TMI Blog2001 (3) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... sider it proper to state the background and the facts leading to the present litigation which are narrated as under. 4.1 There was a family known as Ram Navmiwalas. The family constructed certain temples and dharamshala. Shri Har Govind Prasad Agarwal, in line with the religious activities of the family, executed a Will on 22-11-70 (pp. 20 to 23 of the paper book) and by virtue of this Will, he bequeathed following - properties to the deities of Shri Thakur Ram Laxman Jankiji and Shri Hanumanji and to the dharamshala of Ram Bharoselalji Navmiwale:- 1. House No. 15/295-A, Civil Lines, Kanpur. 2. 1000 sq. yards of land out of house No. 15/295, Civil Lines, Kanpur. 4.2 It may be mentioned that the temple of Thakur Ram Laxman Jankiji was established in house no. 43/64, Chowk, Kanpur whereas dharamshala was in house No. 39/13, Meston Road. As stated in the Will, the dharamshala and the temple were constructed long back, perhaps in 1950 or earlier and both the buildings became in dilapidated condition. The testator wanted to get the same reconstructed or renovated. For this purpose, he dedicated his share in house No. 15/295A and 1000 sq. yards of land in house No. 15 /295 for ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 4-7-1994 is available at page 1 of the Volume 2 of the paper book. The ACIT granted certificate under section 197(1)(a) of IT Act relating to deduction of tax and conveyed the same vide letter dated 6th July, 1994 to the assessee through Shri P.C. Agarwal, Sarwahakar of the trust. A copy of this letter is available at page 2 of the paper book. 4.6 Another application, seeking permission was filed on 9-9-1994 (copy available at page 4 of the paper book Vol. II). Another application was moved on 12-9-1994 to the same effect. The assessee trust also moved an application on 16-9-1994 for the same purpose and clarified the entire position to the department vide a detailed reply dated 29-9-1994. The certificate issued by the Assessing Officer for non-deduction of tax at source remained valid upto 31-9-1995. The application for non-deduction of tax for the assessment year 1996-97 filed on 27-3-1995 (copy available at page 21 of the paper book Vol. 11) was not allowed and a show-cause notice was issued on 8-3-1996 by the Asstt. Commissioner concerned (copy available at page 23/24). Thereafter the certificate granted under section 197(1) was withdrawn vide order dated 22nd March, 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Civil Lines, Kanpur which is claimed by the assessee to be property of the trust styled as Shri Ram Navmiwale Public Charitable Trust. The department, on the other hand, has taken this property to be belonging to Shri Thakur Ram Laxman Jankiji, Shri Hanumanji and dharamshala Shri Ram Bharoselalji Agarwal Ram Navmiwale (artificial juridical persons). The Ld. CIT(A) has stated the controversy in terms of following issue: "Whether the Will executed by the deceased testator and the income derived from the bequeathed property is assessable in the hands of the legatees of the Will Lt., 4 specified deities and dharamshala in the status of artificial juridical person or income as above is assessable in the hands of public charitable religious trust, known as, Shri Ram Navmi wale Public Charitable Trust." 6. On the issue stated above, detailed arguments have been submitted before us by the Ld. representatives of both the sides. 7. Shri S.K. Garg, the Ld. counsel for the assessee after narrating the sequence of events, which has also been given by the assessee in the synopsis of 13 pages presented before us at the time of hearing, submitted that there was a charitable trust in existenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... book); Application for registration of the trust dated 11-10-1975 (Paper No. 28) (e) Rejection of the application under section 12A dated 30-1-1976 (Page No. 32 of paper book) (f) Application dated 6-9-1976 for registration of the trust under section 12A (Page 33 of the paper book) (g) Order dated 24-2-1977, rejecting the application under section 12A (Page 34 of Paper Book) (h) Another application dated 22-4-1977 for registration of trust (Pages 35 and 36 of paper book) (i) A detailed reply dated 12-1-1977 for registration of the trust under section 12A (Pages 38 to 44 of the paper book) (j) Order of registration of the trust under section 12A dated 11-6 1979 on the application dated 9-10-1975 (Paper No. 48 of the paper book) (k) Assessment order for the assessment year 1975-76 (Page Nos. 49 and 50 of the paper book) Assessment order for the assessment year 1976-77 (Page 52 of the paper book) (m) Other documents relating to returns and assessments in subsequent years. 8. The main contention of Shri Garg was that these documents amply demonstrate that the entire information including the details of Will were furnished to the departmental authorities throughout a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Will and no part of it was ever used for personal purpose or for non-charitable and non-religious purposes. After referring to the Will and various other documents, he submitted that the sole trustee or Sarwahakar, namely, Shri P.C. Agarwal, has discharged his duties in relation to trust property very sincerely and faithfully and the department has not been able to show that the trust property was used for any other purpose which was not related to the public and charitable trust. 