 1992-93 and thereafter the trust was entitled to the benefit of s.11: the substituted s.11(4A) requires only that the business be incidental to the attainment of the objectives and that separate books be kept, and it was not in dispute that the newspaper income had been used for the trust's objects of education and relief to the poor and that separate books were maintained. Disposal (para 19): the revenue's appeals were allowed so far as they relate to 1979-80 to 1991-92 and the two Madras High Court judgments reported at [1995] 213 ITR 626 and [1995] 213 ITR 639 were set aside; Civil Appeal Nos. 497-499 of 2000, against the third Madras decision, were dismissed; no order as to costs. It arises in Charitable Trusts & Exemption and Capital Gains Exemptions matters, on section 11, section 11(4), section 11(4A), section 13(1)(bb), section 2(15) of the Income Tax Act 1961, and was decided by Supreme Court of India; S.P. Bharucha, N. Santosh Hegde and Y.K. Sabharwal JJ. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Maintain separate books of account for the business from the first day of the year — s.11(4A) makes it a separate cumulative condition and no amount of application cures its absence. Check which limb of s.2(15) your objects fall in before relying on this case, because for a general public utility trust the proviso to s.2(15) has to be cleared as well — and it has two conditions, that the activity be undertaken in the course of actual carrying out of the advancement of the object of general public utility and that receipts from it not exceed twenty per cent of total receipts. Where the business is a business undertaking held under trust, expect the officer to use s.11(4) to recompute its income under the ordinary provisions and to treat any excess over the book figure as applied to non-charitable purposes.
Still good law. Confined by a later three-Judge Bench. In ACIT (Exemptions) v. Ahmedabad Urban Development Authority [2022] 143 taxmann.com 278 (SC) / 449 ITR 389 (SC), decided 19 October 2022 (Uday Umesh Lalit, CJI, S. Ravindra Bhat and P.S. Narasimha, JJ.), the Court considered this decision at paras 164 to 167 and said its interpretation of s.11(4A) was made in the context of a per se charity - a trust whose object was education - and that its ratio 'cannot be extended to cases where the trust carries on business which is not held under trust and whose income is utilized to feed the charitable objects of the trust'. For a general public utility charity the later Bench held that the activity must now be intrinsically linked to or part of the charity's object, that the predominant-object test is no longer good law, and that the quantitative limit in the proviso to s.2(15) applies. So this decision continues to govern a per se charity carrying on a business held under trust, and no more than that. It is not listed in the case review block of Ahmedabad Urban Development Authority as followed, distinguished or overruled; the treatment is in the body of that judgment. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Read from the numbered paragraphs of the judgment. The decision runs to three separate controversies over three statutory regimes, and the sentence it is usually cited for - that a business whose income is used to achieve the trust's objects is incidental to their attainment - belongs only to the third, the substituted s.11(4A) in force from 1 April 1992. On the first two the trust lost. The Court's own illustration of a business carried on in the course of accomplishing a primary purpose, at para 12, is a trust for relief of the poor that weaves and stitches clothing by employing indigent women. Two of the three Madras High Court decisions under appeal were set aside; the third, Thanthi Trust v. Asstt. Director of Income-tax [1999] 238 ITR 635 (Mad.), stands, the appeals against it having been dismissed. The judgment says nothing about what standard of separateness the books of account must meet, and it does not deal with a business acquired by a trust after its creation as distinct from one settled on trust at the outset - though the distinction it does draw, between a business held under trust and one merely carried on, is what the later Bench in Ahmedabad Urban Development Authority used to limit it. The outcome for the assessment years before 1979-80 is background only: paras 1 to 3 record that exemption for 1955-56 to 1961-62 was allowed after S.B. Adityan v. First ITO [1964] 52 ITR 453 (Mad.), that reopening notices for several later years were quashed in [1973] 91 ITR 261 (Mad.), and that special leave against the 1982 decision on 1968-69 and 1969-70 was declined so far as s.11 was concerned; none of that was decided afresh here. The interaction with the receipts threshold in the proviso to s.2(15) comes from Ahmedabad Urban Development Authority, not from this judgment, which pre-dates it. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Mixed, on three separate periods. (1) For assessment years 1979-80 to 1983-84 the trust was not entitled to exemption. Section 13(1)(bb) applies to a charitable trust for relief of the poor, education or medical relief that carries on any business, whether or not the business is held by it in trust as part of its corpus, and denies exemption unless the business is carried on in the course of actually accomplishing a primary purpose of the trust. The newspaper business did not itself accomplish education or relief of the poor; its income only fed those activities. (2) For assessment years 1984-85 to 1991-92 the trust was not entitled to exemption either, but for a different reason: s.11(4A) as originally enacted allowed business income only where the business was carried on by a trust wholly for public religious purposes and consisted of printing and publishing books or a notified kind, or by an institution wholly for charitable purposes with the work mainly done by its beneficiaries. The trust was not only for public religious purposes, and it was a trust and not an institution, so it fell within neither clause. (3) For assessment year 1992-93 and thereafter the trust was entitled to the benefit of s.11: the substituted s.11(4A) requires only that the business be incidental to the attainment of the objectives and that separate books be kept, and it was not in dispute that the newspaper income had been used for the trust's objects of education and relief to the poor and that separate books were maintained. Disposal (para 19): the revenue's appeals were allowed so far as they relate to 1979-80 to 1991-92 and the two Madras High Court judgments reported at [1995] 213 ITR 626 and [1995] 213 ITR 639 were set aside; Civil Appeal Nos. 497-499 of 2000, against the third Madras decision, were dismissed; no order as to costs.
TaxSphere, “ACIT v Thanthi Trust”, https://taxnotice.vittsphere.com/caselaw/case/acit-v-thanthi-trust-11-4a/ (validity last checked 2026-08-22)
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