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1963 (9) TMI 79

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..... trust deed relating to the Kaira properties provides that the trustees shall spend and apply the net balance of the income of the said trust fund and trust property for the benefit of the public in general of the Baroda State and of Kaira District of Bombay Presidency including Cambay State within its geographical limits in Gujarat without distinction of caste, creed or colour in the advancement of education, commerce, industry, public health and medical relief and particularly: (A)by establishing and maintaining a good and well-equipped hospital at Baroda or nearby; (B)by establishing and maintaining either an industrial home or industrial classes or maternity home for women at village Virsad in Borsad Taluka in Kaira District; (C)by awarding prizes and scholarships to deserving students ; (D)by granting scholarships, travelling fellowships or loans with or without interest to qualified persons for higher education and training in various branches of technology, applied sciences and agricultural subjects and more particularly medicines, chemical and pharmaceutical, engineering and other allied subjects; (E)by giving grants to schools, colleges and technical institutions ; (F)by g .....

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..... ssioner set aside the order of the Income-tax Officer and held that the trusts were entitled to exemption under section 4(3)(i) and granted exemption in conformity with the restrictions imposed by the amendment to the Act by the Income-tax (Amendment) Act, 1953, which was brought into effect from the 1st of April, 1952, and also by the Finance Act of 1955, which came into force as from the 1st of April, 1955. The Commissioner thereafter filed appeals before the Income-tax Tribunal, raising therein two contentions : (1) that one of the objects set out in clause 5 of the trust deed, namely, advancement of commerce and industry, was not a charitable object and since the trustees had discretion under that clause to utilise the corpus as also the income of the trust properties for any of the objects including the aforesaid object the trust was not a charitable trust, and (2) that clauses 12 and 13 of the trust deeds gave power to the trustees to take over other institutions and to accept donations and/or contributions, that such donations might carry with them terms and conditions inconsistent with the objects of the trust and if the trustees were under these powers to accept such donat .....

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..... nd the Finance Act of 1955 was in some respects different from what it is now. But it is conceded that so far as the present reference is concerned, these changes do not make any material difference, for the entire reference really turns: (1) upon the question whether advancement of commerce and industry is a charitable purpose within the meaning of sub-section (3)(i) of section 4, and (2) the interpretation of clause 12 in the two trust deeds. So far as the question as to whether the expression "advancement of commerce and industry" contained in clause 5 of the trust deeds is concerned, no difficulty arises because of the concession made by the learned Advocate-General, in view of the decisions such as All India Spinners' Association v. Commissioner of Income-tax [1944] 12 ITR 482 (PC), Commissioner of Income-tax v. Radhaswami Satsang Sabha [1954] 25 ITR 472, Commissioners of Inland Revenue v. Yorkshire Agricultural Society [1927] 13 Tax Cas. 58, In re Town and Country Planning Act, 1947 : Crystal Palace Trustees v. Minister of Town and Country Planning [1951] Ch. 132 and Andhra Chamber of Commerce v. Commissioner of Income-tax [1961] 42 ITR 503 that such a clause ca .....

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..... d not, therefore, by reason of the power reserved to them under clause 12, be entitled to take over any trust or institution whose objects are not for charitable purposes. No objection therefore can be taken to such a clause if the power of the trustees, by the use of the expression, "allied objects", is clearly circumscribed to accepting administration and management of such trusts or institutions which have objects similar to those of the present trusts. The real controversy, however, centres round the interpretation of the provisions of clause 13. The contention of the learned Advocate-General was that the power granted to the trustees under clause 13 was an unlimited power under which the trustees were entitled to accept donations and/or contributions from any person, company, firm or institution and upon such terms and conditions as they may deem proper. Under this clause, the trustees have also the power to carry out such terms and conditions upon which they accept such donations and/or contributions and they are authorised to apply any portion of the income of the trust fund for the purposes thereof, the meaning of the word "thereof" being the purposes la .....

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..... other clauses of the trust deeds, namely, clauses 1, 2, and 4. Clause 1, inter alia, provides that the trustees shall stand possessed of the shares specified in Schedule A thereto and the investments into which, in exercise of the power contained in the trust deed whereunder, the same or any part thereof respectively may from time to time be invested "upon the trusts and subject to the powers, provisions, agreements and declarations hereinafter contained and concerning the same". Similarly, clause 2 provides that the settlor thereby conveyed, assigned and transferred upon the trustees the immovable property set out therein and called the trust property "to have and to hold the same upon the trusts and subject to the powers and provisions, agreements and declarations hereinafter contained of and concerning the same." Clause 4 of the trust deeds then provides that the trustees shall from time to time collect and get in dividends, interest, income, rents and profits of the said trust fund and trust property and after defraying the necessary expenses shall, out of the dividends, income, rents and profits, pay the charges and expenses of and incidental to the admini .....

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..... dence, management, administration of any trust or institution having allied objects on such terms and conditions as the trustees may, in their absolute discretion, think fit. Clause 12 itself makes a clear distinction between the objects on the one hand and the terms and conditions on the other. The trustees, under the provisions of that clause, are entitled to take over the management, administration, etc., of any trust or institution, provided that such trust and institution have objects which are allied to the objects of the present trusts. They have, therefore, no power under clause 12 to take over any trust or institution of which the objects are contrary to or inconsistent with those of the present trusts. If the objects, however, of such trust or institution are allied objects, the trustees can take over the management or administration of such trust or institution and clause 12 then empowers them to take over the management or the administration of such trust or institution upon such terms and conditions as the trustees may, in their absolute discretion, think fit. Though the discretion granted to the trustees in clause 12 is also unlimited and absolute, it is clear that th .....

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..... d by the trustees during the relevant accounting periods. Equally, there is no question that the trust properties or the income thereof or any portion thereof were used in any way inconsistent with the admittedly charitable purposes of the trusts. That being so, there is nothing on record to show that the corpus or the income of the property was in any way applied for purposes inconsistent with the provisions of section 4(3)(i) or the Explanation to sub-section (3) of section 4 of the Act during the accounting periods or any of them. In fact, in answer to the letter dated December 12, 1958, by the Income-tax Officer, making certain enquiries from the assessee and suggesting an amendment of clause 13, the assessees by their letter dated December 27, 1958, stated : "...and they could not and were not accepting any contributions or donations to which were attached conditions contrary to the objects of the trust as such acceptance would be contrary to the terms of the deed and would be ultra vires of their powers". It is no doubt true that the trustees subsequently wrote a letter dated March 16, 1959, to the effect that they were taking steps to delete article 12 from the tru .....

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