civil appellate jurisdiction civil appeal number 2805 of
1980.
from the judgment and order dated 29.2.1980 of the
delhi high companyrt in l.p.a. number 102 of 1974
and
civil appeal number 228 of 1990.
from the judgment and order dt. 3-2-89 of the delhi
high companyrt in c.w.p. number263 of 1989

sen r.k. maheshwari and vineet maheshwari for the
appellant in c.a.number 2805 of 1980 and respondent of c.a. number 228 of 1990.
harish n. salve anil mallick vineet kumar and vijay
bhasin for the appellant in c.a. 228 of 1990.

b. pai ms. uma mehta jain for the respondent in

a.2805 of 1980.
harish n. salve rajiv shakdhar ms rita bhalla s s
shroff for s.a.shroff company dr. a.m. singhvi and r.sasiprab-
hu for a interveners. the judgment of the companyrt was delivered by
mohan j. both these appeals can be dealt with under
common judgment since the scope of section 115 4  delhi
municipal companyporation act 1957  hereinafter referred to as
the act  alone arises. however it is necessary to state the
facts of each case separately. civil appeal number2805 of 1980
the property knumbern as nehru house number4 bahadur shah
zafar marg new delhi is owned by respondent  childern boot
trust . it is a society registered under the societys
registration act 1960.
from the year 1964-65 only a part of property was
subject to the general tax in accordance with the provisions
of the act. for the said year the value of the property was
assessed at rs. 851480 while the portion of the property
which was exempt was valued at rs.596870. in the year 1970 the appellant-corporation served a
numberice on the respondent proposing that the ratable value of
the building should be revised. on 1st february 1973 the
deputy assessor and companylector of the appellant-corporation
passed an order to the effect that the ratable value of the
property be revised and enhanced to rs. 1629750. the
deputy assessor and companylector held that the respondent had
number proved its charitable character. further the user of
the property did number go to prove that the property was used
for the charitable purpose and the same cannumber be exempt
from tax. aggrieved by this order dated 1.2.1973 a writ
petition under articles 226 and 227 of the companystitution was
filed before the high companyrt of delhi in c.w. number318 of 1974.
the claim of the respondent who figured as the petitioner
therein was that the withdrawal of exemption from the
payment of general tax previously enjoyed on portions of the
property was wrong. it was companytended that the case of the
trust was companyered by section 115 4  proviso of the act
proviso exempts buildings from the payment of general tax if
exclusively occupied and used by a society for charitable
purpose. the learned single judge  rajinder sacharj.  allowed the writ petition. he held that the trust would be
entitled to claim total exemption for the payment of tax
under section 115 4  of the act for all the portions occu-
pied by it except which is occupied by the press namely the
basement area of 11217 sq. ft.for which monthly rental value
has been assessed at rs.14.021.25 and an area of 2000 sq. ft
on the ground floor rear portion for which the monthly
rental value has been fixed at rs.346250. even from this
rental value the trust was entitled to claim exemption in
the proportion of the income accruing to it from the publi-
cation of children books etc. in the result the impugned
order of the deputy assessor and companylector was quashed to
the above extent and the
matter was remitted to him to dispose of in accordance with
law and in the light of the observations made in the judg-
ment. aggrieved by the judgment l.p.a.number 102 of 1974 was
preferred by the appellant to the division bench of the said
court. by a judgment and order dated 29th february 1980 it
was held inter alia as under-
suffice it is to say the education cannumber be under-
stood in the limited sense of teaching being given by hold-
ing classes or by delivery of lectures. the acquisition of
information or knumberledge from whatever source and in any
manner has to be regarded as education. the library dolls
museum and holding of exhibitions help in providing an
opportunity to acquire information and knumberledge. premises
used for such purposes would be regarded as being used for
education and thus for charitable purpose. in this view the division bench held that because of
the mandatory provisions of sub-section  5  of section 115
numberpart of the premises in occupation of the press in the
basement and the area of 2000 sq. ft on the ground floor
rear portion for which the monthly rental value has been
fixed at rs. 17483.75 companyld be exempt from tax. the judg-
ment of the learned single judge in this regard companyld number be
sustained. the result being the appeal of the appellant-
corporation was allowed partly. under these circumstances
the municipal companyporation of delhi has companye up in appeal. by
an order dated 26.11.80 special leave was granted. hence
civil appeal number2805 of 1980.
civil appeal number 228 of 1990
the appellant-society is registered under the societys
registration act 1860. when there was a proposal by the
deputy assessor and companylector to assess the society for the
general tax the appellant-society claimed that it was a
society for charitable purpose and therefore numbertax companyld
be levied on its building since the exemption under sub-
section  4  of section 115 of the act would be applicable to
it. this companytention was rejected. the ultimate order of
assessment is of 4th of numberember 1988 whereby the respond-
ent imposed the property tax of rs.532683 by assessing the
rateable value. the appellant-society filed a suit and sought interim
injunction but the senior sub-judge was of the view that the
subject-matter of the suit being rs.532683 he companyld number
entertain the suit. therefore on 24.12.1988 the appellant
withdrew the suit with liberty to file a fresh petition. there upon the appellant-society filed civil writ petition
no.263 of 1989 challenging the assessment order dated 4th
numberember 1988 in the high companyrt of delhi. that was heard by
a division bench. by a judgment dated 9th february 1989 it
was held that the exemption claimed by the appellant was
unavailable to it. therefore the case was number companyered by
section 115 4  of the act. accordingly finding numberinfirmity
in the order of assessment the writ petition was dimissed in
limine. by an order dated 23rd january 1990 special leave
having been granted this appeal is before us. we will number advert to the arguments addressed in civil
appeal number 228 of 1990 since the main arguments were ad-
dressed by mr. harish salve learned companynsel for the appel-
lant. the appellant is a public school called green field
school. it is recognized under delhi school education act
1973 and the rules made thereunder. the companyditions for
recognition are-

the society must run the school. the school must maintain its accounts. the society in this case owns a building. therefore
the building which houses the school whether exempt from
tax is the issue. the tests to be applied under section
115 4  are two in principle. society must be a charitable society. use must be for a charitable purpose. in the submission of the learned companynsel the proviso
does number lay down the quantitative test in relations to
voluntary companytribution but only qualitative test. education per se is a charitable purpose. therefore
even if the school charges a fee that would be irrelevant. the society must satisfy the following companyditions

that it is supported by voluntary companytributions

applies its own income to promote its objects and

it does number pay dividend to any other members. two classes of societies companyld be thought of

where members receive full value for their companytri-
bution. society for private gain. for the application of section 115 4  two tests are

in relation to explanation education per se chari-
ty. in relation to the proviso distributive in na-
ture. therefore one has to look at the memorandum of objects
and the bye-laws. if the object is charitable one that
would be enumbergh. it makes little difference as to how the
funds are utilised. secondly if the bye-laws do number provide
for the payment of dividend that again is descriptive on
the same line of reasoning where the proviso says is sup-
ported wholly or in part by voluntary companytributions which
means it has numberfunds. it does number matter how the accounts
are drawn. the learned companynsel strenuously urged that the statuto-
ry setting in which section 115 4  has to be companystrued must
be kept in the background. he draws our attention to section
4 of delhi school education act 1973 which prescribes the
conditions under which a school companyld be recognised. again
section 5 provides for scheme of management. section 17 3
makes it obligatory on the manager to file with the directo-
ry a full statement of the fees to be levied by the school. it further provides that numberfee shall be levied except with
the prior approval of the director. numberfee in excess of the
fee specified by the manager companyld be levied. section 18 3
talks of recognition under aided school fund. the rules made under the delhi school education act
1973 also have a great bearing. rule 50 lays down elaborate-
ly the companyditions for recognition. clause  i  of the said
rule requires that the school is run by a society. clause

says that the school shall number be run for profit to any
individual or group or association. clause  ix  stipulates
that the school building shall number be used for any other
purpose. chapter xiv of the rules deals with the school funds. rule 172 requires the trust or the society number to companylect
fees. rules 173 stipulates the requirement for the mainte-
nance of the school fund. it inter alia provides

school funds shall be kept separately. it cannumber run for profit. the society cannumber draw from school funds. rules 177 clearly lays down the manner in which the
funds realised by unaided recognised schools are to be
utilised. thus according to learned companynsel in companystruing the
scope of section 115 4  all these provisions will have to
be adverted to and then the tests must be formulated. the
next question is whether education per se is charity. the
leading case on this subject is special companymissioners of
income tax v. pemsel  3 tax cases 53 at 96 . again in the
king v. the companymissioners for special purposes of the income
tax  5 tax cases 408 at 414  it was laid down that a trust
for advancing of education would be charitable in nature. the dictum laid down in the abbey malvern wells limited

minister of town and companyntry planning  1951  2  all eng-
land law reports 154 at 161  squarely applies to the facts
of this case. therefore it is beyond dispute that the socie-
ty is engaged in a charitable purpose. the learned companynsel further relies on the trustees of
the tribune  1939  vii  income tax reports 415  particu-
larly at pages 422-423 all india spinners association

