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TMI Blog1971 (8) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... igh Court that the case is a fit one for appeal to this court. This court has ruled that such a certificate is an invalid one and an appeal brought on the strength of such a certificate is not maintainable. It is for that reason, the appellant filed Special Leave Application No. 2214 of 1971 seeking special leave from this court to appeal against the very judgment which was the subject matter of the appeal in Civil Appeal No. 1885 of 1968. After hearing the parties, we came to the conclusion that the leave asked for should be granted. That petition is now numbered as Civil Appeal No. 1084 of 1971. The two questions referred to the High Court are: " (1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end the income "amongst others for the advancement of learning and education and/or amelioration of the sufferings of all citizens of the Indian Union, irrespective of caste, colour or creed for maintaining library or libraries for the free use of the public in general who are residents of the Indian Union for fostering encouraging and providing the means of healthy recreation including teaching or singing classes or choruses for the residents of the Indian Union and for the purpose of providing music and instruments for the town and in the premises hereinbefore mentioned for meeting the expenses wholly or in part of the Khalsa High School and A. V. Middle Schools to the extent and for and during such times as long as the trust continues an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision for receipt of donations or gifts from outsiders and therefore the gift made by Sardar Ajaib Singh of the 640 shares was not a valid gift. He also observed that the transfer of the shares was revocable after seven years and accordingly was a conditional transfer; hence the assessee has precluded from claiming the refund of the tax deducted at the source. The assessee appealed against that order to the Appellate Assistant Commissioner. That officer upheld the assessee's right to the refund of tax on the ground that during the relevant year the shares did belong to the assessee and the dividend income accruing thereon was the income of the assessee and therefore refund of the tax deducted at the source was allowable. The departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd accrued on the shares gifted by Ajaib Singh. To us these findings appear to be somewhat mutually conflicting. If the gift in question was a valid one then the trust became the owner of the shares gifted. That being so it also became the owner of the dividends received. Hence, those dividends will have to be considered as the income of the trust. The reason which persuaded the learned judges of the High Court for coming to the above conclusion are set out in their judgment at pages 21 and 22 of the printed paper book. We shall quote that part of the High Court's judgment: "The question for our consideration, however, is whether the gift, as accepted by the trustees, had the effect of augmenting the assessee-trust for taxation purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of section 4(3)(i) of the Indian Income-tax Act." It is somewhat difficult to follow the reasoning adopted by the learned judges of the High Court. Either the gift made by Ajaib Singh and accepted by the trustees was a valid gift or it was not a valid gift. If it was a valid gift, the shares gifted became the property of the trust. If it was not a valid gift, the shares still continued to be the property of Ajaib Singh. It is nobody's case that there was a trust within a trust. No such trust is put forward either by the department or pleaded by the assessee. The existence of a trust is a fact and not a fiction. We fail to see how the learned judges were able to come to the conclusion that Ajaib Singh while gifting the shares created one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receive the gift made by Ajaib Singh is an erroneous one. On the other hand we agree with the Tribunal that the gift made by Ajaib Singh was a valid gift, the shares gifted are vested in the trust and therefore the trust is entitled to the dividends received in respect of those shares. In view of section 4(3)(i), that dividend is exempt from tax. Hence the appellant is entitled to the refund claimed. In the result we allow Civil Appeal No. 1084 of 1971, discharge the answers given by the High Court and in their place, we answer the questions referred to the High Court in the affirmative and in favour of the assessee. The appellant is entitled to its costs in this appeal. We revoke the certificate produced in Civil Appeal No. 1885 of 196 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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