TMI Blog1988 (3) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... s of poor Mussalmans ; 4. for the benefit of poor Syeds ; and 5. for such other religious, pious or charitable purposes as are allowed by Mussalman law as applicable to the Shias in conformity with the provisions of these presents ; 1. The mutawallis shall set apart two-thirds or thereabouts, of the houses bearing No. 28/1 and 28/2, Angappa Naick Street, George Town, Madras, for the residence and use of poor Mussalmans free or on a nominal rent; (a) The inmates shall be selected by the mutawallis firstly from among the poor relations of the wakif being of Shia sect and of good character and moral worth and only in the absence of such relations, shall the mutawallis be at liberty to select other poor persons of Shia sect and of good character and moral worth; (b) the mutawallis shall have absolute discretion to allot to any inmate or inmates such rooms as they, the mutawallis, may think fit and may at any time or times remove such inmate or inmates from one set of rooms to another ; (c) The mutawallis may, upon proof to their satisfaction that any inmate has been guilty of insubordination, breach of regulations, immoral or unbearing conduct or that the inmate had been or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the exemption provision was applicable. At the instance of the Commissioner of Income-tax, the question whether, on the terms of the wakf, the assessee was entitled to exemption for any portion of the income of the wakf property under section 4(3)(i) of the Indian Incometax Act, 1922, was referred to the High Court. By judgment dated January 28, 1944, this court answered the question in the negative and against the assessee. The said judgment is reported in CIT v. Aga Abbas All Shirazi [1944] 12 ITR 179 (Mad). Applying the decision of a Full Bench of this court in CIT v. Jamal Mohamad Sahib [1941] 9 ITR 375, it was held that a settlement for the settlor's poor relations was not a settlement for charitable purposes within the meaning of section 4(3)(i) of the Indian Income-tax Act, 1922. The court held that as the trustees were given the power to apply the whole of the income of the trust for the benefit of the settlor's poor relations, the trust could not be considered to be one for charitable purposes within the meaning of the said section. After the passing of the Muslim Wakfs Act, 1954 (Central Act XXIX of 1954), the Board of Wakfs included the assessee-wakf in the list of w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d control and supervision over the performance of the wakfs by the mutawallis and thus there was a change in the situation which obtained prior to the Act. Finally, it was submitted by learned counsel that just because power was given to the mutawallis to utilise the entire income for a non charitable object, the trust would not cease to be charitable so as to fall outside the scope of section II of the Income-tax Act. According to him, if, in a particular year, the mutawallis exercised the power given to them under the proviso and made a definite allocation of a portion of the income for recognised charitable purposes, thereby giving a definiteness to that part of the income to be spent for charitable purposes, the wakf would be entitled to invoke the provisions of section I 1 of the Income-tax Act with reference to that part of the income. According to learned counsel, that matter has to be decided every year and the question whether any part of the income was allocated specifically by the mutawallis for charitable purposes during the relevant year has to be decided by the Income-tax Officer on the facts placed before him every year. On the other hand, learned counsel for the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which were neither religious nor charitable. There was no suggestion that any part of the property was set aside for charitable or religious purposes so that it could be identified as appropriated exclusively to such purposes. In those circumstances, the Privy Council upheld the conclusion of the courts below that the income of the whole of the property was assessable to income -tax. The above ruling of the Privy Council was relied on by the Supreme Court in East India Industries (Madras) P. Ltd. v. CIT [1967] 65 ITR 611. In that case, a trust was established for various objects, one of which was to manufacture, buy, sell and distribute pharmaceutical, medicinal, chemical and other preparations and other articles. The objects included several charitable and religious purposes. A clause in the trust deed provided that the objects should be independent of each other and that the trustees shall have discretion to apply the property of the trust in carrying out all or any of such objects of the trust as the trustees may deem fit. The question was whether the property of the trust was held wholly for religious or charitable purposes within the meaning of section 4(3)(i) of the Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there was no question of one being dominant and the other being subsidiary. The above decision was followed by the Supreme Court in Yogiraj Charity Trust v. CIT [1976] 103 ITR 777. The Supreme Court held that the case before them fell within the ruling in East India Industries (Madras) P. Ltd's