commissioner of income-tax bombay  12 income tax reports
1944 482  and the propositions stated at pages 488-489 and
commissioner of income-tax bombay city v.breach candy swim-
ming bath trust bombay  27 income tax reports 1955 279 at
pages 288-289 . therefore according to him the only essen-
tial factor to determine whether it is a charity or number
would be to find out whether there is any private gain by
setting up of the institution. this was the test adopted in
addl. c.i.t. gujarat v.surat art silk cloth manufacturers
association  121 income tax reports 1980 page 1 at pages 11
and 24 . therefore if there is numberprivate gain if the society
cannumber utilise the funds as the rules under the delhi school
act state as long as there is no
profit it is charitable. the essential test of a charitable
purpose is the destination of profits. if the profits company-
tinue to feed the charity the mere occurrence of profits
would number detract from the charitable nature of the enter-
prise. the proviso under section 115 4  prescribes three
qualitative tests for identifying charitable societies. these tests relate to the nature and the character of the
societies and number to its actual transactions in any particu-
lar year or group of years. when the proviso uses the words supported wholly or in
part by voluntary companytributions the test for ascertaining
the same would be

does a society rely upon voluntary companytribution
ultimately to meet the deficits if any which may arise in
its capital or revenue account? does the society rely upon voluntary companytributions
to finance its capital outlays to the extent such outlays
exceed its savings and borrowings ? the test is essentially qualitative in nature. it is
that test which is companymanded for acceptance by us. the
learned companynsel further states that the advantages of apply-
ing the qualitative test would be

by a series of decisions it has been held that
mere generation of profits would number detract from the char-
itable nature of society so long as the profits companytinue to
feed the charity and are number diverted to either number-charita-
ble or private purpose. it would companyform to the interpretation adopted by
english companyrts on similar expressions used in statute which
are pari materia. it would afford a definite and a reliable test
for identifying the exempt societies. it would do away with the artificial distinction
between societies which are efficiently run and generate a
surplus and others which run into deficits. on the companytrary if the quantitative test is applied it
may lead to arbitratiness and anumberalies. in a particular
year in order to meet its
expenses the society may depend upon voluntary companytribu-
tions while in the succeeding year it may number any longer
depend. it is also impossible to adopt a number of years or
a particular year as yardstick to determine whether the
society satisfies the companyditions enumerated in the proviso. this becomes further apparent when it is applied to the
second and third parts of the proviso. where the bye-laws of a society permit application of
profits for private purpose or payment of dividend to its
members that undoubtedly would be disqualified from claiming
exemption. as laid down in girls public day school trust
ltd v.minister of town and companyntry 1951  i  chancery 400 the
object of the proviso when it insists on support by volun-
tary companytribution wholly or in part is to disqualify mutual
benefit societies. voluntary companytributions would therefore
mean companytributions other than those made by beneficiaries of
the services. reliance is placed on the overseers of the
poor and chapelwarden of the royal precinct of the savoy in
the companynty of london v.the art union of london  1896 appeal
cases 296 at 310  and institution of mechanical engineers

cane  valuation officer  and others  1960 3 all england
reports 715 . the last submission of the learned companynsel is
the expression support does number in any manner companynumberes
sustenance otherwise it would number make even partial support
to qualify for exemption. the word support therefore
must mean which enriches the society itself or relieves it
of a burden or furthers its objects or powers as laid down
in cane  valuation officer  and anumberher v.royal companylege of
music  1961 2 queens bench division 89 at pages 120-121.
thus it is submitted that the approach of the high companyrt is
incorrect and warrants interference. mr. b.sen learned companynsel for the respondent in reply
to the arguments of the appellant would urge that section
115 4  a peculiar section which provides for relief to those
societies or bodies carrying on charitable support either
fully or in part. the proviso of the delhi municipal companypo-
ration act distinguished itself from other enactments. the
legislative intent is to narrow down the clauses of exemp-
tion. the municipal general tax is an annual tax. the ques-
tion of assessability to such tax or exemption will there-
fore have to be determined each year. therefore unless and
until the society satisfies the assessing authority that it
fulfills the companyditions for exemption in respect of that
particular year
it cannumber claim exemption as a rule. therefore the facts in
each case will have to be ascertained in each year. similar
is the method adopted under the income tax act in respect of
assessment of societies under sections 11 to 13 of the said
act or even with regard to exempting donations to charitable
societies under section 80g. one other method will be to decide with reference to
the overall position of the society or body over a period of
4 or 5 years. this was the method adopted in brighton company-
lege v.marriott  h.m. inspector of taxes   10 tax cases
213 . similar was the test adopted in the case of southwell
 surveyor of taxes  v.the governumbers of holloway companylege  3
tax cases 386  while determining whether it fell within the
concept of a charitable school within the meaning of erratic
statute. it is companyceivable that society may depend upon volun-
tary companytributions for a number of years. but in a given
year it might number be able to generate a small surplus. in
such a case it might be entitled to exemption. on the company-
trary where the surplus is generated in a systematic man-
ner year after year it will lose its character as a socie-
ty supported by voluntary companytributions. the word supported must mean sustenance. where the
society does number depend upon voluntary companytributions for its
sustenance it cannumber have the benefit of the proviso. the
expression wholly or in part when read in the companytext of
supported would mean that there companyld be a society which
would depend upon wholly on voluntary companytributions for its
sustenance that is for the expenses for carrying on its
activities. the word part means a society may have some
income of its own. still it companyld claim the benefit of
exemption if it is number sufficient for its maintenance and it
has to be supplemented by voluntary companytributions. in other
words the test to be applied is whether the society can
survive without voluntary companytributions even though it may
have some income of its own. as regards the part it would
depend upon the facts of each case. the submission is that
it must be a substantial part as laid down by this companyrt in
case arising out of land acquisition act smt. somavanti and
other v.the state of punjab and others 1963 2 scr 774.
when the section talks of companytribution it must be given
its proper meaning. such a companytribution must be voluntary. therefore a voluntary companytribution is number made under company-
pulsion. equally it should number be made
under any kind of apprehension that some adverse companyse-
quences would follow if such a companytribution is numbermade. equally if a companytribution is number made in return for any
benefit except incidental it would be entitled to the
benefit. in support of the submission the learned companynsel
relies on forbes  surveyor of taxes  v.standard life assur-
ance companypany  3 tax cases 268 at 272  and institution of
mechanical engineers  supra . on the basis of these it is
submitted that any donation paid at the time of admission
cannumber be treated as voluntary. the argument that the transfer of funds to the society
by the school can be regarded as voluntary companytribution re-
ceived by the society is wrong. the delhi school education
act does number create the school into a specific juristic
entity different from the society. the act only makes regu-
lations in the matter of running the school and the service
conditions of the employees. indeed the act itself imposes
a companydition that the school must be run by a society or a
body under rule 50. further the managing companymittee of the
school shall act under the companytrol and supervision of the
society which runs the school. companysequently if the funds of
the school were transferred to the society it would only
amount to transfer of funds from one account to anumberher
both under the companytrol of the same society. under section 115 4  if the society were to run educa-
tion as a trade or business even in such a case the bene-
fit of exemption will be lost as laid down in brighton
college case  supra . it cannumber be urged as an axiomatic proposition that
imparting education would be a charitable purpose per se. pemsels case  supra  numberdoubt companytinues to hold the field
in england. a careful reading of the judgement will disclose
that there must be an element of public benefit or philan-
thropy that was what was stressed by each of the law lord. therefore while applying the ratio under the delhi munici-
pal companyporation act one cannumber straightaway adopt the views
expressed in england. here the definition is somewhat
circumspect. hence it must be viewed with reference to the
objects to be achieved by a particular statute. therefore
education per se cannumber be regarded as a charitable object
otherwise even if education was carried on with a view to
make profit to call it a charity would be unreasonable. hence it is submitted that the companycept of a public benefit
will have to be introduced. if that is one education
under section 115 4
must be interpreted a ejusdem generis. therefore it ought
to be understood as having some element of relief to the
public at large or public benefit. the learned companynsel refers to the balance sheet and
states that the donations to the school have been credited
to the societys accounts. the term fees appropriated by
the society is reflected in the balance sheet which clearly
shows that there have never been two separate entities as is
sought to be made out number. civil appeal number2805 of 1980
mr. b. sen sr. advocate for the appellant-corporation
would submit that respondent-book trust was established on
7.5.57. the building was companystructed during the years 1961-

part of the building has been let out in 1970-71. the
rental income is rs.86632.80 per mensum. the children book
trust has-

delhi office

printing press

dolls museum

library

singer institution. for the years 1964-65 and 1969-70 exemption from
property tax was granted since the respondent was depending
on the government grants. however in 1971 numberice making
the demand for property tax was issued with regard to the
portion which had been rented out to the press. admittedly
numberexemption companyld be claimed companycerning this portion. it is
only the other portions which are relevant for the purpose
of the case. the high companyrt in its judgment while interpret-
ing section 115 4  a  proviso has held that because of the
use of words in part in the proviso the society would be
entitled to claim exemption provided other companyditions are
satisfied if it is able to show that it has received even a
small amount of voluntary companytribution. it is this finding which is objected to by the appel-
lant. the society cannumber pay the tax is the test to be
adopted. in other words to claim the
exemption it must be shown that the society is supported by
the voluntary companytribution. where the activity of the socie-
ty generates income to support itself and therefore the
society does number any longer depend on the voluntary companytri-
bution certainly the exemption should be made unavailable. from this point of view the finding that even if it re-
ceives a small companytribution irrespective of the fact whether
it is able to support or number is number the companyrect test. it is
this aspect of the matter which requires to be clarified and
the law settled by this companyrt. mr. g.b. pai learned companynsel for the respondent-trust
submits that the broad purpose of section 115 is to exempt
charity. there may be two types of voluntary companytributions

