TMI Blog1975 (4) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... of the four specified purposes required the application of the income outside the taxable territories and the other two purposes required the application of the income within the taxable territories. Though the settlor expressed a desire that, as far as possible, the income should be spent equally for the four specified objects, he did not oblige them to do so. Instead he gave them absolute discretion to spend the income " in such shares and proportions and in such manner " as they deemed fit. The settlor died in February, 1967, and the trust became effective. Soon thereafter the trustees resolved that the income from the trust would be utilised for the two purposes which required its application within the taxable territories only and that any balance left would be accumulated, also to be utilised for those two purposes only. For the assessment year 1968-69, the Wealth-tax Officer assessed the trustees to wealth-tax overruling their claim to exemption under section 5(1)(i) of the Wealth-tax Act. The claim to exemption was, however, accepted by both the Appellate Assistant Commissioner and the Appellate Tribunal. At the instance of the revenue, the following question has been r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eme Court in H. E. H. Nizam's Religious Endowment Trust v. Commissioner of Income-tax [1966] 59 ITR 582 (SC) and Commissioner of Income-tax v. Sint. Kasturbai Walchand Trust [1967] 63 ITR 656 (SC). We find it difficult to accept the submissions of Sri Anjaneyulu. Now, a property can be said to be held under trust for the purposes for which the settlor has created the trust and not for the purposes for which the trustees may utilise or decide to utilise the income from the trust property if the trustees in exercise of the absolute discretion given to them under the deed of trust decide to utilise the income for a few out of the many purposes for which the settlor created the trust, it does not mean that the trustees hold the trust property for those purposes only for which they have decided to utilise the income and that they have ceased to hold the trust property for the other purposes specified in the deed of trust. It only means that the trustees have, for the time being, circumscribed their activities in relation to the objects of the trust. It cannot mean that the objects of the trust are themselves circumscribed. It is not as if the discretion given to the trustees, once exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llows : " 11. (1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income-- (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India ; and, where any such income is accumulated for application to such purposes in India, to the extent to which the income so accumulated is not in excess of twenty-five per cent. of the income from the property or rupees ten thousand, whichever is higher : (b) income derived from property held under trust in part only for such purposes, the trust having been created before the commencement of this Act, to the extent to which such income is applied to such purposes in India; and where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of twenty-five per cent. of the income from the property held under trust in part. " It is clear from these provisions that in order to be eligible for exemption from the levy of income-tax, while it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apart the accumulation for the purposes within the taxable territories it must be said that the purposes are within the taxable territories. The observations made by the Supreme Court were in connection with the levy of income-tax and they cannot have any application to the levy of wealth-tax. We have already pointed out the distinction between the relevant provisions of the Wealth-tax and Income-tax Acts. In Commissioner of Income-tax v. Smt. Kasturbai Walchand Trust [1967] 63 ITR 656 (SC) the facts were : Seth Walchand created a trust under which the trustees were to pay the income from the trust properties to Bai Kasturbai during her lifetime and, thereafter, to apply the income to certain charities. Some time after the execution of the deed of trust Bai Kasturbai executed a deed surrendering to the trustees all her interest in the income of the trust fund so that the trustees might forthwith utilise the same for charitable purposes. Thus, the trust was accelerated and the question arose whether the income was exempt from tax under section 4(3)(i) of the Indian Income-tax Act, 1922. The Supreme Court held that Bai Kasturbai having validly surrendered her right under the trust ..... X X X X Extracts X X X X X X X X Extracts X X X X
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