The main legal point established in the judgment is that income derived from conducting kuries can be exempt under S.11(1)(a) of the Income Tax Act, and setting apart reserves under Art.39 does not necessarily affect the charitable purpose of the institution.

1. The questions referred to us in the reference are

1 Whether on the facts and in the circumstances of the case, the Appellate Tribunal is correct in law in holding that the income derived by the assessee is exempt under S.11 (1) (a) of the Income tax-Act, 1961?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that setting apart reserves under Art.39 of the assessee's memorandum did not vitiate the charitable purpose of the institution?"

The assessee is a company, which was originally registered under the Cochin Companies Act and later on under the Indian Companies Act of 1956. It was allowed to be registered with limited liability without the addition of the word "limited" to its name by the Dewan of Cochin; and the registration was followed under the Indian Companies Act too. The sources of income of the Company are interest on securities, income from property and business of conducting kuries (chit funds). In a previous reference, viz., Dharmodayam Co. v-Commissioner of Income-tax, Kerala (45 ITR. 478), a Division Bench of this Court had occasion to consider the position relating to the kuries conducted by the Company under S.4 (3) (i) of the Indian Income-tax Act of 1922; and the Court held that the business of conducting kuries was held by the Company under trust for religious or charitable purposes and proviso (b) to S.4(3)(i) was not attracted. The Memorandum of Association of the Company had as its objects

"(a) To raise funds by conducting kuries with the Company as the foreman; receiving donations and subscriptions; and by such other means as the Company deems fit.

(b) To do the needful for the promotion of Charity, Education and Industry."

It was in construing this portion of the Memorandum of Association that this Court held that the business of conducting Kuries was held by the Company under trust for religious or charitable purposes, namely "the promotion of Charity, Education and Industry". The matter was taken in appeal to the Supreme Court by the Revenue; but, the appeal was withdrawn, with the result that the decision of this court became final.

3. After the Income-tax Act of 1961 came into force, the present case arose. The assessment year, with which we are concerned in this case, is 1968-69; and the Income-tax Officer assessed the income derived by the Company by conducting kuries to tax for the said year. The Officer held that, since the sole test for exemption under S.11 of the Act was that the objects on which the income was spent should be charitable, the test was not satisfied and therefore the liability to tax arose. In appeal, the Appellate Assistant Commissioner came to a different conclusion; he held that the earlier decision of this Court applied to the case and the alteration in the definition of "charitable purpose" in S.2(15) of the new Act did not bring about any alteration in the position of the Company. This view was accepted by the Appellate Tribunal as well. Thereafter, at the instance of the Revenue, the questions mentioned at the commencement of the judgment have been referred to us.

4. The counsel of the Revenue has referred mainly to the decision of the Mysore High Court in Commissioner of Income-tax, Mysore v. Sole Trustee, Loka Shikshana Trust (77 ITR. 61). In that decision, the Mysore High Court was considering the scope of S.2 (15) of the Act of 1961. This clause, as we have already indicated, defines "charitable purpose" to include "relief of the poor, education, medical relief, and the advancement of any other object of general public utility not involving the carrying on of any activity for profit". From the very language of this definition, what appears is that in so far as relief of the poor, education and medical relief are concerned, no question of any activity for profit can arise; in other words, the question whether there is involved any activity for profit is confined only to the last part of the definition, namely, th