TMI Blog1976 (9) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... : "With a view to perpetuate the name and memory of my father, Gnani S. Ramaswamy Iyer, and to provide for the support and benefit of male and female students of Saurashtra community, I have this day founded a charitable trust in the name of my father. For the said purpose, I have constituted a fund of Rs. 50,000 in cash and dedicated the said fund as fixed and permanent asset to the said Trust. I have further made out deeds and documents in respect of the said trust describing the same therein as 'Gnani S. Ramaswamy Iyer Charitable Foundation'. I have also arranged for the maintenance of accounts in the name of the said Trust in which the amount has been credited in favour of the said trust as its fixed asset and permanent fund. I shall be the first trustee of the said Trust for the duration of my life and after me, my male heirs and after their lifetime, their respective male heirs and so on from generation to generation, shall be trustees. The trustee or trustees for the time being shall deposit the amount with a reputed bank or banks or with sound business men for interest for fixed terms. The interest shall be realised once in six months or a year by the said trustee as th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... free text books, etc., to the male and female students of our community on the reopening of schools after summer holidays. After my demise, should any of my male adult heirs living at the time wish to perform any other charities in any year or years, they may spend half of the income for that charity in accordance with the decision of the majority of my heirs at a meeting convened for the purpose, for those years while the other half shall be spent on the above-said four objects every year as stated above from out of the income of each year." On 29th March, 1961, the founder-trustee executed another instrument which, according to him, was intended to amend by way of clarification the terms of the original deed. That document read as follows : "I executed a charitable trust deed on January 6, 1947. This was registered with the Madurai Registrar as document number 6 of 1947, in Volume 79 in pages 260 to 263 in Book 4. As per the terms and conditions stipulated in the above charitable trust settlement deed, I have created 'Saint (Gnani) S. Ramaswamy Iyer Charitable Trust'. In the above trust deed, it has been stated that trust properties and deposit amounts (fundamounts) shou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The said sum of Rs. 3,449 was arrived at after deducting a sum of Rs. 1,642 from the gross income of Rs. 5,092. The Income-tax Officer, by his order dated 25th November, 1966, took the view that out of the expenses of Rs. 1,642, a sum of Rs. 1,394.65 had been spent for the benefit of the grandchildren of Shri P. Nagendran and that, therefore, that could not be allowed as a deduction. Therefore, deducting only the balance of Rs. 203 from Rs. 5,092 he assessed the income of Rs. 4,089 to tax. Similarly, for the assessment year 1963-64, the assessee claimed an expenditure of Rs. 2,147 out of the gross income of Rs. 7,174 of the trust. The Income-tax Officer held that apart from Rs. 114 out of Rs. 2,147, the balance had been spent for the benefit of the grandchildren of Shri Nagendran, who is the author of the trust, and that, therefore, the same could not be claimed as a deduction, Therefore, deducting Rs. 114 from Rs. 7,174 he assessed the income of Rs. 7,060 to tax. The orders of assessment for all the three years, namely, 1961-62, 1962-63 and 1963-64, were taken up in appeal and the Appellate Assistant Commissioner of Madurai Range by his order dated 28th February, 1969, all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose, as contained in the Act. As we have pointed out already, the Tribunal and the Appellate Assistant Commissioner proceeded on the basis that the founder of the trust had no right to execute the supplemental deed dated 29th March, 1961. We are of the view that the Tribunal was right in this behalf. Once we hold that the original trust was for a charitable purpose in the nature of benefit to the public, the trustee cannot alter that purpose without a power being reserved therefor in himself, in that trust deed. As we have pointed out already, except to the extent of 50% of the income from the trust property being diverted for other charitable purposes after the death of the founder, at the instance of the trustees then functioning, under the original trust deed, there is no other provision therein reserving a power with the founder to alter the charitable character and the object of the trust and to provide for application of any part of the income from the trust properties for the benefit of the poor relations. The result of this will be that the original trust deed stood in law without being in any way influenced or affected by the subsequent supplemental deed dated 29th March, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be exempt and that if it is not so applied, but accumulated, that also will not be liable to be included in the total income to the extent to which such income so set apart is not in excess of twenty-five per cent. of the income from the property held under trust in part. In view of our finding that the original trust deed stood unaffected by the subsequent supplemental deed dated 29th March, 1961, it must follow that the property was held in trust wholly for charitable purposes and that consequently it is section 11(1)(a) of the Act that applied to the case and not section 11(1)(b) of the Act. In that event, as we have pointed out already, the income actually applied to such purposes or the income accumulated for such purposes, within the limits provided for in the second limb of section 11(1)(a) of the Act, will not be liable to be included in the total income of the person receiving the same. If any part of the income has actually been spent in terms of the subsequent supplemental deed dated 29th March, 1961, that will only mean that that part of the income had not been applied for charitable purposes for which the trust was created. Therefore, the authorities below should ..... X X X X Extracts X X X X X X X X Extracts X X X X
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