TMI Blog1997 (4) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ------------------------------- The respondents-assessees and the assessment years in respect of the rest of the cases are as follows :--- Case No. Name of the respondents-assessee Assessment year T. C. No. 1 of 1997 K. N. Varadarajan Family Trust 1988-89 T. C. No. 18 of 1997 -do.- 1987-88 T. C. No. 2 of 1997 P. Natarajan Family Trust 1987-88 T. C. No. 3 of 1997 -do.- 1988-89 T. C. No. 4 of 1997 Ramesh Family Trust 1987-88 T. C. No. 5 of 1997 -do.- 1988-89 T. C. No. 6 of 1997 Chandrasekhar Family Trust 1987-88 T. C. No. 7 of 1997 -do.- 1988-89 T. C. Nos. 21 to 37 of -do.- 1973-74 to 1986-87 1997 and 1989-90 to 1991-92 T. C. No. 8 of 1997 K. N. Gnanaprakasam Family Trust 1987-88 T. C. No. 14 of 1997 -do.- 1988-89 T. C. No. 9 of 1997 M. Sivaprakasam Family Trust 1988-89 T. C. No. 17 of 1997 -do.- 1987-88 T. C. No. 10 of 1997 P. Srinivasan Family Trust 1987-88 T. C. No. 11 of 1997 -do.- 1988-89 T. C. Nos. 38 to 54 of -do- 1973-74 to 1986-87 and 1997 1989-90 to 1991-92 T. C. No. 12 of 1997 K. N. Mohanram Family Trust 1987-88 T. C. No. 13 of 1997 -do.- 1988-89 T. C. No. 15 of 1997 K. N. Krishnaswamy Family Trust 1987-88 T. C. No. 16 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which company, the sums in question remained deposited in their respective names. Devi Films Private Limited was to pay interest on such deposits. The abovesaid Devi Films Private Limited was a company, in which, out its 17 shareholders, five were the trustees of the above referred to T. N. K and V. Educational Trust. Along with the aforesaid cheques, the abovesaid T. N. K and V. Educational Trust wrote ten identical letters, addressed to each of the family trusts stating in effect, that the said contribution and any accumulation thereto should be utilised for certain specified educational purposes for the general public and that the investments of the said contributions and accumulations thereto should be kept separate from the investment of the other funds of the family trust. Each of the family trusts received in due course interest from the abovesaid Devi Films Private Limited and in the returns of income filed by each of the said family trusts, the interest received less the amount applied for charitable purposes, was admitted as their income. For the assessment years 1970-71 to 1972-73, the Income-tax Officer in the assessments of the abovesaid T. N. K and V. Education ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner (Appeals) held that the abovesaid transfer of Rs. 12,80,000 was valid and that as per the abovesaid letters dated August 13, 1969, the said funds were given only for charity. Further, according to him, the abovesaid donation of Rs. 12,80,000 was made for carrying out the objects of the abovesaid T. N. K. and V. Educational Trust and was in accordance with the abovesaid clause 12. So holding, the Commissioner (Appeals) set aside the assessments made on T. N. K and V. Educational Trust. When subsequently the matter came up before the Tribunal, the Tribunal sustained the Commissioner (Appeals)' order, holding that the abovesaid transfer was valid and that the abovesaid donation by way of the abovesaid transfer would amount to application of income by the abovesaid T. N. K. and V. Educational Trust for charitable purposes listed in the above referred to declaration of trust dated December 15, 1960. Now, we shall set out the common question of law referred to us under section 256(1) of the Act in T. C. Nos. 411 to 416 of 1984, which runs as follows : "Whether the Appellate Tribunal was justified and had valid materials to hold that the transfer of Rs. 12,80,000 to 10 family tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in law in holding that the grant of certificate under section 12A with regard to these trusts would indicate that the trusts are charitable in nature and it would not be open to the Assessing Officer to reopen this question in the assessment proceedings and reach a different conclusion? 3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the assessee is entitled to exemption under section 11 of the Income-tax Act in view of the time-limit up to March 31, 1992, for converting the deposits into permissible mode of investment even though the non-specified assets had not been acquired during the previous years?" Then, coming to T. C. Nos. 21 to 37 of 1997, they arise out of the order of the Tribunal dated August 31, 1994. Then, T. C. Nos. 38 to 54 of 1997 arise out of the order of the Tribunal dated August 28, 1994. In both these orders, the Tribunal relied on only the above referred to earlier order of the Tribunal dated April 29, 1994. Now, we shall set out the questions referred to us under section 256(2) of the Act in T. C. Nos. 21 to 54 of 1997, which are as follows : "1. Whether, on the facts and in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal in this regard to the effect that the above