case [1967] 65 ITR 611 (SC) and reiterated the proposition in the following terms : (p. 784) "The test is that if one of the objects of the trust deed is not of religious or charitable nature and the trust deed confers full discretion on the trustees to spend the trust funds for an object other than of a religious or charitable nature, the exemption under section 4(3)(i) of the Act is not available to the assessee. ( Lakshmi Narain Lath Trust v. CIT [1969] 73 ITR 402 (Raj)." Again, in Dharmaposhanam Co. v. CIT [1978] 114 ITR 463, the question before the Supreme Court was whether the business of the appellant company in conducting kuries and money-lending was held in trust for a. "charitable purpose" within the meaning of section 2(15) of the Income-tax Act, 1961, and its income from that business was exempt from tax under section 11(1)(a) of the Act. The company was registered under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t from tax. In other words, where the main or primary objects are distributive, each and every one of the objects must be charitable in order that the trust or institution might be upheld as a valid charity : vide Mohd. Ibrahim Riza Malak v. CIT [1930] LR 57 IA 260 and East India Industries (Madras) P. Ltd. v. CIT [1967] 65 ITR 611 (SC). But if the primary or dominant purpose of a trust or institution is charitable, another object which by itself may not be charitable but which is merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or institution from being a valid charity : vide CIT v. Andhra Chamber of Commerce [1965] 55 ITR 722 (SC). The test which has, therefore, to be applied is whether the object which is said to be non-charitable is a main or primary object of the trust or institution or it is ancillary or incidental to the dominant or primary object which is charitable." In view of the decisions of the Supreme Court referred to above, there can be no doubt that the wakf in question is not one that could fall within the ambit of section 11 of the Income-tax Act. A feeble attempt was made by learned counsel for the assessee to submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... religion ; or ... (f) other purposes beneficial to the community not falling under any of the foregoing purposes . . .." There was a proviso that "in applying the income as aforesaid, the trustees shall give preference to the poor and indigent relations or members of the family of the founder of the trust including therein distant and collateral relations. It was further provided that in the application of the income of the said charitable trust fund, the said trustees shall observe the following proportions, viz., that not less than half the income of the said funds should at all times be applied for the benefit of the members of the Jewish community of Bombay only (including the relations of the founder) and Jewish objects and particularly in giving donations to the members of the Jewish community of Bombay on the anniversary of the death of the founder and his wife which falls on the twenty-second day of June and the remaining income for the benefit of all persons and objects including Jewish persons and objects and in such proportions as the said trustees may think proper . . ." The Supreme Court held that the deed of trust constituted a valid public charitable trust and as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in CIT v. Dharmodayam Co. [1977] 109 ITR 527 and contends that the provisions in the deed of wakf giving liberty to the mutawallis to utilise the entire income for any of the objects mentioned in the deed, will not make the trust a non-charitable one, when admittedly some of the objects are for charitable purposes. In the case cited by learned counsel, the first question that arose for consideration was whether the business of kuries conducted by a company registered under the Companies Act, whose sources of income were interest on securities, income from property and kuries or chit funds, was itself held by the assessee under a trust for religious or charitable purposes and not one conducted on behalf of a religious or charitable institution. On the facts and in the circumstances of the case, the Supreme Court affirmed the view taken by the Kerala High Court that the business in kuries was one held in trust for a charitable purpose by the company. Another contention put forward by the Revenue in that case was based on article 39 of the articles of association of the company which empowered the general meeting to set apart the entire profit or a substantive part of it for reserve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was the subject-matter of consideration in that case, was considered by the Supreme Court in East India Industries (Madras) (P.) Ltd. v. CIT [1967] 65 ITR 611, to which we have already made reference in detail and it was held that the trust was not entitled to the benefit of exemption under section 4(3) of the Indian Income-tax Act, 1922. The decision of the Supreme Court related to the assessment years 1957-58 to 1961-62. For the subsequent years 1962-63 to 1974-75, the assessee made a claim for exemption under section 11 of the Income-tax Act of 1961. It was contended on behalf of the assessee that the principle of estoppel or res judicata could not apply to decisions rendered