TMI Blog1980 (12) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... en while the building was under construction, Ganga Bai executed a document described as a deed of trust on September 13, 1958, in which the trust was named as " Ganga Bai Charities ". It is to this deed that practically every one connected with this case has turned his gaze to find out what the object of Ganga Bai was in a providing the fund and in constructing the building and to what use the properties are to be put, even though she provided but the nucleus of the whole project and it was only a part of the total outlay on the building, her deed of trust is the basic document to which we have to address ourselves in order to ascertain the objects and functions of the trust. Ever since the construction of Dharmaprakash, it was being let out as a marriage mandapam to be used by members of the public as such. The income derived from the letting out of this Kalyana Mandapam came to Rs. 1,06,392 in the year ended March 31, 1963. For the subsequent years also the, income was substantial. Under the aegis of Ganga Bai Charities, a printing press was also being run. The trust earned a profit of Rs. 27,784 from the printing press in the year ended March 31, 1963, and a sizable income in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our construction. We must iron out the creases, as one learned English judge described the process, in another context. We must try to make out, as best as we may, what the author of the trust was driving at. In order to enable us to do so, we will have to take in the entire document and try to fit in all parts of the document as of one piece, the operative portions as well as the recitals. Our endeavour is to get at the object of this trust and we must be thankful for these and other internal aids to construction wherever we may find them in the body of the document. The deed executed by Ganga Bai starts by reciting that she had a long cherished desire to construct and provide a building in Purasawalkam, Madras, for the benefit of the public, to be used by them for religious, charitable, and/or cultural and social purposes. The preamble also shows that the old lady intended thereby to secure a religious benefit for herself as well as to satisfy a long felt need of the public in that part of the city. After referring to the provision made by her of the initial fund for bringing into being the trust property, the trust deed proceeds to declare that the fund is being provided for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the document or memorandum with reasonable certainty, with reference to the particular purposes in view. Learned counsel referred, especially to the language of s. II of the Act, and submitted that the scheme of exemption under that provision is not to exempt the entire income from the property held under religious or charitable trust, but only that portion of the income which is actually applied for the charitable purposes avowed in the trust, or accumulated, for application to such purposes, subject to certain conditions. His thesis was that the scope of the exemption under s. 11 gives a clue to the manner in which the charitable or religious purposes have got to be avowed for any trust claiming exemption under the Act. Turning to the provisions of the document executed by Ganga Bai, the learned standing counsel submitted that merely repeating or chanting the statutory words "religious and cultural purposes " cannot be regarded as fulfilling the requirements of S.11. Adverting to the operative clauses in the trust deed wherein the trust objects are seemingly enumerated, Mr. Jayaraman submitted that religious, charitable or cultural and social purposes referred to in the trus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l said that the approach of the court in a matter of this kind must be guided by what he described as equitable imagination, apparently indicating by that expression that the endeavour must be not to find flaws in the deed, but try to render the provisions of the deed workable in the way in which it might have been reasonably intended although the actual drafting of the deed might leave many things unsaid and many things to be desired. As we have earlier indicated, the construction of this deed is a matter for argument from beginning to end. On the submissions made on either side, the objects of the trust can be regarded in either of two ways. One way of construction is that suggested by learned counsel for the Revenue, namely, that the so-called objects in the deed do not pertain to the trust at all, but they only condition the objects which the users of the trust property are permitted to avow. The other line of interpretation, which has been advanced by the learned counsel for the assessee, is that the objects which they have been set out in the trust deed, must be regarded as the very objects of the trust itself. At one stage of the arguments, dealing with the objects purel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther the expression "charitable purposes " occurring in, the trust deed is or is not void for uncertainty does not conclude the discussion in the case. We have got to find out whether the objects, assuming them to be objects of the trust, can be regarded as rendering the income of the trust exigible to tax exemption. As we earlier pointed out, s. 11 is the operative provision for tax exemption. The section refers to " income derived from property held under trust wholly for charitable or religious purposes ". The expression " religious purposes " is not, in terms, defined under the interpretation clauses of the I.T. Act. But an indication as to what it means is to be found in s. 13. Section 13(1)(a) lays down that 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, cannot claim tax exemption. Likewise, even in the case of a trust avowed for " charitable purposes " any income of the trust where it is established for the benefit of any particular religious community or caste, will not be eligible for exemption. These provisions in s. 13 indicate that a " religious purpose " within the meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would not thereby cease to be charitable purposes within the meaning of the statutory definition. The Supreme Court pointed out that where the head of charity falls within the residuary head of " any other object of general public utility ", then it is essential under the definition, that such an object should not involve the carrying on of any activity for profit. The effect of this understanding of the statutory definition of " charitable purposes " under the Act is that there must always be an enquiry whether any given object of general public utility does or does not involve the carrying on of any activity for profit. Because, upon that enquiry will depend the ultimate determination whether the purpose is or is not charitable. Basing himself upon this aspect of the definition of the expression " charitable purpose ", learned counsel for the Revenue submitted that the mere repetition of the statutory phrase and the mere description of the object of a given trust as a charitable object cannot meet with the requirements of the statutory definition. He pointed out that the trust deed in this case did not even indicate what major heads of charitable purposes are avowed by the fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession " charitable purposes ", we