TMI Blog2000 (11) TMI 99X X X X Extracts X X X X X X X X Extracts X X X X ..... n instrument of trust dated January 8, 1974. Clauses 13 and 14 of the instrument of trust, which contain the objects of the trust, read as under : " 13. That the object of the trust will in the main be the promotion of science and technology and Muslim theology among the Muslim intelligentsia comprising both males and females. 14. That in this connection, the author of the trust is painfully aware of the fact that, whereas, rapid strides have been made in other spheres of national activity, the Muslims of the State and some other sections of the population have lagged behind in this particular branch of learning and it is his earnest desire that a substantial portion of the income derived or derivable from the subject-matter of the trust shall be used in furtherance of this great purpose of the trust. As a practical step in that direction, the author of the trust desires that scholars belonging to educational institutions both in and outside the State may be given such financial assistance by way of ex gratia grants or loans on easy terms to enable them to prosecute their further studies and research in science and technology both within and outside the State ; it being clearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned counsel for the assessee. We have also heard Mr. Anil Bhan, learned counsel for the Revenue. The real controversy in this case is whether the assessee-trust established for the promotion of Muslim theology amongst the Muslim intelligentsia is hit by clause (a) and clause (b) of-sub-section (1) of section 13 of the Act. Section 13(1)(a) provides that nothing contained in section 11 or section 12 of the Act shall operate to exempt any part of the income from the property held under trust which does not enure for the benefit of the public. Clause (b) provides that no exemption under section 11 of the Act shall be available in the case of a trust created or established for the benefit of any religious community or caste. Section 13(1)(a) and (b) read as follows : "13. Section 11 not to apply in certain cases.---(1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof--- (a) any part of the income from the property held under a trust for private religious purposes which does not enure for the benefit of the public ; (b) in the case of a trust for charitable purposes or a ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . P. Shanti Verma Jain [1998] 281 ITR 787. That was a case under the Kerala Agricultural Income-tax Act, 1950 (the "Kerala Act'). The assessee in that case claimed exemption from tax on its agricultural income under section 4 of the Kerala Act. The authorities under that Act held that the trust was a private family trust and the dominant object of the trust was to propagate a particular religion and to render services to the followers of that religion. This finding of the authorities was reversed by the High Court. The High Court held that the trust was both religious and charitable and even if it was construed as a private religious trust, the benefit to the public provided for in the trust deed took it out of the exclusion of clause (a) of sub-section (3) of section 4 of the Kerala Act. The High Court said that taken as a charitable trust the benefits of the trust were not confined to any particular religious community or caste and for that reason it did not fall under the exclusion in clause (b) of sub-section (3) of section 4 of that Act as well. The High Court was, there fore, of the view that the income of the trust was entitled to exemption under section 4 of the Kerala Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... medical aid could be given to them only if any member of the families managing the trust, shows sympathy and is interested in their treatment. The Tribunal, in our opinion, was right in its conclusion that the dominant purpose of the trust in the present case was propagation of the Jain religion and to serve its followers and any part of agricultural income of the trust spent in the State of Kerala also could not be treated as an allowable item of expense." The ratio of the above decision squarely applies to the facts of the present case. In this case also the objects of the assessee-trust contained in clauses 13 and 14 of the instrument of trust clearly show that the dominant purpose of the trust is promotion of Muslim theology among the Muslim intelligentsia. Another object is promotion of science and technology but that too among the Muslim intelligentsia. Similarly, in clause 14 of the instrument of trust which confers powers on the trustees to give financial assistance by way of ex gratia grants or loans 'on easy terms to scholars of educational institutions to enable them to prosecute their further studies and research in science and technology, it is specifically provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, it was held : "Where the property is vested in the head of a community under deeds of trust, but the trust property is applicable to purposes, many of which are neither religious nor charitable, and it is not suggested that any part of the property is set aside for any charitable or religious purposes, so that it can be identified as appropriated exclusively for such purposes, then the income of the whole of the property is assessable to income-tax." To the same effect is the decision of the Supreme Court in East India Industries (Madras) Pvt. Ltd. v. CIT [1967] 65 ITR 611. In that case, the Supreme Court held : "If the trustees can, under a trust held validly, spend the entire income of the trust on this non-charitable object, it is difficult to hold that the trust property is held under a trust or other legal obligation wholly for religious or charitable purposes within the meaning of section 4(3)(i) of the Act [corresponding to section 11(1) of the Income-tax Act, 1961]." It is clear from the above decisions that where the objects are distributive, each one of the objects must be charitable in order that the trust might be upheld as a valid charity. The reason is tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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