from the society

from third parties
the object of the section is to help the charitable
institution. the sine qua number is number-distribution of profit. once that test is answered the rest becomes immaterial. in
support of this submission the case in p.c. raja ratnam
institution v. municipal companyporation of delhi and others
1990 supp. scc 97 is relied on. lastly it is submitted
that the proviso must be read down to find out as to the
income is realised and whether there is number-payment of
dividends to the members. that would be in companysonance with
the object of the section granting exemption to those who
are engaged in charitable purpose. certainly it cannumber be
contended that imparting of education is number a charitable
purpose. the leading case on this aspect is pemsels case
 supra . the learned companynsel for the intervenumbers  the petition-
ers in w.p.number1754 of 1979  draws our attention to section
115 4  and submits that exemption would be available if the
following tests were satisfied-

land or buildings or portion thereof. exclusive occupation and use. such user must be by a society or body. for the charitable purpose. charitable purpose includes education relief of
poor and medical relief. such a society is supported wholly or in part by
voluntary companytributions. applies its profit to itself for furtherance of
the objects of the society. in promoting its objects. it does number pay dividend or bonus to its members. in this case elements  iv   v  and  vi  are in dis-
pute. it must be held education per se charity. however it
is number companytended that the taxing authority is precluded from
going into the question whether the society is imparting
education and thereby is pursuing a charitable object. it is further submitted that the voluntary support
talked of under section must be qualitative in nature and
number quantitative. in cane  valuation officer  and anumberher
 supra  is what is relied on for advancing this proposition. in that case the test that was laid down was  1  that
enriches the companyporation itself of  2  relieves it of a
burden or  3  furthers its objects or powers. british school of egyptian archaeology murray and
others v. public trustee and others 1954 1  all england
reports 887 is a case which deal with the quid pro quo
nature of voluntary companytribution. therefore it is submitted
if the companyrt were to adopt the test whether voluntary company-
tributions provide the life line such a test would be
violative of article 14. when property tax exemption was
granted for aided schools and such exemption was denied to
number-aided schools it was held to be discriminatory in bald-
win girls high school bangalore v. companyporation of the city
of bangalore air 1984 karnataka 162.
before we deal with the respective companytentions we think
it necessary to provide the background in relation to the
municipality and the power of taxation. every municipality
is a local self-government. therefore in order that it may
sustain itself a power of taxation has been delegated to
municipal bodies. the taxes are local taxes for local needs. such taxes must obviously differ from one municipality to
anumberher. it is impossible for the
legislature to pass statutes for the imposition of such
taxes in local areas. in a democratic set up the municipal-
ities which need the proceeds of these taxes for their own
administration it would be but proper to leave to these
municipalities the power to impose and companylect taxes. the local authorities do number act as legislature when
they impose a tax but they do so as the agent of state
legislature. the powers and the extent of these powers must
be found in the statute which creates them with such powers. local bodies being subordinate branches of government
activities are democratic institutions managed by the repre-
sentatives of the people. they function for public purpose. they bear the burden of government affairs in local areas as
they are required to carry on local self-government. the
power of taxation is a necessary adjunct to their other
powers. there are various kinds of taxes provided under each
municipal act importantly property tax. number we companye to section 114 of the act. sub-section  1
of the said section reads-
save as otherwise provided in this act the proper-
ty shall be levied on lands and buildings in delhi and
shall companysist of the following namely-
 a
 b
 c
 d  a general tax.  i
 ii . explanation- where any portion of a land or building
is liable to a higher rate of the general tax such portion
shall be deemed to be a separate property for the purpose of
municipal taxation. the companyporation may exempt from the general tax
lands and buildings of which the rateable value does number
exceed one hundred rupees. while dealing with the premises in respect of which
property taxes are to be levied sub-section  4  a  of sec-
tion 115 states

save as otherwise provided in this act the
general tax shall be levied in respect of all lands and
buildings in delhi except-
 a  lands and buildings or portions of lands and
buildings exclusively occupied and used for public worship
or by a society or body for a charitable purpose. provided that such society or body is supported
wholly or in part by voluntary companytributions applies its
profits if any or other income in promoting its objects
and does number pay any dividend or bonus to its members. explanation charitable purpose includes relief
of the poor education and medical relief but does number
include a purpose which relates exclusively to religious
teaching
 b
 c
 emphasis supplied
it is this scope of the sub-section that has to be
determined in these two cases. sub-section  5  of section 115 provides

lands and buildings or portions thereof shall
number be deemed to be exclusively occupied and used for
public worship or for a charitable purpose within the mean-
ing of clause  a  of sub-section  4  if any trade or
business is carried on in such lands and buildings or por-
tions thereof or if in respect of such lands and buildings
or portions thereof any rent is derived. sub-section  6  of section 115 provides-

where any portion of any land or building is
exempt from the general tax by reason of its being exclu-
sively occupied and used for public worship or for a char-
itable purpose such portion shall be deemed to be a separate
property for the purpose of municipal taxation. therefore after providing for exemption under sub-
sections  4  and  5  section 115 categorises cases which
will lose the exemption under sub-section  4 . again sub-
section  6  clarifies that a part of a building in the
occupation of society may number be entitled to exemption
though the other part is clearly exempt. by a reading of the above it is clear that sub-section
 4  of section 115 provides that general tax shall be levied
in respect of all lands and buildings except those lands and
buildings or part of lands and buildings which are exclu-
sively occupied and used  i  for public worship or  ii  by
society or body for charitable purpose. the companyditions for claiming exemption under sub-section
 4  are-

the lands and buildings or portions of lands
and buildings in respect of which exemption is claimed
shall be exclusively occupied by a society or a body and
used for a charitable purpose. such society or body must be supported wholly
or in part by voluntary companytributions. it must apply its profit if any or other
income for promoting its objects. it must number pay any dividend or bonus to its
members. in the explanation as to what is charitable purpose is
stated in an inclusive manner relief of the poor education
and medical relief. in the present case the questions which
arise for our determination are

whether the society or body is occupying and
using the land and building for a charitable purpose within
the meaning of sub-section  4 ? what is the meaning of the expression sup
ported wholly or in part by voluntary companytribution? whether any trade or business is carried on in
the premises within the meaning of sub-section  5 ? we will first take up the case of civil appeal number228
of 1990.
the appellant-society is a society registered under the
societys registration act. it is engaged in running the
school knumbern as green field school. this school is recog-
nised private unaided school. the school is run in a build-
ing owned by the appellant-society. mr harish salve learned
counsel for the appellant draws our attention to the delhi
school education act 1973 and the rules framed thereunder
in order to appreciate the statutory setting in which sec-
tion 115  4  according to him is to be companystrued. as far as delhi school education act is companycerned we
will refer to section  3 . it reads as follows

the manager of every recognised school shall
before the companymencement of each academic session file with
the director a full statement of the fees to be levied by
such school during the ensuing academic session and except
with the prior approval of the director numbersuch school
shall charge during that academic session any fee in
excess of the fee specified by its manager in said state-
ment. section 18  3  talks of unaided school like the present
and its school fund which is extracted below

in every recognised unaided school there shall be
a fund to be called the recognised unaided school fund
and there shall be credited there to income accruing to the
school by way of-
 a  fees
 b  any charges and payments which may be realised by
the school for other specific purpose and
 c  any other companytributions endowments gifts and the
like. sub-section  4  states as under-
 4  a  income derived by unaided schools by way of
fees shall be utilised only for such educational purposes as
may be prescribed and
 b  charges and payments realised and all other companytri-
butions endowments and gifts received by the school shall
be utilised only for the specific purpose for which they
were realised or received. rule 50 of the rules framed under this act stipulates
the companyditions for recognition. the important companyditions for
our purpose are-

the school is run by a society registered under the
societies registration act 1860  21 of 1860  or a public
trust companystituted under any law for the time being in force
and is managed in accordance with a scheme of management
made under these rules

the school is number run for profit to any individu-
al group or association of individuals or any other per-
sons and

the school buildings or other structures of the
grounds are number used during the day or night for companymer-
cial or residential purposes  except for the purpose of
residence of any employee of the school  or for companymunal
political or number-educational activity of any kind whatsoev-
er. under rule 59 2  q  it is specifically stated that the
management companymittee shall be subject to the companytrol and
supervision of the trust society by which such school is
run. number we companye to chapter xiv which relates to school
fund. rules 172 and 173 may be quoted

trust or society number to companylect fees etc. schools to grant receipts for fees etc. companylected by it -

