TMI Blog1946 (4) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... be allowed to deduct a sum of ₹ 9,750, being interest which he was liable to pay to the R.B. Hanmantram Tarachand Charitable Trust Account. In his assessment order the Income-tax Officer has considered the claim as put forth by the assessee. The claim was that the amount being deposited with the joint family firm, interest had become payable on this charitable trust account and therefore the assessee firm should be allowed to deduct the amount as a permissible deduction under Section 10 of the Indian Income-tax Act. The Income-tax Officer rejected this contention because in his opinion no valid trust was created. On appeal to the Appellate Assistant Commissioner, this view was upheld. The matter was then taken by the assessee to the Income-tax Appellate Tribunal. From the record now before this Court, it appears that on behalf of the assessee four affidavits had been filed before the Income-tax Officer in the previous year. No copies of those affidavits were produced before the Income-tax Officer dealing with the assessment under review. The books of account showing how the entries were made and dealt with were perhaps shown to the Income-tax Officer but no extracts were f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut before us. The question to be answered will be as follows:- Whether the assessee is entitled to claim a reduction of ₹ 9,750 from his income, under the circumstances of the case, under Section 10 of the Income-tax Act? To decide this question the Court will have to decide whether this amount was payable by way of interest to a creditor of the assessee. That would give rise to the question, who was the creditor? To answer that question the Court must determine whether there was a valid trust created by Rao Bahadur Hanmantram, because, unless such trust was created, the trustees could not be creditors of the assessee and unless they were creditors, the claim could not be allowed. The question, therefore, reverts back to the discussion contained in the statement of case, viz., whether a valid trust was created by Rao Bahadur Hanmantram? Although the Indian Trusts Act does not apply to charitable trusts, it is clear that the three certainties there described are required to create a charitable trust. They are: (1) a declaration of trust which is binding on the settlor, (2) setting apart definite property and the settlor depriving himself of the ownership thereof; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be disposed of on the determination of the second point, viz., whether the property is clearly specified and whether the settlor divested himself of beneficial interest in the same. It appears from the statement of case that on October 23, 1938, certain entries were made in the books of the joint family firm. Before that date, there was in the assessee's ledger an Anna Chhatra account in Samvat 1994. ₹ 11,639 stood to the credit of that account. There was another account described as the hospital account. In that account ₹ 43,150 stood to its credit. The firm had also a profit and loss account. A sum of ₹ 3,13,607 stood to the credit of that account. On the last day of Samvat 1994 a sum of ₹ 41,000 was debited in the hospital account, a sum of ₹ 11,000 was debited in the Anna Chhatra account and a sum of ₹ 1,48,000 was debited in the profit and loss account. The total of these three, viz., ₹ 2,00,000, was credited in the charitable trust account. At the end of the year interest at the rate of four and a half per cent. was credited and certain amounts were spent on charitable objects. As I have already mentioned before, the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es mentioned to us do not lead to that conclusion. On behalf of the Commissioner our attention was drawn to Chambers v. Chambers I.L.R. [1914] Mad. 617. In that case Mr. Chambers caused entries to be made in the books of his business, the Chrome Leather Company, crediting Mrs. Chambers, his children by her, and certain other relatives with various sums of money and debiting his capital account in the company's books with those sums. Separate accounts were opened in the respective names showing the sums so credited. In particular in the case of Mrs. Chambers a separate account was opened in the company's books showing ultimately Us. 2,00,000 to her credit. Before that, on July 25, 1919, Mr. Chambers had written a letter to his company stating inter alia, as follows:- With reference to the amounts at present standing to the credit of my wife and children in your books please make such additions thereto as may be required so that as from April 1st last the capital at their credit in the firm is as follows:- Mrs. Chambers ₹ 2,00,000.... Please note also that as and from the 1st April last, those sums at their respective credits are to bear interest at 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erms do not apply to charitable trust. It is, however, equally clear that the necessity of having ascertained property as the subject matter of the trust is none the less in the case of charitable trusts. We therefore agree with the conclusion of the Tribunal that the property not being ascertained and the settlor not being shown to have divested himself of all beneficial interest therein so as to transfer the ownership to the trustees, there is no valid trust in law. If so, there can be no creditor to whom interest is payable and the claim for allowance as made by the assessee was rightly rejected. The answer to the question formulated by us under the circumstances will be in the negative. In concluding, we must note that the Tribunal has taken considerable pains in setting out in detail the facts as were brought to their notice in this reference. In sending back the reference we had no desire to criticize the manner in which they had held the inquiry in the first instance. We had pointed out that in order to arrive at the conclusion indicated in their judgment it was necessary to set out the facts, as mentioned in our referring judgment. We are glad to note that the Tribunal h ..... 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