TMI Blog1974 (7) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... y, whose income was sought to be exempted, was not held under a trust ?" The short facts giving rise to question No. 1 may be stated: Two Muslim gentlemen, Mahomedhusein Shaikhalli Barodawalla and Sultanalli Shaikhalli Barodawalla, settled a sum of Rs. 5,000 upon trust for certain objects by an indenture dated June 12, 1959. The trustee were to hold and stand possessed of the trust property, inter alia, upon the following trusts: "4. (1)(i) To establish, help, conduct and maintain institutions, which have for their objects the carrying out of public purposes of a charitable nature relating to the people of India; (ii) For the education of the people of India by conducting and/or aiding the conduct of schools, colleges, libraries, hostels, research institutions or any other educational institutions and/or publishing and/or aiding the publications of books, booklets, newspapers, magazines or in any other manner; (iii) Helping societies and institutions which have similar objects by way of grants, donations or otherwise; (iv) To provide for welfare of the employees of the trust or any institutions conducted by the trust; (v) To give scholarships or other aid or as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustees. In other words, by reason of these two agreements--one dated July 1, 1959, and the other tripartite agreement dated November 9, 1959--the trustees became entitled to receive licence fees from Messrs. Tata Fison Pvt. Ltd. in respect of the premises given on leave and licence basis to the latter. The assessee with whom we are concerned in this reference are the trustees of Zenith Tin Works Charitable Trust formed under an indenture dated June 12, 1959, and the assessment year in question is the year 1960-61, and the corresponding previous year is the year ended 31st March, 1960. During this previous year the trustees had recovered and realised the sum of Rs. 24,291 as a licence fee in respect whereof the trustees claimed exemption from tax under section 4(3)(i) of the Income-tax Act as being the income from property held under trust or legal obligation for charitable purposes. The Income-tax Officer took the view that the source of this income, namely, right to receive licence fees under the agreements dated July 1, 1959, and November 9, 1959, was not held by the assessee under a trust or other legal obligation and, therefore, the income that was received by the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or charitable purposes. It was urged that it was not open to the Appellate Assistant Commissioner to shift the ground under section 31 of the Act. Both these contentions were negatived by the Tribunal and the Tribunal confirmed the Appellate Assistant Commissioner's order and that is how the two questions were framed by the Tribunal on an application made by the as before it under section 66(1) of the Indian Income-tax Act, 1922. However, Mr. Patil has not pressed the reference so far as question No. 2 is concerned and the only question for our consideration in this reference is whether on the facts and in the circumstances of the case the licence fees received in the assessment year 1960-61 was exempt under section 4(3)(i) of the Income-tax Act ? We have already set out above the objects clause, viz., clause 4(1) of the deed of indenture dated June 12, 1959. It is true that the objects mentioned in sub-clauses (i), (ii), (iii), (v) and (vi) of clause 4(1) would be objects of a public charitable nature. But even Mr. Patil did not dispute before us that the object mentioned in sub-clause (iv) of clause 4(1) could not be regarded as an object of a public charitable trust. The othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two-fold contention before us. In the first place, he has contended that having regard to the provisions contained in the indenture read as a whole the dominant intention of the settlors to do public charity becomes apparent and sub-clause (iv) of clause 4(1) should not be regarded as providing for an object of the trust at all and, according to him, simply because sub-clause (iv) found place in clause 4(1), it cannot mean that it is one of the objects of the trust. Alternatively, he contended that if at all what is provided in sub-clause (iv) is to be regarded as an object of the trust, it should be held to be an incidental or ancillary object not vitiating the dominant charitable purpose of the deed and, therefore, the assessee should be held to be entitled to the exemption under section 4(3)(i) of the Act. In support of his first contention he invited our attention to sub-clause (vii) of clause (1), which provides as follows: "If the income from the trust property in any particular year is not fully utilised for any of the aforesaid objects the trustees shall be entitled to carry forward the unexpended income to the next year." What was urged by him was that the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the settlors in executing this indenture was obviously to carry out charitable objects mentioned in the deed and such charitable objects were specified in detail in clause 4(1) of the deed and amongst the charitable objects under sub-clause (iv) thereof it was provided that the trustees shall out of the income of the trust property provide for welfare of the employees of the trust or any institutions conducted by the trust. In other words, according to Mr. Patil, this sub-clause (iv) should be regarded, if at all, as incidental or ancillary object and since the main or dominant object of the deed was to do charity and since