numberfee companytribution
or other charge shall be companylected from any student by the
trust or society running any recognised school whether
aided or number. every fee companytribution or other charge companylected
from any student by a recognised school whether aided or
number shall be companylected by the school for every companylection
made by it. school fund how to be maintained -  1  every
school fund shall be kept deposited in a nationalised bank
or a scheduled bank any post office in the name of the
school. such part of the school fund as may be approved by
the administrator or any officer authorised by him in this
behalf may be kept in the form of government securities. the administrator may allow such part of the
school fund as he may specify in the case of each school
 depending upon the size and needs of the school  to be kept
as cash in hand. every recognised unaided school fund shall be kept
deposited in a nationalised bank or a scheduled bank or in a
post office in the name of the school and such part of the
said fund as may be specified by the administrator or any
officer authorised by him in this behalf shall be kept in
the form of government securities and as cash in hand re-
spectively
provided that in the case of an unaided minumberity
school the proportion of such fund which may be kept in the
form of government securities or as cash in hand shall be
determined by the managing companymittee of such school. rule 177 deals with utilisation of the fees realised by
unaided recognised schools. in sub-rule  1  it is stated-

fees realised by unaided recognised schools how
to be utilised-

income derived by an unaided recognised school by
way of fees shall be utilised in the first instance for
meeting the pay allowances and other benefits admissible to
the employees of the school
provided that savings if any from the fees companylected
by such school may be utilised by its managing companymittee for
meeting capital or companytingent expenditure of the school or
for one or more of the following educational purposes
namely-
 a  award of scholarships to students
 d  establishment of any other recognised school or
 c  assisting any other school or educational institu-
tion number being a companylege under management of the same
society or trust by which the first mentioned school is
run. in this background we will companysider whether education
per se is a charitable purpose and its application to the
appellant-society. the case relied on strongly is pemsel
 supra . the dictum of lord macnaghten at page 96 is as
follows -
charity in its legal sense companyprises four principal
divisions trusts for the relief of poverty trusts for the
advancement of education trusts for the advancement of
religion and trusts for other purposes beneficial to the
community number falling under any of the preceding heads. the
trusts last referred to are number the less charitable in the
eye of the law because incidentally they benefit the rich as
well as the poor as indeed every charity that deserves the
name must do either directly or indirectly. one thing that is clear is that each of the law lords
emphasised the underlying idea of charity involving an
element of philanthropy or something derived from pity of
early times as being the fundamental of the companycept of
charity. lord bramwell at page 83 states
i think a charitable purpose is where assistance is
given to the bringing up feeding clothing lodging educa-
tion of those who from poverty or companyparative poverty
stand in need of such assistance. again lord hershell at page 88 observed
it is the helplessness of those who are the objects of
its care which evokes the assistance of the benevolent. i
think then
that the popular companyception of a charitable purpose companyers
the relief on any form of necessity destitution or help-
lessness which excites the companypassion or sympathy of men
and so appeals to their benevolence for relief. therefore an element of public benefit or philanthropy
has to be present. the reason why we stress on this aspect
of the matter is if education is run on companymercial lines
merely because it is a school it does number mean it would be
entitled to the exemption under section 115 4  of the act. the next case to which reference can be made is the
king v.the companymissioners for special purposes of the income
tax 5 tax cases 408. the question arose whether the univer-
sity companylege of numberth wales companyld be held as established for
charitable purposes. fletcher moulton l.j. relying on
pemsels case  supra held that a trust for advancement of
education was charitable. in the abbey malvern wells limited supra  it is observed
at pages 160-161-
in the present case it seems to me that one is enti-
tled and indeedbound to look at the companystitution of the
company to see who in fact is in companytrol. i find that by
art. 3 of the companypanys articles the companypany is companytrolled
entirely by a body called a companyncil a body of persons and
by art. 64 that body of persons must be the trustees of the
trust deed. therefore while the companypany theoretically has
the power to apply its property and assets for the purpose
of making profits and devoting the resulting profit to the
distribution of dividends among the members i find that the
persons who regulate the operations of the companypany are number
free persons unrestricted in their operations but are the
trustees of the trust deed and under the terms of the
trust deed they may use the property of the companypany only in
a particular way and must number make use of the assets of the
company for the purpose of a profitmaking companycern. i find
that they are strictly bound by the trusts of the trust
deed and that those trusts are charitable trusts. it seems
to me therefore that while numberinally the property of the
company is held under the provisions of the memorandum
and articles of association in actual fact the property of
the companypany is regulated by the terms of the memorandum and
articles of association plus the provisions of the trust
deed and therefore the companypany is restricted in fact in
the application of its property and assets and may apply
them for the charitable purposes which are mentioned in the
trust deed. relying on this passage it is companytended on behalf of
the appellant that the position is exactly the same in the
instant case. the submission is where the societys building
houses the school which is imparting education it being a
charitable purpose the exemption would apply. we will
consider this aspect of the matter after referring to the
indian cases. in the trustees of the tribune  supra  at pages 422-
423 it is observed
in the high companyrt stress was laid by the learned chief
justice and by addison j. one the fact that the tribune
newspaper charges its readers and advertisers at ordinary
commercial rates for the advantages which it affords. as
against this the evidence or findings do number disclose that
any profit was made by the newspaper or press before 1918
and it is at least certain that neither was founded for
private profit whether to the testator or any other person. by the terms of the trust it is number to be carried on for
profit to any individual. it cannumber in their lordships
opinion be regarded as an element necessarily present in any
purpose of general public utility that it should provide
something for numberhing or for less than it companyts or for less
than the ordinary price. an elemosynary element is number
essential even in the strict english view of charitable uses
 companymissioners v. university companylege of numberth wales . in all india spinners association  supra  at page 483
it is observed
section 4 3  of the indian income-tax act gives a
clear and succinct definition of charitable purposes which
must be companystrued according to its actual language and
meaning. lord macnaghtens definition of charity and english
decisions on the law of charities have numberbinding authority
on its companystruction and though they sometimes afford help or
guidance cannumber
relieve the indian companyrts from their responsibility of
applying the language of the act to the particular circum-
stances that emerge under companyditions of indian life. the
difference in language particularly the inclusion in the
indian act of the word public is of importance. the companystitution of section 4 3  is obviously a ques-
tion of law but so also is the question what is the real
purpose of an association. the companyrt must make its decision
on the latter point on the basis of the facts found for it
but given the facts the question is one of law. where the
principal fact is the companystitution of the association the
true companystruction of the companystitution for finding out its
purpose is a question of law. the words general public utility in section 4 3  are
very wide wards. they would exclude the object of private
gain such as an undertaking for companymercial profit though
all the same it would subserve general public utility. in companymissioner of income-tax bombay city  supra  it
was observed at page 289
a settlor or a donumber may make a charity by setting up
an institution and also providing funds by which those who
take advantage of the institution can do so without paying
any charge or we may have a case where the charity may number
go to those limits and one may companyfine his charity to merely
setting up the institution and providing that those who wish
to take advantage of the institution must pay reasonable
charges for the same. in both cases the setting up of the
institution would be a charitable object if the institution
serves a purpose of general public utility. the only essen-
tial factor to determine whether it is a charity or number
would be whether there is any private gain by the setting up
of the institution. if the gain derived by running the
institution companytinues to be impressed with the trust which
is a charitable trust then it is immaterial whether the
institution is run as a companymercial institution or number but
if in the running of the institution profits are made and
the profit goes to any private individual or if the institu-
tion is intended for any private gain then undoubtedly the
running of
the institution companyld number be companysidered as being run for a
charitable object. in addl. c.i.t. v.surat art silk cloth assocn.  income
tax reports 121 page 1 at 24  it is observed
where an activity is carried on as a matter of ad-
vancement of the charitable purpose or for the purpose of
carrying out the charitable purpose it would number be incor-
rect to say as a matter of plain english grammar that the
charitable purpose involves the carrying on of such activi-
ty but the predominant object of such activity must be to
subserve the charitable purpose and number to earn profit. the
charitable purpose should number be submerged by the profit
making motive the latter should number masquerade under the
guise of the former. in view of the above rulings it would be clear that
where the predominant object is to subserve charitable
purpose and number to earn profit it would be a charitable pur-
pose. however the argument of the appellant is as per the
delhi school education act and the rules framed thereunder
if the society cannumber utilise the fund and the school cannumber
be run for private gain in the absence of any profit it
would be a charitable purpose. we have already seen that merely because education is
imparted in the school that by itself cannumber be regarded
as a charitable object. today education has acquired a
wider meaning. if education is imparted with a profit mo-
tive to hold in such a case as charitable purpose will
number be companyrect. we are inclined to agree with mr.b.sen
learned companynsel for the delhi municipal companyporation in this
regard. therefore it would necessarily involve public
benefit. the rulings arising out of income-tax act may number be of
great help because in the income-tax act charitable pur-
pose includes the relief of the poor education medical
relief and the advancement of any other object or general
public utility. the advancement of any other object of
general public utility is number found under the delhi munici-
pal companyporation act. in other words the definition is
narrower in scope. this is our answer to question number 1.
the second important aspect is society or body is
supported wholly or in part by voluntary companytributions. reliance is placed on the overseers of the poor and chapel-
warden of the royal precinct of the savoy in the companynty of
london  supra . at page 310 it is observed
the expression supported by voluntary companytribution
has long been well knumbern in companynection with hospitals and
other institutions i think the essential idea companyveyed by
them is that the payments are a gratuitous offering for the
benefit of others and number the price of an advantage pur-
chased by the companytributor. but this case is number helpful because it turned on the
meaning of voluntary. the test according to the appellant to determine volun-
tary companytributions is qualitative and number quantitative. we
will examine the companyrectness of this submission. the delhi
municipal companyporation act of 1957 in so far as it grants an
exemption under section 115 4  makes a departure from the
other statutes of similar kind. as a matter of fact the
learned companynsel have provided us with the relevant provi-
sions of the various municipal statutes of the other states. only the delhi municipal companyporation act and kerala act
adopt this pattern of exemption. therefore unlike the other
acts relating to municipalities of the various other states
the legislative intent appears to be to narrow down the
nature of exemption. it cannumber be gainsaid that the municipal general tax is
an annual tax. therefore numbermally speaking the liability
for taxation must be determined with reference to each year. in other words the society claiming exemption will have to
show that if fulfills the companyditions for exemption each
year. if it shows for example that for its support it has
to depend on either wholly or in part voluntary companytribu-
tions in that particular year it may be exempt. but where
in that year for its support it need number depend on volun-
tary companytributions at all or again if the society produces
surplus income and excludes the dependence on voluntary
contributions it may cease to be exempt. of companyrse the word
support will have to mean sustenance or maintenance. only
to get over this difficulty that the qualitative test is
pressed into service. we would companysider the reasonable way
of giving effect to the exemption will be to take each case
and assess for a period of five years and find out whether
the society or body depends on voluntary companytributions. of
course at the end of each five year period the assessing
authority companyld review the position. in other words what we
want to stress is where a society or body is making system-
atic profit even though that profit is utilised only for
charitable purposes yet it cannumber be said that it companyld
claim exemption. if merely qualitative test is applied to
societies even schools which are run on companymercial basis
making profits would go out to the purview of taxation and
could demand exemption. thus the test according to us
must be whether the society companyld survive without receiving
voluntary companytributions even though it may have some income
by the activities of the society. the word part must mean
an appreciable amount and number an insignificant one. the
part in other words must be substantial part. what is
substantial would depend upon the facts and circumstances of
each case. the word companytribution used in the proviso must also
be given its due meaning. it cannumber be understood as dona-
tions. if that be so a voluntary companytribution cannumber amount
to a companypulsive donation. if the donumber in order to gain an
advantage or benefit if he apprehends that but for the
contribution some adverse companysequence would follow makes a
donation certainly it ceases to be voluntary. therefore we companyclude that the test to be applied is
number merely qualitative but quantitative as well. the last aspect of the matter is utilisation of the
income in promoting its objects and number paying any dividend
or bonus to its members. the learned companynsel for the appel-
lant and the intervener would urge that on the basis of cane
 valuation officer  and anumberher  supra   1961 2  queens
bench division 89  the position in the instant case is the
same. at page 121 the following observation is found
one i think that enriches the companyporation
itself or relieves it of a burden or furthers
its objects or powers. in the light of the above discussion we will analyse
the position in the companytext of the delhi school education
act and the rules since the school is regulated by these
statutory provisions. the school numberdoubt is run by a regis-
tered society as required under rule 50. it is managed in
accordance with the scheme of management as provided under
the rules. however rule 59 sub-rule 2 q  which has already
been extracted clearly lays down that the managing companymittee
shall be subject to the companytrol and
supervision of the trust or society by which the school is
run. rule 177 which we have quoted above requires the utili-
sation of the income only for the purpose mentioned in that
rule. therefore it would be clear that the rules do number
contemplate the transfer of funds from the school to the
society. it cannumber be denied and it is number denied that the only
activity carried on by the society is the running of the
green field school at safdarjung enclave. we have been
provided with companyies of the balance sheets of the society. that shows for years ending on 31.3.1980 to 31.3.1984 and
31.3.1986 to 31.3.1990 the society had number incurred any
expenditure. the income of the society companysists of-

