1942 (2) TMI 16

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... 00. Mr. Naidu constituted himself the managing trustee of the trust and gave himself full power to deal with its assets. This reference arises out of a claim made under Section 4(3)(i) of the Indian Income-tax Act by Mr. Naidu, as the managing trustee, for a refund of the tax paid in respect of dividends declared on the shares held in these transport companies, The Income-tax autorities refused to allow a refund. Their reason was that the shares were not held under trust wholly for charitable purposes within the meaning of the section. The managing trustee having asked the Commissioner of Income-tax to state a case to this Court under Section 66(2) of the Income-tax Act, the Commissioner has referred this question; Whether on a proper .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... which Mr. Naidu was interested were to have the benefit of these assets set apart by him. Clause 54 of the deed provides that so long as Mr. Naidu holds the office of managing trustee he shall have the power to borrow to any extent on the properties conveyed to the trust and that the board of trustees shall be able to borrow moneys which are necessary to discharge debts contracted by Mr. Naidu. The power given to him is not limited to borrowing for the purpose of the trust. Apparently he can borrow moneys for his own purposes on the security of the assets set apart by him. By clause 55 the trustees are empowered, so long as Mr. Naidu holds the office of managing trustee, to sell immoveable properties belonging to the trust in expanding or .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... Naidu's own purposes or the purposes of his companies, it is impossible for him to contend with reason that the deed creates a trust wholly for charitable purposes. The idea that some day the institution contemplated by the deed may be founded is not sufficient compliance with the section. It is said that in 1939 Mr. Naidu made considerable alterations in the trust deed and that these alterations remove the objections now referred to. Whether the deed as it now stands creates a trust which is entitled to the benefits of Section 4(3)(i) is a question with which the Court is not concerned. It is concerned only with the question whether a trust was created wholly for charitable purposes in the year of account, 1937-38, and it is obviou .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X