several other sub-clauses of clause 4 indicate what those charitable objects were, it should be held that notwithstanding sub-clause (iv) of clause 4(1) the trust should be regarded as one having been created wholly for charitable purposes. It is not possible to accept this submission of Mr. Patil either. In the first place, there is nothing to indicate in clause 4(1) of the deed that the object mentioned in sub-clause (iv) thereof is incidental or ancillary to other objects mentioned in the other sub-clauses of clause 4(1). Secondly, clause 4(2) in term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erty to spend the income of the trust property. Having regard to the above position which obtains very clearly on reading of the deed of trust as a whole, it is difficult to accept Mr. Patil's contention that sub-clause (iv) of clause 4(1) should either be regarded as not providing any object at all or as providing for an incidental or ancillary object. It is clear to us that the object mentioned in sub-clause (iv) is also one of the independent objects on which the trustees have been given power to spend the income of the property or even the entire corpus of the trust property by virtue of clause 4(2) of the deed and if that be so, it is clear that the trust in question cannot be regarded as being one created wholly for the purpose of the charitable objects. During the course of his argument Mr. Patil referred to a number of reported decisions, but we do not think it necessary to refer to all the cases relied upon by him; reference to a couple of decisions won be sufficient. He principally relied upon a decision of this court in Commissioner of Income-tax v. Breach Candy Swimming Bath Trust. In that case under a trust deed executed in 1876 between the Government of India and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scretion in the carrying out of the object of the trust. The facts in the instant case before us are quite simple. In view of the discussion which we have already made, it is clear that sub-clause (iv) of clause 4(1) of the deed must be regarded as one of the independent objects of the trust and it was under clause 4(2) of the deed that power has been conferred upon the trustees to utilise the income or corpus of the trust property or any part thereof for any one or more of the objects mentioned in clause 4(1). The decision relied upon by Mr. Patil, therefore, does not assist him. The next decision on which Mr. Patil relied was the case of Bai Hirbai Rahim Aloo Paroo v. Commissioner of Income-tax. In that ease certain properties were settled by two sisters belonging to the Khoja community on trustees by their will with the intention of creating a charitable and religious endowment. The trusts were consolidated and a scheme of management was sanctioned by the High Court of Bombay. Though it was clear from the general tenor and the several clauses of the will and the scheme that the dominant intention of the settlors was to create trust for charitable and religious purposes, the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ramsey Khakoo'. Relying on these words, it was urged by Mr. Joshi, on behalf of the department, that these words which we have just quoted indicate that it was a private object, namely, the commemoration of her husband's name, and that conclusion is also supported by the provision for feeding the relations and acquaintances of the settlors. We do not think we can construe sub-clause (c) of clause 9(2) in this manner. The dominant intention of that clause is, as we have shown, to hold an annual majlis or a meeting in remembrance of the anniversary of Imam Hussein Saheb, who is the subject of the highest veneration by the Khojas to which sect Kesarbai belonged. The provision that the celebrations should be associated with the name of her husband does not, in our opinion, take away from the main provision of the sub-clause. We may also emphasise here that the words used are 'majlis' and, as we shall show, a majlis is essentially a religious meeting in the context in which it is used here. No doubt, today the word 'majlis' also implies any educational or cultural purpose, but in the context in which it is used, namely, 'remembrance of the anniversary of the Imam Hussein Saheb', it can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rust are of a religious or charitable nature, the existence of an ancillary or secondary object which is not of a religious or charitable nature but which is intended to subserve the religious and charitable objects would not prevent the grant of such an exemption." In the instant case, as we have already discussed above, we are not inclined to accept Mr. Patil's contention that the object occurring in sub-clause (iv) of clause 4(1) of the deed is either incidental or ancillary to the other objects mentioned in clause 4. In our view, it is one of the independent objects on which the trustees in exercise of their power conferred on them under clause 4(2) could spend even the entire income or the corpus of the trust property during the course of administration of the trust. In other words, it is clear to us that even if the trustees under the indenture dated June 12, 1959, were to spend the entire income over non-charitable object as mentioned in sub-clause (iv) of clause 4(1), they would not be committing any breach of any of the terms or conditions of the trust. In such a situation, it is clear to us that the trust cannot be regarded as one created wholly for charitable purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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