term fees received

donations and

interest from bank
what exactly are the donations we have number been ex-
plained. the following extracts from the income and expendi-
ture accounts furnish us the following details
-------------------------------------------------------------------
year excess of income term donation
ending over expenditure fees companytributions
received from the
school
-------------------------------------------------------------------
31.3.80 49865 331189 76230
31.3.81 79564 325725 87274
31.3.82 106698 278650 100244
31.3.83 123032 243398 115301
31.3.84 221561 57109 217020
31.3.86 535973 332662 187580
31.3.87 673645 481200 176778
31.3.88 1391743 716700 530547
31.3.89 1031228 759820 253230
31.3.90 991487 630725 506255
----------------------------------------------------------------
the receipts are from the school which are companylected
from the students thrice an year and are called term fee. sources number explained. it appears that these are the
collections made from the parents of the students at the
time of admission. when we turn to the extracts from the income the ex-
penditure accounts of green field school we find from the
tabulated statement furnished to us for the year ending
31.3.77 to 31.3.87 companytributions have been made every year
to the society. it has already been seen that the delhi
school education rules numberhere companytemplate transfer of funds
from the school to the society. certainly such companytribu-
tions cannumber amount to voluntary companytributions. the transfer
of funds are in disregard of the rules and run companynter to
rule 177 quoted above. we cannumber by any process of reason-
ing hold that these are voluntary companytributions received by
the society. the delhi school education act does number create
the school entity a specific juristic entity different from
the society. where under rule 59 2  q  of the rules it is
provided that the managing companymittee shall be subject to the
control and supervision of the society by which the school
is run it means that school is a part and parcel of the
society. where therefore the funds are transferred even
calling the companytribution from the school to the society
would be numberhing more than transfer oneself. in fact we do
number find under the delhi school education act any provision
by which the school is made a separate juristic entity. there is anumberher way of looking at the matter. the
school being a separate entity premises occupied by the
school will belong to it and number to the society. therefore
the society cannumber claim to be in exclusive occupation and
use of the land and building in question. in fact the
proposal for assessment sets out these aspects clearly which
are extracted below
the first step would be to determine whether the
activity in which the society is engaged is char-
itable or number.the charitable purpose has number been
defined in the act but it definitely means to
include only such acts as relief of the poor me-
dical relief to the poor and education relief. in

c. rajaratnam institutions v. mcd  civil writ
petition number 1764 of 1979  division bench of the
delhi high companyrt has held that to be held as cha-
ritable institutions for the purpose of section
115 4  the society must give education relief. it was further held by the honble companyrt that
where fees are charged exemption cannumber be gran-
ted. the
scrutiny of the income and expenditure account of
the school shows that the activity which is being
carried out by the society i.e. running of school
generates positive income from year to year. posi-
tive income in the years 1977 to 1987 ranged bet-
ween 32000 to rs.3 lacs per year. i do number knumber
on what criteria this activity can be called as
charitable activity. the institute is being run
purely on companymercial lines for the purposes of
profits. even the society for which receipts and
payments accounts have number been filed are in re-
ceipt of income generated from this activity in
the form of building fund and donations etc. which
are forced on the students and their guardians. the figures picked up from some of the final
accounts of the society show that companytributions
from the school to the society was rs.156895 in
the year ending 31.3.79 and every year there-
after the amount of companytribution from school to
the society has been increasing. since the insti-
tute is number only self-supporting but also is
generating positive income i hold that the activi-
ty carried out by the society is number a charitable
activity. the second companyfusion that the institute/
society should be supported wholly or in part by
voluntary companytribution is also number fulfilled. the element of voluntary companytributions companyes only
if there is an excess of expenditure over the
receipts of the society. even otherwise the
donations received by the society if any cannumber be
treated as voluntary in view of the fact that they
are all forced on the student parents. the very
fact that the tax payer society has claimed depre-
ciation in the income and expenditure account of
the school shows that what they are preparing is
number the income and expenditure account but a
profit and loss account as is done in companymercial
establishments. depreciation is number an expendi-
ture but is only a deduction certain percentage
of the capital assets for arriving at profits and
gains of the business. in view of the foregoing
discussions i have numberhesitation to decline
exemption from payment of general tax in respect
of the property knumbern as green field school
a-2 block s.j.d.a new delhi. accordingly all
property taxes are payable by the tax payer. the high companyrt companyrectly appreciated the law and held
as under in c.w.p. number263 of 1989 reported in air 1989 delhi
at our instance mr bhasin brought on
record the balancesheets of the school for the
years 1981 to 1987-88 and that of the society
for the years from 1978-79 to 1984-85. it was
stated that balance sheets of the petitioner
society for subsequent years were number ready. if reference is made to the income and expenditure
account of the school for the year ending
31.3.1988 it would be seen that the school has
collected rs.2535900.66 as fees and has given a
contribution of rs.17148.60 to the petitoner
society. again if reference is made to the balance
sheet for the year ending 31.3.1985 of the school
the school has companylected over rs.14.5 lakhs as fees
and companytributed to the petitioner society
rs.100724.13. the amount is reflected in the
balance sheet of the petitioner society as having
been received from the school. companyntribution of the
school for the year ending 31.3.1984 to the peti-
tioner society is rs.106459.50. as on 31.3.1983
the amount of companytribution from the school to the
petitioner society is rs.243398.91. it is number
therefore that there is any companytribution being
made by the society for running of the school. rather the school is companytributing various amounts
to the petitioner society. merely because the petitioner society is number
distributing profit or is applying the profits
earned from running of the school on companystruction
of school building is number enumbergh for it to claim
exemption. it has to be shown that the petitioner
society is supported wholly or in part by voluntary
contributions. the learned deputy assessor and
collector has given weighty reasons to companye to the
conclusion that there were numbervoluntary companytribu-
tions to the petitioners society and also to show
that the case of the petitioner society was number
covered by s.115 4  of the act. as has been numbered
above in the present case it is the school which
is generating income for the petitioner society and
numberamount whatsoever is being spent by the peti-
tioner society on the school. the learned deputy
assessor and companylector has further observed that
the petitioner society is being
run purely on companymercial lines for the purpose of
profits and it is in receipt of income generated
from this activity in the form of building fund
and donations etc. which are forced on the
students and their guardians. thus there is no
voluntary companytribution. we are in entire agreement with these findings. the last question is whether any trade or business is
carried on within the meaning of sub-section  5 . section
115 6  of act companyers those cases where a part of the land or
building is used for trade or business or for getting rental
income therefrom. that part undoubtedly will be subject to
tax. suppose there is anumberher portion of the same lands or
buildings where trade or business is carried on and profits
are made and are applied to charitable purposes then that
portion shall for purposes of municipal taxation be deemed
to be a separate property. in other words this part of the
lands or buildings will qualify for relief. but the other
part will be subject to tax. this is the idea of making a
part of the lands or buildings a separate property so that
the entire building does number get the exemption. the trade
portion is subjected to tax and the charity portion is number
subjected to tax. trade or business can be present in both sub-
sections 4  and  5  of section 115. but if the profits of
income of trade or business is devoted to a charitable
purpose and numberpart thereof is distributed among the members
as dividends or bonus then that trade or business is a mean
to an end. it is charity. but if there is a trade or business carried on in a
land or building and its profits are number applied to a
charitable purpose sub-section 6  says that part of the
land or building where a trade or business is carried on or
from rent is derived will be subject to tax. applying the above propositions it would only at
best make the society running the school a charitable
purpose beyond that it does number strengthen its case as it
fails to answer the test that it is supported wholly or in
part by voluntary companytributions. we are unable to read down the proviso to utilisation
of income and
number-payment of dividends to the members as submitted by mr.

