HON’BLE SUPREME COURT · SOURCE-REVIEWED NOTE
The East India Industries (Madras) Private Ltd., Madras & Another v. Commissioner of Income-tax, Madras
Civil Appeal No. 1399 of 1966
[1967] 3 SCR 356 ·
Indian Income-tax Act, 1922: sections 4(3)(i), 15B and 66(1)
Sources & disclosures includedDownload original judgment / order
3-judge bench; unanimous judgment delivered by V. Ramaswami, J. · J. C. Shah, J. · S. M. Sikri, J. · V. Ramaswami, J.
Assessment years: 1955-56
01 · Facts of the case
East India Industries donated Rs.7,500 to the Agastyar Trust and claimed section 15B relief for assessment year 1955-56. The trust was created on 1 July 1944 by partners of K. Rajagopal and Company, a waste-paper business that set aside 80 percent of profits for religious and charitable purposes. Its objects included education, relief, hospitals and religion, but also independently authorized manufacturing, buying, selling and distributing pharmaceutical, medicinal, chemical and other preparations. The officer and first appellate authority denied the deduction. The Tribunal relied on its earlier conclusion that Agastyar was a public trust and allowed it. On Revenue's section 66(1) reference, the Madras High Court answered against the assessee (SCR pp.357-359; PDF pp.2-4).
Source: Primary judgment: facts
02 · Discussion by the Hon’ble Court
Section 15B applied only to an institution or fund whose income was exempt under section 4(3)(i). Although most objects were charitable or religious, clause 5(i) allowed the trustees to apply all capital or income to any one object, and no special trust earmarking restricted this power. Because the pharmaceutical manufacturing and trading object was neither charitable nor religious on its independent wording, the trustees could validly devote the entire income to a non-charitable activity. The trust therefore was not held wholly for qualifying purposes (SCR pp.359-360; PDF pp.4-5). Reading the deed as a whole did not make that object subsidiary to hospitals: the objects were declared independent and the trustees had absolute selection power. Prior authorities supported the distinction between incidental powers and substantive objects freely capable of absorbing the fund (SCR pp.360-363; PDF pp.5-8). The High Court could examine section 4(3)(i) because the authorities and Tribunal had dealt with the trust's qualifying status; a legal issue dealt with in the Tribunal's order arose from it even if not separately articulated (SCR pp.363-364; PDF pp.8-9).
Source: Primary judgment: discussion
03 · Judicial decision
The Court upheld the High Court's answer that the donation was not deductible under section 15B, rejected the reference-jurisdiction objection and dismissed the assessee's appeal with costs (SCR pp.363-364; PDF pp.8-9).
Source: Primary judgment: decision
04 · Outcome / in whose favour
In favour of Revenue/the Commissioner. The donor failed to obtain deduction because the Agastyar Trust's unrestricted objects permitted all income to be applied to an independent non-charitable business object (SCR pp.362-364; PDF pp.7-9).
Source: Primary judgment: outcome
05 · AKHB REVIEW POINT
AKHB analysis: charity-object review should distinguish a genuine incidental power from an independent object and then trace the trustees' allocation discretion. A predominantly charitable list may still fail a 'wholly' test if the deed validly permits the whole fund to flow to a substantive non-charitable object. Check earmarking, severability, dominant-object language and actual governing provisions, but apply today's charitable-purpose, business and donation rules afresh; this 1922 Act result is not a current registration or deduction determination (based on SCR pp.359-364; PDF pp.4-9).
Source: Primary judgment: reviewPoint
Source & verification
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Statutory scope
The judgment applies the former donation and charitable-trust provisions in sections 15B and 4(3)(i) of the repealed Indian Income-tax Act, 1922. It does not determine present sections 2(15), 11 to 13, 80G, registration, business-incidental-to-object, specified-mode or accumulation consequences under the Income-tax Act, 1961. No current-law or comprehensive later-treatment clearance was undertaken.
Later treatment
Source checked 2026-10-11. Later judicial treatment and current statutory applicability have not been comprehensively checked; no current-law or citator clearance is represented.
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