referred to proviso (iia) to section 13(1)(d) is attracted in the present case, is also wrong. Further he also points out that at any rate, the Tribunal, even without giving necessary finding that the abovesaid deposits with Devi Films Private Limited had been substituted by approved form of investments as prescribed under section 11(5) of the Act at least later, that is, on or before March 31, 1992, as prescribed in the abovesaid proviso (iia), had grossly erred in holding that the abovesaid ten assessees (family trusts) would be entitled to get the benefit of exemption under section 11. He also points out that the Tribunal also erred in holding as if the said ten assessees are charitable in nature. Learned counsel for the assessee no doubt initially argued that in view of clause 12 of the abovesaid declaration of trust dated December 15, 1960, the abovesaid donation of Rs. 12,80,000 is valid. But, later, the said learned counsel submitted that the abovesaid transfer of Rs. 12,80,000 by the abovesaid T. N. K. and V. Educational Trust to the abovesaid ten family trusts could be held invalid and the assessment for the above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent case. That apart, clause 12 also says that in case the abovesaid objects have become impossible of fulfilment, the properties and funds of the said trust should be "utilised for such charitable purposes as the trustees in office at that time may determine." In other words, this would only mean that the said trustees could themselves utilise the said properties and funds for some other charitable objects and it would not mean that they could transfer the said Rs. 12,80,000 to the abovesaid ten family trusts. If really the founders of the said trust of 1960 wanted to give such power to the trustees for transferring such funds to other trusts even with a view to utilise the said funds for charitable purposes, they would have specifically provided so in the said declaration of trust itself. In the absence of such specific provision in the said declaration of trust and in the light of the abovesaid expression used in clause 12, it cannot be said that what the trustees therein had done by their abovesaid minutes of the meeting dated August 13, 1969, is valid in law. After so holding, and while dealing with the abovesaid questions referred to us in T. C. Nos. 411 to 416 and 786 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is necessary to clarify the factual position. As already seen, ten family trusts were constituted by a deed dated August 1, 1969. The Income-tax Officer, in the orders of assessment, passed in the private family trusts, held that the family trusts created by the deed dated August 1, 1969, are not charitable trusts. He further proceeded on the basis that there was a violation of the provisions of section 13(1)(d)(ii) of the Act, as the investments were found to be unapproved securities and the assessee-trusts were not entitled to exemption under section 11 of the Act, even assuming that the trusts are charitable trusts. He further found that the trusts are private trusts and the recognition accorded by the Commissioner of Income-tax under section 12A of the Act was not conclusive in the determination of the question either as to the nature of the trust or to the applicability of the provisions of the Act granting exemption. The Appellate Assistant Commissioner, in one group of appeals, held that the assessee was only a private discretionary trust, and therefore, not entitled to the exemption under section 11 of the Act. He also held that there was a violation of the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding of the Appellate Tribunal that the trusts in question are charitable in nature refers to the trusts created on August 13, 1969, then, in view of the judgment in T. C. Nos. 411 to 416 and 786 of 1984, no valid trust has come into existence. If the Appellate Tribunal refers to the trusts created on August 1, 1969, it is not necessary to consider the question whether the trusts created on August 1, 1969, are charitable in nature or not. Therefore, we proceed on the basis that the Appellate Tribunal refers to the trust constituted by the letter dated August 13, 1969, and since we have held that there was no valid transfer in the eye of law, no valid trust came into existence by a letter dated August 13, 1969. Secondly, it is also not clear whether the order of the Commissioner granting recognition under section 12A of the Act, refers to the private trust created on August 1, 1969, or to the special trust created on August 13, 1969. Since we are proceeding on the basis that no special trust was created on August 13, 1969, it is not necessary to consider the question whether the exemption granted to the private family trust created on August 1, 1969, would enure to the benefit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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