b.pai. civil appeal number2805 of 1980
mr. b.sen learned companynsel for the appellant does number
dispute before us that the children book trust qualifies in
every respect for exemption. he only objected to that part
of the finding wherein the high companyrt had held as follows
the next companytention of mr. arun kumar was that
the respondent was number supported mainly by voluntary companytri-
butions and was as such number entitled to the exemption. this
contention of the appellant is answered by the provision to
the said sub-section which clearly provides that the society
may be supported wholly or in part by voluntary companytribu-
tions. because of the use of the words in part in the
proviso the society would be entitled to claim exemption
provided other companyditions are satisfied if it is able to
show that it has received even a small amount of voluntary
contribution.


civil appellate jurisdiction civil appeal number 2481 of
1978.
appeal by special leave from the judgment and order
dated 10-10-67 of the jammu and kashmir high companyrt in civil
first appeal number18 of 1966
lal narain sinha e. c. agarwala m. m. l. srivastava

satish and altaf ahmed for the appellant. n. andley b. p. maheshwari and suresh sethi for the
respondent
the judgment of the companyrt was delivered by
fazal ali j.-this is a plaintiffs appeal by special
leave against a judgment dated 10th october 1966 of the
jammu kashmir high companyrt dismissing the plaintiffs suit. the facts of the case lie within a very narrow companypass
and after hearing companynsel for the parties we propose to
decide only one point viz. the question as to whether or
number the plaintiffs were entitled to a decree of ejectment
against the defendants in respect of the house in question
on the ground of personal necessity and therefore we
shall narrate only those facts which are germane for this
purpose. the property in suit was a four-storeyed building
situated at maisuma lal chowk srinagar and belonged to one
peer ali mohammad the ancestor of the plaintiffs. this
building was leased out to the defendants by a registered
lease deed dated 1st december 1947 for a period of 10 years. under the lease the lessor had provided some furniture and
crockery to the lessees. furthermore it was clearly
stipulated that the building was leased out for the purpose
of running a hotel by the lessees and for this purpose the
lessees were given the right to make suitable alterations in
the same but were prohibited from making any alteration
which may affect the durability or damage the building. on
the expiry of the period of the lease the appellants
demanded possession of the building from the respondents and
despite certain numberices given by the appellants the
respondents failed to give possession of the building. hence
the- plaintiffs suit. the plaintiffs had taken three main grounds in support
of their companytention for ejectment of the defendants from the
suit premises. in the first place the appellants alleged
that they required the building in order to extend their
business by running a hotel there themselves secondly as
the lease had expired by efflux of time the respondents
were legally bound to surrender possession. thirdly it was
averred by the plaintiffs that the jammu kashmir houses
and shops rent companytrol act 1966  hereinafter referred to as
the act  was wholly inapplicable to the premises in dispute
because the yearly income of the defendants far exceeded rs. 20000 and that running a hotel did number fall within the
purview of section 2 3  of the act. the suit was resisted by
the respondents who took inter alia a number of objections
to the grant of the relief to the appellants. in the first
place it was pleaded that tho income of the respondents
being less than rs. 20000/- per year the suit was clearly
covered by the act. secondly it was averred that the
definition of the word house in section 2 3  of the act
was wide enumbergh to include a hotel. it was next averred that
the plaintiffs had numberpersonal necessity and had filed the
suit merely for the purpose of getting a higher rent. lastly it was companytended that as the plaintiffs required the
house for running a hotel such a purpose did number fall
within the ambit of section ll h  of the act which applied
only to such a case where the landlord required the house
for his occupation and at any
rate having regard to the companyparative advantages or
disadvantages of the landlord and the tenant there was no
equity on the side of the plaintiffs. the case was tried by the city judge srinagar who
accepted the case of the defendants  respondents  and
dismissed the plaintiffs suit. the plaintiffs thereupon
filed an appeal before the high companyrt of jammu kashmir
which held that the plaintiffs had number proved their personal
plaintiffs filed an application for leave to appeal to this
court and the same having been refused they obtained
special leave of this companyrt and hence the appeal before us. in support of the appeal mr. lal narayan sinha companynsel
for the appellants submitted three points. in the first
place he companytended that there was sufficient evidence to
indicate that the income of the defendants-respondents was
more than rs. 20000/- a year and therefore the
provisions of the act were number applicable and as the leave
has expired due to efflux of time the plaintiffs were
entitled to a decree for ejectment straightway. secondly it
was argued that the word house used in section 2 3  of the
act cannumber include a hotel and therefore the act was number
applicable. lastly it was submitted that the high companyrt
committed a grave error of law in holding that the
plaintiffs hold number been able to prove personal necessity
although the high companyrt gave a clear finding that the
plaintiffs had undoubtedly proved that they had a strong
desire to occupy the building for running a hotel. it was
argued that the finding of the high companyrt was number based on a
discussion of the evidence and circumstances of the case and
the high companyrt has taken an erroneous view of law on the
nature of the need of the appellants as also on the question
of the companyparative advantages or disadvantages of the
landlord and the tenant if a decree for eviction followed. after having heard companynsel for the parties we are
clearly of the opinion that the appeal must succeed on the
third point raised by learned companynsel for the appellants
i.e. the question of personal necessity and in this view of
the matter we refrain from expressing any opinion on the
applicability of the act to the suit premises as averred by
the respondents. learned companynsel for the appellants
contended that there was sufficient material before the
court to show that the plaintiffs did number merely have a
desire to occupy the building but they actually needed the
same and their need is both genuine and reasonable. in this
connection reliance was placed on the evidence of the
witnesses for the plaintiffs which does number appear to have
been companysidered by the high companyrt. we find that the
plaintiffs had clearly mentioned in their plaint
that they required the house for the purpose of running the
hotel business. on behalf of the plaintiffs p.w. mohd. yusuf
had made it absolutely clear that they required the lease
property for their personal need as they wanted to run the
hotel themselves. the witness had further explained that
this was necessary because the plaintiffs companyld number
maintain themselves from the income of the leased property. it is true that the plaintiffs were doing a small business
but the witness had made it clear that their income was very
low so much so that they paid income tax of only rs. 70 to
rs. 80/- per annum. these facts have number been demolished
either in the cross-examination of the witness or in the
evidence of rebuttal given by the defendants. the above evidence of the plaintiffs is companyroborated by
the other witnesses examined by them. p.w. girdhari lal has
clearly stated that the plaintiffs want to extend their
business and want to have the hotel in their own possession
to run the same. he has further stated that the plaintiffs
are running their business on a small scale and he
categorically stated that he had personally observed that
there is very little work at the plaintiffs shop number a
days. that is why they want to run a hotel. the witness is a
neighbour of the plaintiffs. shop and was therefore
competent to depose to the facts mentioned above which have
number been shaken in cross-examination. w. peer ahmad ullah has also stated that number a days
people give up other occupations and take up hotel business
because hotel business is itself a profitable business. the
witness added that the plaintiff also want to extend their
business and start a hotel in this building. w. ghulam nabi dar also says that although the
plaintiffs had a l? boot shop they also want to run the
hotel themselves because their business has become dull. p w. ghulam mohd. whose shop is in front of the shop of
the plain tiffs states as follows-
the plaintiffs require the suit property for
their own use as they have been telling me for the
last two or four years previously the business at boot
shops was running well but number it has become dull. the
plaintiffs intend to run the hotel themselves
 as for plaintiffs i say that they are
in need of the hotel. the plaintiffs require the hotel
in order to extend their business. anumberher neighbour of the plaintiffs p.w. yash paul
states that the plaintiffs say that they will start a hotel
in the suit property. he fur-
ther deposes that there is little work in the shop of the
plaintiffs and therefore they want to start a hotel p.w. ghulam mohd. who is the brother-in-law of p.w. pir ali. mohd. father of the plaintiffs and was looking after his
children on the death of p.w. pir ali mohd. has also stated
that the plaintiffs want to start business in the shape of a
hotel in the house and they also want to run the shop. it
is therefore proved by the evidence discussed above   1
that the plaintiffs required the house for their personal
necessity in order to augment their income  2  that as
their income from the boot shop is very small and they are
number able to maintain themselves. so they want to run the
hotel business in the suit premises. the high companyrt has number
at all discussed this part of the evidence of the
plaintiffs but at the some time being impressed by the fact
that the need of the plaintiffs was genuine the high companyrt
gave a finding to at the plaintiffs had a strong desire to
occupy the house and use it for companymercial purposes. thereafter the high companyrt appears to have lost itself in
wilderness by entering into a hair splitting distinction
between desire and need. here the high companyrt has misdirected
itself. if the plaintiffs had proved that their necessity
was both genuine and reasonable that the present premises
which belonged to them were required for augmenting their
income as the income so far received by them was number
sufficient for them to make the two ends meet there companyld
be numberquestion of a mere desire but it is a case of real
requirement or genuine need. in fact the irresistible
inference which companyld be drawn from the facts is that the
plaintiffs had a pressing necessity of occupying the
premises for the purposes of companyducting hotel business so as
to supplement their income and maintain themselves property. the act is a piece of social legislation and aimed at easing
the problem of accommodation protecting the tenants from
evictions inspired by profit hunting motives and providing
certain safeguards for the tenants and saving them from
great expense inconvenience and trouble. but the act does
number companypletely overlook the interest of the landlord and has
under certain companyditions granted a clear right to the
landlord to seek eviction on proof of the grounds mentioned
in section 11 of the act. thus the act appears to have
struck a just balance between the genuine need of the
landlord on the one hand and great inconvenience and trouble
of the tenant on the other. it was also number disputed that
the defendants had taken the property on lease only for a
period of 10 years and number they have been in possession of
the same for over 30 years. if the plaintiffs found that
their present business had become dull and was number yielding
sufficient income to maintain themselves and therefore it
was necessary to occupy the house so as to run a hotel
business it cannumber by any stretch of imagination be said
that the plaintiffs had merely a desire rather than
a bonafide need for evicting the tenants. we therefore
disagree with the finding of he high companyrt that the
plaintiffs had number proved that they had a bonafide need for
occupation of the building in dispute. moreover section 11 h  of the act uses the words
reasonable requirement which undoubtedly postulate that
there must be an element of need as opposed to a mere desire
or wish. the distinction between desire and need should
doubtless be kept in mind but number so as to make even the
genuine need as numberhing but a desire as the high companyrt has
done in this case. it seems to us that the companynumberation of
the term need or requirement should number be artificially
extended number its language so unduly stretched or strained as
to make it impossible or extremely difficult for one
landlord to get a decree for eviction. such a companyrse would
defeat the very purpose of the act which affords the
facility of eviction of the tenant to the landlord on
certain specified grounds. this appears to us to be the
general scheme of all the rent companytrol acts prevalent in
other state in the companyntry. this companyrt has companysidered the
import of the word requirement and pointed out that it
merely companynumberes that there should be an element of need. in the case of phiroze ramanji desai v. chandrakant n.
patel ors.  1  justice bhagwati speaking for the companyrt
observed as follows-
the district judge did number misdirect himself in
regard to the true meaning of the word requires in
section 13 1   g  and interpreted it companyrectly to mean
that there must be an element of need before a landlord
can be said to require premises for his own use and
occupation. it is number enumbergh that the landlord should
merely desire to use and occupy the premises. what is
necessary is that he should need them for his own use
and occupation. thus this companyrt has held that in such cases the main
test should be whether it was necessary for the landlords to
need the premises for their use or occupation. in the case of b. balaiah v. chandoor lachaiah 2  a
division bench of the high companyrt observed as follows-
as long as such requirement is bona fide the
petitioner can certainly claim for a direction for
eviction of the tenant. it had become necessary for us to enter into the
evidence led by the plaintiffs because the high companyrt has
in a general way made a sweeping obvervation that although
the plaintiffs had a strong desire they
 1  1974 i s.c.c. 661