10. Shri Shambhu Chopra, the Ld. standing counsel, appearing on behalf of the department argued with vehemence that the testator had dedicated the property in question not to the trust but to the deities, as is evident from a perusal of the Will. In support of his argument, he pointed out that there was no trust deed setting out the objects of the trust nor any rules or regulations of the trust. He also pointed out that no trust Committee was ever formed by the Sarwahakar, for managing the trust. According to him, even if there was any trust in existence at the time of making of the Will, then also the property in question cannot be treated to be a part of that trust or property held under that tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o section 13 trust includes any other legal obligation and by this definition also, the property was held by the trustee or Sarwahakar under a legal obligation, ie., the maintenance of deities, temples and dharamshala, which itself were the parts of the trust. Shri Garg also submitted that it is not the stand of the department that the trust, ie., Ram Navmiwale Charitable Trust does not exist. According to him, even the registration granted under section 12A is still continuing. About the formation of the trust committee, the argument of Shri Garg was that the option was given to the Sarwahakar by the testator, to constitute a trust property or not as required by him and, therefore, it was not essential to form a trust committee for managing the trust affairs. Shri Garg also pointed out that right to sell the property was given by the testator under the Will to the Sarwahakar and after obtaining the permission of Income-tax Department, the said property was sold by Sarwahakar in 1981 and sale proceeds were invested in acquiring another capital asset and in constructing and repairing the trust properties, the details of which were furnished to the department also in the relevant ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is that there existed a public charitable trust in the name of Shri Ram Navmiwale Public Charitable Trust. This stand of the assessee is supported by a plethora of documentary evidence. There is no dispute about the fact that in property No. 43/64, Chowk, Kanpur there was a temple of Ram Laxman Jankiji and in another property there was temple of Shri Hanumanji. A perusal of paras 10 and 11 of the application dated 12-1-1978, addressed to the income Tax Officer (Pages 38 to 44 of the paper book), goes to show that the temple of Shri Ram Laxman Jankiji was founded by Late Lala Bhagwan Dasji in premises No. 43/64, Chowk, Kanpur about 125 years back. In para 10 of the application, details of several documents have been given at A to E which were placed before the Income-tax Officer. Likewise, in para 11, the evidence relating to construction of dharamshala in premises No. 39/13, Meston Road constructed in the year 1950 was led. In sub-paras (f) to (1) of para 11, reference to various documents have been given to establish this fact and also to demonstrate that it was a public charitable dharamshala. Photocopies of the letter dated 28-7-1951 of Municipal Board, Kanpur, copy of lett ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at all or that the trust was not for public or charitable purposes. (v) So far as the objection of the department that in absence of a trust deed, there cannot be any trust is concerned, that objection is not sustainable. In the case of CIT v. Trustee, of Shri Cutchi Lohana Panchtade Mahajan Trust [1975] 98 ITR 448, the Bombay High Court has observed that no formal deed or any other writing is needed to constitute a charitable or religious trust. According to the Hon'ble Court, a charitable trust may be created by any words sufficient to show the intention. 16. In the case of CIT v. Promod Jain Trust [1971] 81 ITR 604, the Hon'ble Delhi High Court has held that no formal document or other thing was necessary to create a charitable or religious trust, According to Hon'ble Court, "such a trust could be created by words as showed an intention to create a charitable trust or religious trust". if that intention was accompanied with or followed by a formal divesting of the ownership of the property on the part of the donor and vesting of the same in any other person or even in the donor himself as trustee, the dedication is complete. 17. In that case, the donor wrote a letter to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tute a valid dedication or property, by a Hindu, for religious and charitable purposes, no document in writing or registered is necessary. 19. On the basis of the above legal position and facts relating to the instant matter, it is established that there existed a valid trust. It is further established that the said trust is still continuing. The stand of the assessee that the trust is public charitable is also proved as there is nothing on record against this stand of the assessee. 20. Now, the question comes as to whether this trust included in its ambit the deities of Shri Ram Laxman Jankiji and Shri Hanumanji temples and dharamshalas, as shown by the assessee. The evidence on record, including the Will referred to above goes to demonstrate that the trust was for the maintenance of deities, temples and buildings, including dharamshala and the earlier sarwahakar of the trust was the testator himself as mentioned by him in the Will and after his death, Shri P.C. Agarwal has remained the sole trustee of the said trust. It may not be out of place to mention that in all the documents submitted before the Income-tax Authorities, the income from the properties has been shown as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat desire, he made arrangement for reconstruction of dharamshala etc. by dedicating the properties to the said trust of temples and dharamshala. Not only this, the conduct of the testator and other attending circumstances as well as the conduct of the Sarwahakar appointed by the testator go to demonstrate that the properties were given by the testator to the trust and some were held by the trust for a public charitable purpose. In the case of Deokinandan Khetan v. CED [1968] 69 ITR 801, the Hon'ble Allahabad High Court has held that no writing is necessary to create an endowment and that the finding of the department that the property in dispute belonged to Hindu undivided family was not supported by any evidence or on record and 'hence inclusion of a share thereof in the estate of the deceased was not justified. In that case, an endowment Was created by one as a particular item of property was not specifically included in the endowment deed. it continued to stand in his name long after his death. His son, later on, applied to Municipal Board to have the property registered In the name of Manager of the temple to which the same had been dedicated according to him by his father. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chamber of Commerce Ltd. v. Ganpat Rai Hira Lal [1958] 33 ITR 245 (SC). 23. It may be pointed out that in the present case, there was divesting of the property for a religious and charitable purpose and the intention of the testator to dedicate the property to the trust was accompanied by a formal divesting of the ownership of the property on his part and vesting of the same in the trust. In the case of Promod Jain Trust it was held that a trust could be created by words as showed an intention to create a charitable trust or religious trust. It may also be pointed out that even if it was a dedication to deities, the beneficiaries being the worshippers, i.e., the general public at large and not the deities. As such, the object is clear and evident, i.e., the dedication was, in fact, and in effect to the trust in the larger sense. Issue No. 3--Whether these properties were dedicated to the deities, namely, Shri Thakur Ram Laxman Jankiji and Shri Hanumanji and to the Dharamshala Ram Navtniji Wale and whether the above mentioned properties were held under the trust? 24. The stand of the department is that the properties were dedicated to the deities of Ram Laxman Jankiji and tem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tively and this initial presumption must be rebutted by clinching testimony and the crucial question is as to whether the public worship in the temple as of right. In the instant case, the said presumption, instead of being rebutted by the appellant, is reinforced by the entries in the Inam Registers as well as by the oral evidence of DWs 1 to 4 with regard to public having free access to the suit temple for the purpose of worshipping the deity. The finding that the suit temple is a public temple and not a private one is a finding of fact. In the instant case, the Trial Court as well as the High Court have found that suit temple. is a public temple. The said finding is not open to further scrutiny by this Court unless it suffers from an error of law. Therefore, the finding recorded by the High Court that the suit temple is a public temple and not a private one and that the appellant has failed to establish his case that he is a hereditary trustee of the same has to be upheld." 25. In the case of Estate of T.R. Narayanaswami Naidu Joint Hindu family had set apart the building known as Natarajaneelam for the use of pilgrims visiting the town, the other family groups were partitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndividuals and yet so conduct himself as to provide conclusive evidence of dedication by implication and by conduct." 28. In the case of Deoki Nandan v.Murlidhar AIR 1957 SC 133, the Hon'ble Supreme Court has held that 'An idol is a juristic person capable of holding properties. The properties endowed for the temple vest in it, but the idol has no beneficial interest in the endowment. The true beneficiaries are its worshippers. On facts it was found that the temple was a public temple.' 29. According to section 3 of the Trust Act, "A trust is an obligation annexed to the owner of a property and arising out of a confidence reposed in and accepted by the owner or declared or accepted by him for the benefit of endower. 30. According to above definition, for constitution of a trust, three parties are necessary - the settler, the trustee and the beneficiary. A trust is not complete until the trust property vested in the trustee for the benefit of the public at large. In the present case, all these ingredients stand satisfied and, therefore, the properties bequeathed under the Will are held to be trust property. 31. In view of our discussions on issue Nos. 1 and 2 and our finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a registered deed 'R' dedicated certain immovable properties to a deity which was installed by him. The property was dedicated for defraying the expenses of the daily sewa and periodical festivals of the deity. The question arose whether the income derived from the properties dedicated was exempt from tax under section 4(3)(i) of the Indian Income-tax Act. The Hon'ble High Court of Calcutta has stated as under: "Held, (1) that the endowment was created by an instrument of dedication and not through the medium of a trust, that the deed of dedication created a legal obligation in the deity and its shebait to hold and apply the income of the endowed properties for the purposes specified in the deed of dedication and for no other purpose, and that the income was therefore derived from property held under a legal obligation wholly for religious purposes and was therefore, exempt from tax under section 4(3)(i);" 35. In the present case also, the property was loaded with a charge or obligation which was for maintenance of deities, temples and buildings etc. and in discharge of this legal obligation, the testator as well as the sarwahakar did everything. The properties and their inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption under section 11 since the property is held under legal obligations within the extended purview of expression, as defined by Explanation I of section 13 of the Income Tax Act. The Ld. Dy. CIT(A) has not adjudicated this ground properly. 