TMI Blog1998 (2) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... ter payment of all charges and expenses, 80 per cent. shall be set apart and allotted to charitable and religious objects. The amounts which were to be credited to the charity account in the books of business were to be utilised by the trustee for carrying out the objects of the trust. The partnership deed appointed one T. N. Venkatarama Chettiar, son of one of the partners, as the sole trustee. The power which was given to the said sole trustee was contained in para. 8 of the deed, which reads as follows : "The said T. N. Venkatarama Chettiar shall from time to time after acceptance of the trust, operate on the fund in execution of the trust and spend out of the said fund in connection with temple festivals in Madras and other places like Conjeevaram, Tirupathi, Srirangam, Salem and other places, medical relief, the giving of alms including food to the poor on occasions of Hindu festivals as selected by him in his discretion, of the gift of sums of money to poor deserving persons for celebration of marriages and generally on any object of choultries, work houses, hospitals, etc." The aforesaid partnership deed whereby the appellant-trust was created, contained a clause which g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber 28, 1941, and the declaration of the trust under a deed dated July 1, 1944, was invalid. On behalf of the Revenue, however, reliance was placed upon the aforesaid decision of this court in East India Industries' case [1967] 65 ITR 611, and it was submitted that this court having come to the conclusion that since the appellant was not a charitable public trust, the appeal of the appellant should be dismissed. By a detailed order, the Income-tax Tribunal came to the conclusion that the question as to whether the deed dated July 1, 1944, was validly executed, was not in issue in East India Industries' case [1967] 65 ITR 611. It further held that since an irrevocable trust had been created by virtue of partnership deed dated November 28, 1941, neither the founders nor the trustees had any right, in law, to vary the objects of that trust by executing another document dated July 1, 1944. The Tribunal, therefore, concluded that the decision of this court in East India Industries' case [1967] 65 ITR 611 could not prevent it from examining the terms of the objects of the trust contained in the partnership deed dated November 28, 1941, inasmuch as that a deed dated July 1, 1944, being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o exemption under section 11 of the Income-tax Act, 1961, read with section 13 and was not, therefore, assessable to tax for the assessment years 1962-63 to 1973-74?" The High Court in the judgment which is reported as CIT v. Shri Agastyar Trust [1984] 149 ITR 609 and which is under appeal in this case, came to the conclusion that this court having held in East India Industries' case [1967] 65 ITR 611 (SC), that the appellant was not a public charitable trust, that question was final and binding and, therefore, the appellant could not contend that the court should examine the deed of November 28, 1941, in order to ascertain whether the appellant was a public charitable trust or not. Applying the principle of res judicata, the High Court answered the questions referred for the years 1962-63 to 1973-74 in the negative and in favour of the Revenue and then observed that in view of this it was not necessary to go into the other five questions which had been referred to it for the years 1957-58 to 1961-62. These five questions were accordingly returned unanswered in view of the answer which had been given by it in respect of the question relating to the later years. It has been cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The matter was taken up in further appeal to the Income-tax Appellate Tribunal which observed that in relation to the previous assessment year, it had held that the Agastyar Trust was a public trust and that any donation made to that trust was an allowable deduction under section 15B." This court then referred to the various clauses of the deed dated July 1, 1944, and came to the conclusion that the trust could not be regarded as a public charitable trust. In the passage from the judgment quoted above, there is nothing to indicate that it was brought to the notice of this court in East India Industries' case [1967] 65 ITR 611, that the trust had been created by virtue of document dated November 28, 1941. In the judgment of the court there is no specific reference to this document. It is no doubt true that it is mentioned that the trust was created by the partners of the firm, K. Rajagopal and Company and that under the terms of the partnership deed it was setting apart 80 per cent. of the profits for charitable and religious purpose but the only trust deed which is referred to is the one dated July 1, 1944, which was executed by Venkatarama Chetty. It is this deed which was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 1, 1944, executed by the trustee was clearly without any authority and was non est. He had no right or jurisdiction to execute the document of July 1, 1944, which in effect changed the objects of the trust radically and in fact converted what was meant to be a public charitable trust to a non-charitable trust as held by this court in East India Industries' case [1967] 65 ITR 611, when the deed dated July 1, 1944, was construed by it. It will be useful at this juncture to refer to the following passage from Tudor on Charities (6th edn.) at page 131, it is stated as follows : "When a charity has been founded and trusts have been declared the founder has no power to revoke, vary or add to the trusts. This is so irrespective of whether the trusts have been declared by an individual, or by a body of subscribers, or by the trustees." When the founders of the trust have no power to alter or vary the terms of the trust, a trustee appointed to manage the properties of the trust for securing its object, can under no circumstances be regarded as having such a power specially when the original deed dated November 28, 1941, does not bestow such power on him. Such a question also came up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no valid or genuine trust was created or established by the deed dated November 28, 1941, and on the dissolution of partnership the assets of the trust were also liable to be distributed amongst the partners. This contention not having been accepted by the trial court the same was reagitated in appeal before the Madras High Court. A Division Bench of that court by its judgment dated October 26, 1951, in OS (Appeal) No. 69 of 1949---V. S. Nanjappa Chettiar v. K. Rajagopal Chetty, held that the dedication for religious and charitable objects by the deed dated November 28, 1941, after the power to revoke had been withdrawn, was absolute and irrevocable. It concluded that there was a real dedication to charity and the plaintiff therein was not entitled to a share in the funds set apart for charity or in the properties purchased therefrom. In view of the aforesaid decision it can be safely concluded that an irrevocable trust had been established by the partnership deed dated November 28, 1941. The objects of the trust are contained in clause (8) of the deed and, in our opinion, none of the objects contained therein can be regarded as non-charitable. The Tribunal, therefore, was right ..... X X X X Extracts X X X X X X X X Extracts X X X X
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