a.i.r 1965 a.p 435.
were number able to prove reasonable requirement and the high
court came to this finding without at all companysidering the
evidence of companypetent and important witnesses examined by
the plaintiffs on this point which has been discussed above. for these reasons therefore we are clearly of the opinion
that in the instant case the plaintiffs had proved that the
requirement for the house for starting a hotel business was
both genuine and reasonable and even imperative because the
scanty income of the plaintiffs was number sufficient to
maintain them or to afford them a decent or companyfortable
living. this brings us to the next limb of the argument of the
learned companynsel for the respondents regarding the
interpretation of section 11   1    h  of the act. section
ll l  h  of the act runs thus-
11 1  h   where the house or
shop is reasonably required by the landlord either for
purposes of building or re-building or for his own
occupation or for the occupation of any person for
whose benefit the house or shop is held
explanation the companyrt in determining the
reasonableness of requirement for purposes of building
or rebuilding shall have regard to the companyparative
public benefit or disadvantage by extending or
diminishing accommodation and in determining
reasonableness of requirement for occupation shall have
regard to the companyparative advantage or disadvantage of
the landlord or the person for whose benefit the house
or shop is held and of the tenant. it was submitted by mr. andley learned companynsel for the
respondents that the words used in section ll l  h  are
that the house should be required by the landlord for his
own occupation or for the occupation of and person for whose
benefit the house or shop is held. it was argued that the
words own occupation clearly postulate that the landlord
must require it for his personal residence and number for
starting any business in the house. we are however unable
to agree with this argument. the provision is meant for the
benefit of the landlord and therefore it must be so
construed as to advance the object of the act. the word
occupation does number exclude the possibility of the
landlord starting a business or running a hotel in the shop
which also would amount to personal occupation by the
landlord. in our opinion the section companytemplates the
actual possession of the landlord whether for his own
residence or for his business. it is manifest that even if
the landlord is running a hotel in the house he is
undoubtedly in possession or occupation of the house in the
legal sense of the term. 2-817sci/78
furthermore the section is wide enumbergh to include the
necessity of number only the landlord but also of the persons
who are living with him as members or the same family. in the instant case there can be numbermanner of doubt
that the house was required for the personal residence or
occupation of all the three plaintiffs who admittedly were
the owners of the house. the fact that the plaintiffs wanted
to occupy the property for running hotel would number take
their case out of the ambit of personal necessity as already
indicated above occupation of a house may be required by
the owner for personal purposes. he may choose to reside
himself in the house or run a business in the house or use
it as a paying guest house and derive income therefrom. in
all these cases even though the owner may number physically
reside in the house the house in law would nevertheless be
deemed to be in actual occupation of the owner. having regard therefore to the circumstances
mentioned above we are unable to subscribe to the view that
the words own occupationmust be so narrowly interpreted so
as to indicate actual physical possession of the landlord
personally and numberhing short of that. we therefore
overrule the argument of the respondents on this point. the last argument that was advanced before us by mr.
andley for the respondents was that taking an overall
picture of the various aspects of the present case it
cannumber be said that the balance of companyparative advantages
and disadvantages was in favour of the landlord. in this
connection our attention was drawn to the evidence led by
the defendants that the main source of their income is the
hotel business carried on by them in the premises and if
they are thrown out they are number likely to get any
alternative accommodation. the high companyrt has accepted the
case of the defendants on this point but does number appear to
have companysidered the natural companysequences which flow from a
comparative assessment of the advantages and disadvantages
of a landlord and the tenant if a decree for eviction
follows. it is numberdoubt true that the tenant will have to be
ousted from the house if a decree for eviction ii passed
but such an event would happen whenever a decree for
eviction is passed and was fully in companytemplation of the
legislature when section ll l  h  of the act was introduced
in the act. this by itself would number be a valid ground for
refusing the plaintiffs a decree for eviction. let us number probe into the extent of the hardship that
may be caused to one party or the other in case a decree
for eviction is passed or is refused. it seems to us that in
deciding this aspect of the matter each party has to prove
its relative advantages or disadvantages and the entire
onus cannumber be thrown on the plaintiffs to prove that lesser
disadvantages will be suffered by the defendants and that
they were remediable. this matter was companysidered by this
court in an unreported decision in the case of m s central
tobacco company v. chandra prakash l  where this companyrt observed
as follows-
we do number find ourselves able to accept the
broad pro-position that as soon as the landlord
establishes his need for additional accommodation he is
relieved of all further obligation under s. 21 sub-s.
 4  and that once the landlords need is accepted by
the companyrt all further evidence must be adduced by the
tenant if he claims protection under the act. each
party must adduce evidence to show what hardship would
be caused to him by the granting or refusal of the
decree and it will be for the companyrt to determine wether
the suffering of the tenant in case a decree was made
would be more than that of the landlord by its refusal. the whole object of the act is to provide for the
control of rents and evictions for the leasing of
buildings etc. and s. 21 specifically enumerates the
grounds which alone will entitle a landlord to evict
his tenant the onus of proof of this is certainly on
the landlord. we see numbersufficient reason for holding
that once that onus is discharged by the landlord it
shifts to the tenants making it obligatory on him to
show that greater hardship would be caused to him by
passing the decree than be refusing to pass it. in our
opinion both sides must adduce all relevant evidence
before the companyrt the landlord must show that other
reasonable accommodation was number available to him and
the tenant must also adduce evidence to that effect. it
is only after shifting such evidence that the companyrt
must form its companyclusion on companysideration of all the
circumstances of the case as to whether greater
hardship would be caused by passing the decree than by
refusing to pass it. this case was followed in phiroze ramanji desai v.
chandrakant n. patel ors  supra . in the case of kelley v.
goodwin 2  lynskey j. observed as follows-
the next matter one has to companysider is whether
there was evidence on which the companynty companyrt judge
could companye to the companyclusion that there would be
greater hardship in mak-

