Judgments on Charitable and Public Trusts: Bansi Dhar, Loka Shikshana Trust, Surat Art Silk and AUDA

📖 State of Uttar Pradesh v Bansi Dhar (decided 11 December 1973)

Held: In deciding whether a charitable gift survives the failure of its particular object, the court must ask whether the donor had a paramount general charitable intention, distinct from the particular mode he specified. If such an intention exists, the gift is applied to charity; if not, the whole gift fails. The Court observed that the law of charitable trusts must undergo an evolutionary adaptation to Indian conditions, and that, although Section 83 of the Trusts Act does not itself apply to public charitable trusts, the underlying principles of equity and good conscience apply to both private and public trusts.

📖 Sole Trustee, Loka Shikshana Trust v CIT (decided 28 August 1975)

Held: Education in the definition of charitable purpose means systematic instruction, schooling or training given to the young in preparation for the work of life, not every acquisition of knowledge; publishing newspapers is not education. Under the definition then in force, an object of general public utility qualified only if it did not involve carrying on any activity for profit, and the word "profit" was not confined to private profit. Since the trust's deed placed no restriction on profit and profit-making was integral to its operations, it was not entitled to exemption.

📖 Additional CIT v Surat Art Silk Cloth Manufacturers Association (1979)

Held: After an amendment to the definition, the test for general public utility became the predominant object: if the predominant object of the activity is to carry out the charitable purpose, and not to earn profit, the purpose does not lose its charitable character merely because some profit arises incidentally. An association promoting the interests of an industry could qualify.

📖 ACIT (Exemptions) v Ahmedabad Urban Development Authority (decided 19 October 2022)

Held: Following the amendments from 2008, an entity whose purpose is the advancement of any other object of general public utility cannot carry on trade, commerce or business, or render services in relation to them for a fee, except where the activity is undertaken in the actual course of carrying out the object and the receipts stay within the prescribed percentage of total receipts. Charging for goods or services at cost or a nominal mark-up may be consistent with charity; charging significantly above cost indicates trade. The predominant object test of Surat Art Silk no longer governs this category. Statutory authorities performing regulatory or public functions were considered on these principles, with their fees and charges examined case by case.

Bansi Dhar (1973)

Paramount general charitable intention

Charitable gifts survive failure of the particular mode where the general intention is charity; otherwise fail

Loka Shikshana Trust (1975)

Strict

Education means formal instruction; general public utility excluded any activity for profit

Surat Art Silk (1979)

Liberal

Predominant object test; incidental profit does not defeat charity

AUDA (2022)

Strict again, under amended law

General public utility entities may not carry on trade or business beyond incidental activity within a receipts limit

⚠ Note

Under the Income-tax Act, 2025 (from 1 April 2026), the definition of charitable purpose and the limits on commercial activity are carried into the provisions for registered non-profit organisations (Topic 48). AUDA remains the leading authority on their interpretation.

⚠ Key point

Bansi Dhar (1973): a charitable gift survives failure of its particular object only if there is a paramount general charitable intention; charitable trust law must adapt to Indian conditions, and equitable principles apply to public as well as private trusts. Loka Shikshana Trust (1975): education means systematic instruction; general public utility then excluded any profit activity. Surat Art Silk (1979): the predominant object test allowed incidental profit. AUDA (19 October 2022): after the 2008 amendments, general public utility entities may not carry on trade or business beyond incidental activity within a receipts limit, and pricing above cost indicates trade.