TMI Blog1986 (2) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... ind or of general utility and for any one or more of the said objects and to such extent and in such manner as the trustees may in their absolute discretion deem proper AND in particular to spend such of the said sum as they might think fit every year on such humanitarian and educational institutions as Jadavpore T. B. Hospital, Arya Vidyamandir, Bhowanipore, Calcutta, Gurukul Kangri, Kankhal (Hardwar), Calcutta Blind School, Deaf and Dumb School, Calcutta, Baba Kali Kamliwala Panchayat, Kshetra Rishikesh and for support and maintenance of the poor and indigent relations of the settlor. (iii) The remaining half of the net income of the trust property shall be accumulated by the trustees for such period as they might think fit and after sufficient accumulation, the same should be invested in making additions, alterations, improvements and acquisitions and the whole of the net income should be applied by the trustees for the purpose mentioned in paragraph 3(ii) thereof. " The assessee was assessed to income-tax for the assessment years 1967-68 to 1971-72 and also 1973-74. It was contended before the Incometax Officer on behalf of the assessee that 50% of the net income of the tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o this court as question of law arising out of the order of the Tribunal, a common question in all the said assessment years : " Whether, on the facts and in the circumstances of the case and on a correct interpretation of the deed of trust, the Appellate Tribunal was right it law in holding that the income derived from the property held under the trust was not exempt from tax under section 11 of the Income tax Act, 1961 ? " At the hearing, the learned advocate for the assessee contended before us that on a proper construction of the provisions of the trust deed in the instant case, it would appear that the predominant object of the trust was public charity and the provisions made for the support and maintenance of the poor and indigent relations of the settlor were merely ancillary to the said predominant object and were merely an illustration thereof. He submitted that the Tribunal had failed to construe the relevant provisions of the deed correctly in the light of the said decision of the Supreme Court. In support of his contentions, learned advocate cited the following decisions. (a) Trustees of the Charity Fund v. CIT [1959] 36 ITR 513 (SC) In this case, the trust deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id to deserving or poor Hindus of the three upper classes. There was a proviso directing the trustees that in carrying out the said object, preference should be given to the members of the caste of the settlor and also preference to the members of the family and the relatives of the settlor. Following the decision of the Supreme Court in Trustees of the Charitable Fund [1959] 36 ITR 513, the Bombay High Court held that the property was held by the trustees wholly for religious or charitable purposes and the income of the trust was exempt from income-tax. (c) CIT v. Moosa Haji Ahmed [1964] 52 ITR 147 (Guj): In this case, a wakf deed provided that the surplus out of the income of the trust would be utilised, inter alia, to help the poor and that in doing so, help must first be given to the poor relations of the settlor. Following the decision of the Supreme Court in Trustees of the Charity Fund [1959] 36 ITR 513, it was held by the Gujarat High Court that the dominant intention of the trust was to provide relief to the poor. The at preference be given to the relatives of the settlor would not affect the dominant object and it was held that the income of the trust was exempt from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 88 ITR 47 (SC): In this case, the Supreme Court construed the trust deed and came to a conclusion that the trust was intended primarily for the benefit of the family of the settlor and as such was not a public charitable trust exempt from taxation. Learned advocate for the assessee also drew our attention to another decision of the Supreme Court in Addl. CIT v. Surat Art Silk Cloth Manufacturers Association [1980] 121 ITR 1. In this case, the Supreme Court held that where the main or primary objects of the activities of the assessee were distributive, each and every one of the objects must be charitable in order that the trust or institution may be upheld as a valid charity. But if the primary or dominant purpose of a trust or institution was charitable, another object which by itself may not be charitable but which was merely ancillary or incidental to the primary or dominant purpose would not prevent the trust or institution from being a valid charity. Learned advocate for the Revenue contended, on the other hand, that the trust deed in the instant case had as one of the objects of the trust, support and maintenance of the poor and indigent relations of the settlor. This o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purpose would not prevent the trust from being a valid charity. A clear distinction must be drawn between the object of a trust and the powers conferred upon the trustees as incidental to the carrying out of the object. " (c) Dharmadeepti v. CIT [1978] 114 ITR 454 (SC). In this case, the memorandum of association of a company, the assessee, laid down the objects of the company to be (a) to give charity; (b) to promote education; (c) to establish or aid in the establishment of associations, institutions, funds, trusts with the object of promoting charity and/or education. It was further stated in the memorandum that an object incidental or ancillary to the attainment of the above main objects was to run chitties, i.e., kurries. It was held by the Supreme Court on the construction of the said memorandum that power to run the business of chitties would be incidental or ancillary to the attainment of the main objects which were charitable. It was held further that the income from the business was intended to be applied only to charitable purposes and the assessee was entitled to exemption of the income of such business from income-tax. Learned advocate for the Revenue also cited E ..... X X X X Extracts X X X X X X X X Extracts X X X X
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