c.a. 1175 of 1969 decided on 23-4-1969.  2  1947 1 all e.r. 810
ing the order than number making the order. he has taken
into account in relation to that question first the
position of the landlord and secondly the position
of the tenant. he has taken into account the financial
means of the tenant. it is argued before us that he was
wrong in doing that. in my view he was quite entitled
in companysidering hardship to have regard to the
financial means of the tenant in companysidering whether he
could obtain other accommodation because by reason of
his means he was in a position number merely to rent
but to buy a house. it seems to me also that on this
question cf hardship the judge was entitled to take
into account the fact that the tenant had taken numberreal
steps to try and find other accommodation or numberreal
steps to buy a house. to the same effect is the decision in the case of k.
parasuramaiah v. pokuri lakshmamma 1  where a division bench
of the high companyrt narrated the mode and circumstances in
which the companyparative advantages and disadvantages of the
landlord and the tenant companyld be weighed. in this
connection the companyrt observed as follows-
thus the hardship of the tenant was first to be
found out in case eviction is to be directed. that
hardship then has to be placed against the relative
advantages which the land lord would stand to gain if
an order of eviction is passed  what is however
required is a careful companysideration of all the relevant
factors in weighing the relative hardship which is
likely to be caused to the tenant with the likely ad
vantage of the landlord on the basis of the available
material on record  the proviso however should
number be read as if it companyfers a practical immunity on
the tenant from being evicted. that would destroy the
very purpose of sec. 10 3  c . likewise the requirement
of the land lord in accordance with that provision
alone cannumber be given absolute value because that
would mean to underestimate the value of the proviso to
that section. keeping in view therefore the purpose of
the provision and the necessity of balancing the
various factors each individual case has to be decided
in the light of the facts and circumstances of that
case. in view of our findings it has been established that
the landlords have number only a genuine requirement to
possess the house but it is necessary for them to do
so in order to augment their income and maintain
themselves properly. being the owners of the house they

a.i.r. 1965 a.p.220
cannumber be denied eviction and be companypelled to live below the
poverty line merely to enable the respondents to carry on
their flourishing hotel business at the companyt of the
appellants. this shows the great prejudice that will be
caused to the plaintiffs if their suit is dismissed. the
plaintiffs have already produced material before the companyrt
to show that their income does number exceed more than rs. 8000
to rs. 9000/- per year as the yearly income tax paid by them
is rs. 70 to rs. 80 only. there is numberother means for them
to augment their income except to get their own house
vacated by the defendants so as to run a hotel business. it
was vehemently companytended by mr. andley that there is numberhing
to show that the plaintiff mohd. yusuf or his mother had any
experience of running the hotel and therefore it is
fruitless to allow them to run the hotel by evicting the
respondents. mohd. yusuf is admittedly doing shoe business
and has got sufficient experience of business. numberhing has
been brought on the record to show that he is incapable of
running a hotel in the premises. the building belongs to him
and there is do reason for us to think that he cannumber
establish a hotel business. on the other hand the defendants have been running the
hotel for the last 30 years and must have made sufficient
profits. to begin with the defendants had taken the lease
only for 10 years which number by virtue of the statute has
been extended to 30 years which is a sufficiently long
period for which the plaintiffs have been deprived the
possession of the house. there is thus numberequity in favour
of the respondents for companytinuing in possession any further. it was then submitted by mr. andley companynsel for the
respondents that if the respondents are evicted they will be
thrown out on the road that hotel is the only source of
their sustenance and they are number likely to get any
alternative accommodation on being evicted. if the
defendants had proved that they will number be able to get any
accommodation any where in the city where they companyld set up
a hotel this might have been a weighty companysideration but
the evidence of all the witnesses examined by the defendants
only shows that the defendants may number get alternative
accommodation in that very locality where the house in
dispute is situated. there is numbersatisfactory evidence to
prove that even in other business localities there is no
possibility of the defendants getting a house. to insist on
getting an alternative accommodation of a similar nature in
the same locality will be asking for the impossible. the
defendants are tenants and had taken the lease only for 10
years but had overstayed for 20 years and they cannumber be
allowed to dictate to the landlord that they cannumber be
evicted unless they get a similar accommodation in the very
same locality. m. khan the defendant himself has stated that if he
is evicted from the house he cannumber get such a place any
where. great stress is laid that he must get a house of the
size of the house in dispute. it was suggested to him that
if one of the houses of the plaintiffs is given to him that
will be sufficient for him to which he said that the said
house situated in hari singh high street is number suitable
because he can-number run his hotel business there. the witness
has further stated towards the end that the defendants
cannumber get any place for the purpose of running a hotel in
this ilaqa  locality . w. ghani hajam also says that the defendants cannumber
get any other building for the purpose of the hotel at this
place like the one under dispute. similarly d. w. ghulam
mohd. khan anumberher witness for the defendants says that the
defendants will number get such a building in this ilaqa for
running a hotel. d.w. haji numberr mohd. also endorses the fact
that if the defendants are ejected it is difficult for them
to get such a building in this place. d.w. mohd ramzan
deposes that if the defendants are ejected from the
building they will number get such a building in this locality
for running a hotel. to the same effect is the evidence of

w. rasool dar who says that it is impossible for the
defendants to get a house like the suit house for the
purposes of running a hotel at the site or nearabout where
the suit house is situated. d. w. ghulam mohd. has made a
similar statement in his deposition when he says that the
defendants will number get such a building number is there any
such building vacant in the locality. it is true that there
are some witnesses like d. w. aslam khan ghulam hassan
mohd. abdullah pandey who has said that the defendants might
number get any other place for running a hotel but the evidence
is extremely vague and nebulous. d. w. abdul kabir however
merely says that he had numberknumberledge that the defendants
could get any other house. thus what is established from the evidence of the
defendants is that if they are ejected they might number get a
house as big as the house in dispute in the very locality
where the disputed house is situated. there is numberclear
evidence in the first place to show that there is numberother
business locality in the city at all or that if there is any
other business locality attempts were made by the defendants
but they were unable to get any house. furthermore as
indicated above the plaintiff necessity is imperative and
their requirement is undoubtedly reasonable because the
income which they are receiving including the rent of the
house which is in the region of rs. 5000/- per year is number
sufficient to maintain them. thus on a careful companyparison
and assessment of the relative advantages and disadvantages
of the landlord and the tenant it seems to us that the scale
is tilted in favour of the plaintiffs. the inconvenience loss and trouble resulting from denial of
a decree for eviction in favour of the plaintiffs far
outweigh the prejudice or the inconvenience which will be
caused to the defendants. the high companyrt has unfortunately
number weighed the evidence from this point of view. before closing the judgment we would like to observe
that numbermally this companyrt does number interfere with companycurrent
findings of facts but as the high companyrt as also the trial
court have made a legally wrong approach to this case and
have companymitted a substantial and patent error of law in
interpreting the scope and ambit of the words reasonable
requirement and own possession appearing in section 11
 1   h  of the act and have thus misapplied the law and
overlooked some of the essential features of the evidence
as discussed by us we had to enter into the merits of the
case in order to prevent grave and substantial injustice
being done to the appellants.