might assume that either she used this expression in a general sense, or she used it in the sense in which the taxation law understood that expression. We have already referred to the definition of the expression " charitable purposes " in the Indian I.T. Act, 1922, in which charitable purpose was defined to include " any other object of general public utility ", and it was not concerned whether the object of general public utility did or did not involve any activity for profit. It is reasonable to hold as a matter of construction, that when the founder used the expression " charitable purpose " in the deed she meant to include not only the relief of the poor, education, medical relief, but also advancement of any other object of general public utility in which no element of profit was at all excluded. We were informed at the bearing that the founder herself had occasion to execute supplemental deeds, but nothing was stated in the supplemental deeds to clarify that charitable purpose as avowed in the original trust deed did not exclude any activity for private profit. We must, therefore, proceed on the footing that the expression charitable purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ects under the other two enumerated heads, namely, medical relief or poor relief. Much less can the deed be regarded as containing an embargo on any object involving any activity for private profit. We also accept the initial submission made by the learned counsel for the Revenue that since the crux of the statutory exemption is not the income earned being derived from the property held under trust, for, in view of a charitable object, but the actual application, or the accumulation or setting apart of the income for application, for a charitable purpose, the objects in any given trust deed will have to be construed not in an abstract sense but with reference to the capability or amenability of that charitable object to be put into operation for the purpose of enabling the earning of the income to meet the object. In this view the necessity for and the importance of particularising the objects at least into their major heads cannot be gainsaid. It is in this respect that this trust deed finally fails. We are satisfied that on a proper construction of this trust deed the objects avowed by the founder do not meet the requirements of the statutory definition of the expression " charit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to put the property, This is because these purposes are referred to in the context of the property being given to members of the public free or at such Tents as the trustee may think reasonable. The point of view throughout the deed seems to be the point of view of the users of the trust and not the point of view of the founder of the trust. Even apart from all these considerations, the introduction in the objects clauses of cultural and social purposes makes for a further difficulty. . Although the expression "I charitable " standing by itself might be regarded as sufficiently certain and capable of investing the expression with a set meaning, we cannot understand what the idea behind the expression "cultural and social purposes" is. The expression " cultural " is not necessarily something which encompasses the entire public. Even if it does, it is a matter of debate whether any particular cultural milieu is for the general public utility or whether it would only subserve a particular class or segment of the population. What passes for " culture ", according to some, may look like snobbery, according to others. People might differ as to what a social purpose might be, might cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ees to put the trust property either to religious or to charitable purposes, the fact that religious purposes are capable of being correctly and clearly understood will not set right the defect in the definition of the trust object, created by the inclusion of such vague phrases as " cultural ", " social " and " allied " purposes. Mr. Ramamani urged that this manner of construing the charitable purposes as avowed in the trust deed cannot be regarded as the correct approach. He said that in the matter of exemption of income from the charities under the I.T. Acts there are really two steps involved. The first stage, according to him, is to ascertain the objects of the trust in general way. The second stage, according to learned counsel, comes later, when the assessing authority has to proceed to quantify the income earned in given year to find out whether in that year any income has been applied to the avowed charitable purposes, and if so to what extent, or whether any part of the income is set apart or accumulated for application for such purposes, in the future. According to Mr. Ramamani, the second stage of the proceedings for exemption will not really arise at the stage of asc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n be regarded as a charitable object. The Department's view was that celebration of marriages cannot be regarded as a public charitable object. The Tribunal was inclined to hold otherwise. We have to observe that this approach to the question of ascertaining the object of the trust is a wrong approach. In the first place, there is nothing in the declared objects of the trust, such as they are, which states that one of the objects of the trust is to make available the trust property for the performance of marriages. The entire discussion had proceeded only from the fact that " Dharmaprakash " had actually been made available by the trustees for being used as a marriage mandapam and the bulk of the income of the trust was realised by letting out the building for such purposes. This, however, only shows in what way the trust property was actually put to use and how the trust property was exploited for the earning of income. These facts cannot indicate to any extent that the trust object itself was to make the property available for performance of marriages. It may be that in one sense the provision of marriage mansions may be regarded as an object of general public utility. Equally, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rried on by a charitable trust as a means of furthering its objects, the objects themselves being indubitably charitable in nature. We may observe in conclusion that the range of arguments which the stated case has provoked at the Bar before us has covered a wider field and pursued new directions which had perhaps not been presented before the Tribunal. There was a stage at the hearing when Mr. Ramamani even suggested that the matter had better be sent back to the Tribunal for fuller consideration for the reason that arguments which were being Urged in this reference had not had the opportunity of being heard by the Tribunal. We, however, do not think that this course is a proper one to pursue, having regard to the nature of the question of law, which is in the following terms : " Whether it has been rightly held that the income of the trust would be entitled to exemption under s.11 of the Income-tax Act, 1961 ?" It cannot be disputed that the discussion of the case as it proceeded before the Tribunal was on the question of the applicability of s. 11 on construction of the trust deed executed by Ganga Bai. The consideration of the question of law at the hearing before us was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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