under the Income-tax Act and that the question has to be decided with reference to the facts and circumstances prevailing in the relevant assessment years There was also a contention that the Supreme Court had proceeded on an erroneous basis that the trust in that case was constituted for the first time under a document dated July 1, 1944, overlooking the fact that the trust had been constituted earlier in the year 1941 under a deed of partition. Apart from holding that the decision of the Supreme Court wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon a different assumption of fact ; secondly, the same principle applies not only to an erroneous admission of a fundamental fact, but to an erroneous assumption as to the legal quality of that fact. Parties are not permitted to begin fresh litigations because of new views that they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances . . . . . . . Thirdly, the same principle namely, that of setting to rest rights of litigants, applies to the case where point, fundamental to the decision, taken or assumed by the plaintiff and traversable by the defendant, has not been transversed. In that case also, defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken.' The decisions in Ramji Das Jaini and Co., In re [1945] 13 ITR 430 (Lah), Kamlapat Motilal v. CIT [1950] 18 ITR 812 (All) and CIT v. L. G. Ramamurthi' [1977] 110 ITR 453 (Mad), all take the same view. Thus, it appears to be well-established that a decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... table purposes set out in the deed, that part of the income defined for "charitable purpose" would be entitled to exemption during the relevant assessment year, has to be rejected as the trust in question falls outside the purview of section 11(1) of the Incometax Act, 1961. It is only in a case where the income is derived from a property held under trust wholly or in part for charitable or religious purposes, the exemption provision would come into play. If the trust is outside the purview of section 11 of the Income-tax Act, the income from the property thereof will not be entitled to exemption. Learned counsel for the assessee places reliance on the observations of the Supreme Court in CIT v. P. Krishna Warriar [1964] 53 ITR 176. In that case, a physician who was running a business in ayurvedic drugs under the name and style of "Arya Vaidya Sala" created a trust in respect of his properties including the Arya Vaidya Sala by his will and gave directions to the trustees appointed under the will to utilise 60 % of the profits of the business for 20 years and 85% thereafter for religious and charitable purposes. The question which arose before the Supreme Court was whether the 60% o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antive clause fall into a piece. The first limb deals with a property or part of it held in trust wholly for religious or charitable purposes, and the second limb provides for such a property held in trust partly for religious or charitable purposes. On the said reading of the provision it follows that the entire business of Arya Vaidya Sala is held in trust for utilising 60 per cent. of its profits, i.e., a part of the income, for religious or charitable purposes. The present case, therefore, falls squarely within the scope of the substantive part of clause (i) of section 4(3) of the Act." In that case, a definite portion of the income from the property was carved out by the founder of the trust even at the time of creation of the trust and expressly provided for in the document by which the trust was created. No discretion or liberty was given to the trustees to change the proportion or alter the percentage fixed for charitable purposes. On these facts, the Supreme Court held that the property was one held in trust in part for charitable purposes. That decision cannot apply to the facts of the present case. Moreover, the assessee has not placed any materials in these proceeding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts of the wakf besides the provision prescribing duties of the mutawallis which include carrying out the directions given by the Wakf Board. We cannot agree with learned counsel for the assessee that the provisions of the Wakfs Act would change the character of the trust vis-a-vis the provisions of the Income-tax Act. As rightly pointed out by learned counsel for the Revenue, the function of the Wakf Board is to ensure that the income and other property of the wakfs are applied to the objects and for the purposes for which such wakfs were created or intended, and the Wakf Board cannot take a mutawalli to task if he acts in pursuance of the deed of wakf and spends the entire income for one of the purposes mentioned therein, exercising the discretion given to him under the deed. The enactment of the Wakfs Act in 1954 will not have any impact on the character of the trust in question for purposes of the Income-tax Act which has to be determined in accordance with the provisions of the Income-tax Act. Hence, the first question is answered against the assessee and we hold that the assessee was not entitled to exemption under section 11 of the Income-tax Act. As regards question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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