38. In view of the facts and circumstances narrated above and also in view of the legal position stated above, we are of the view that alternative plea raised on behalf of the assessee also deserves to be accepted. Issue No. 5-Whether the reopening of the assessment was legally justified in the facts and circumstances of this matter by invoking provisions of sections 147 and 148 of the Income Tax Act? 39. The Ld. counsel for the assessee challenged the action of the departmental authorities in making reassessment by invoking provisions of sections 147 and 148 of the Income Tax Act. It was contended before us the no new fact or material came to the notice of the departmental authorities and, therefore, there was no justification for re-examination or re-consideration of the issue finalised earlier. It was emphatically argued by Ld. council that it is a case of mere change of opinion on the same facts and material. To support this con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and entire relevant material, including the documents before the Income Tax Department in the assessment year 1973 and onwards and no new material came to the light of the departmental authorities, demanding or justifying initiation of re-assessment proceedings. A perusal of the order of the Assessing Officer makes it very clear that what was constructed or re-constructed, interpreted or re-interpreted considered or re-considered by him, was the only one document, ie., the Will dated 22-11-1970. The Assessing Officer did not take pains even to point out any fact or circumstances which was inconsistent or contradictory to the stand of the assessee. Even about the user of the dedicated property or utilisation of its income otherwise than in compliance to the deed of Will could not be found and pointed out by the departmental authorities. So far as the reference to the decision of Hon'ble Supreme Court of India in the case of M.P. Pariakaruppan Chettiar is concerned, in that case the issue related to the construction of gift deeds and use of certain words in the gift deeds was considered to ascertain as to whether the gift was to the sons absolutely or not. In any case, the ratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id by the firm in this account, tax at the maximum rate was deducted. The assessee disclosed these facts to the Income Tax Officer and contended that since he had no business in the taxable territories, the assessment proceedings should be discharged. The Income Tax Officer upheld this contention in assessment year 1947-48 and assessment year 1948-49 and held that there was no source of income in the taxable territories. The proceedings were dropped. In 1949-50, a similar order was passed by another officer. In 1956, the Income Tax Officer initiated proceedings in re-assessment under section 34(1)(a). It was contended on behalf of the assessee that all the primary facts necessary for the purposes of assessment were fully and truly disclosed and, therefore, the officer had no jurisdiction to initiate assessment proceedings. The Tribunal, in appeal, rejecting the plea of the assessee held that he did not furnish particulars as to how the delivery of ghee was given and his statements were incomplete. On a reference, the Hon'ble High Court held that all the primary facts had been disclosed and, therefore, the action under section 34(1)(a) was not valid. On appeal to the Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption of the assessee appellant should not have been reopened. The Hon'ble Court also made the following observations: "Strictly speaking, res judicata does not apply to Income-tax proceedings. Though, each assessment year being a unit, what was decided in one year might not apply in the following year; where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent years." 48. In the case of Parashuram Pottery Works Co. Ltd. v. ITO[1977] 106 ITR 1, the Hon'ble Supreme Court has also observed as follows: "At the same time, we have to bear in mind that the policy of Law is that there must be a point of finality in all legal proceedings, that stale issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity." 49. In the case of M.A. Namazie Endowment v. CIT [1988] 174 ITR 58 (Mad.), the issue was as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pinion and to be not covered by the same circumstances as envisaged in section 147 of the Act. 52. So far as the other objection relating to bequeathing the unpartitioned share of HUF is concerned, we are of the view that there is no legal impediment in bequeathing or dedicating even undivided share in HUF. So far as the present case is concerned, no dispute has been raised by any family member or coparcener about the capacity of the testator who was Karta of the HUF and who had dedicated and divested his own share to the deities and to the trust. Issue No. 6--Whether the income of the property mentioned above is entitled for exemption under section 11 of the Income-tax Act? 53. In view of the above discussion, we hold that firstly the property was held by the trustee, namely, Ram Navmiwale Public Charitable Trust and, therefore, its Income was exempted under sectioe 11 of the Income Tax Act. It may be pointed out that the registration of exemption granted to the trust on 11-6-1979 on the basis of application dated 9-10-1975 and other applications included in the Will and it has not been pointed out by the department that the said certificate has been withdrawn or modified in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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