TMI Blog1959 (5) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to as "the said Act") against its order dated February 21, 1956, in Income-tax Reference No. 32 of 1954 answering in the negative two questions of law referred to it under section 66(1) of the said Act at the instance of the appellants. The appellants are the trustees of a charity fund known as "The Charity Fund Founded by Sir Sassoon David, Baronet of Bombay". The said Sir Sassoon David, Bart., and four other persons, who were holding certain securities of the value of Rs. 24,25,000 for the purpose of charity and had been applying the same for and towards charitable purposes, executed, on June 8, 1922, a deed of declaration of trust declaring that the said trust fund would be held by them on trusts more specifically therein mentioned. Clause 13 of the said deed, on the true construction of which depends the answer to the referred questions, runs as follows : "13. The trust fund shall be held by the trustees upon the trusts to apply the net income thereof after providing for all necessary expenses in relation to the management of the trust funds for all or any of the following purposes that is to say, (a) the relief and benefit of the poor and indigent members of Jewish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so desires that the income for the time being of the trust funds or any part thereof may be applied to such charitable object or objects as the said Sir Sassoon David, Bart., shall direct and in such case the trustees shall so apply the income." This deed of declaration of trust was, on June 4, 1953, registered under the Bombay Public Trusts Act, 1950. The trust fund had been invested by the trustees in inter alia 3 1/2% Government securities. In the year 1930 a certificate was issued by the Income-tax Officer, A-Ward, Bombay, whereby the Reserve Bank of India was authorised not to deduct at source the tax on the interest on the said securities so held by the trustees. It was mentioned in the said certificate that it was to enure till its cancellation. In 1946 the 3 1/2% Government securities were redeemed by the Government of India and were converted into 3% Conversion Loan, 1946. Accordingly in February 1948, the said certificate of exemption was cancelled, as the securities covered thereby had been redeemed by the Government. The trustees thereupon asked for a fresh certificate of exemption from the Income-tax Officer, Bombay Refund Circle, in respect of the 3% Conversion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal drew up a statement of case and referred two questions of law arising out of its order to the High Court for its opinion. The said questions are as follows : "(1) Whether the trust property is held wholly for religious or charitable purposes within the meaning of section 4(3)(i) of the Indian Income-tax Act ? (2) If the answer to question (1) is in the negative, whether the trust property is held in part only for religious or charitable purposes ?" The said reference came up for hearing before the said High Court and both the referred questions were answered in the negative. The High Court, however, gave the appellants a certificate of fitness for appeal to this court and the present appeal has been filed on the strength of such certificate. A perusal of clause 13 of the deed shows that the trust fund is declared to be held by the trustees upon trusts to apply the net income thereof for all or any of the six purposes enumerated therein. It was conceded before the High Court and it has not been disputed before us--that if there was nothing else in this clause, then each of these six purposes would have to be upheld as a charitable purpose involving an element o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of the family of Sir Sassoon David, Bart. The High Court points out that in view of the language of clause 13 of the deed read as a whole, it is open to the trustees, without being guilty of any breach of trust, to spend the entire net income of the trust fund for the purpose of giving relief to the poor and indigent relations or members of the family of the said Sir Sassoon David, Bart., including therein the distant and collateral relations and such being the position, the High Court came to the conclusion that it could not be said that the property was held wholly or partly for religious or charitable purposes involving an element of public utility. The High Court accordingly held that the income from the trust fund was not exempt from taxation under section 4(3)(i) and answered both the questions in the negative. The problem before us is whether the High Court was right in so answering the questions. In coming to the decision that it did, the High Court relied on its own earlier decision in the case of Trustees of Gordhandas Govindram Family Charitable Trust v. Commissioner of Income-tax. The facts in that case, however, were somewhat different from the facts now before ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose latter sub-clauses cannot be ignored, for they certainly have some bearing on the question as to who or what were the primary objects of the trust as a whole. In the next place, the purpose of sub-clause (a) is the "relief and benefit of the poor and indigent members of Jewish or any other community of Bombay or other parts of India or of the world". It is conceded by learned counsel that this sub-clause clearly expresses a general charitable intention involving an element of public utility. It follows, therefore, that sub-clause (a) constitutes a valid public charitable trust having as its beneficiaries the several classes of persons referred to therein. This is the first position. We then pass on to the provisos. The first proviso opens with the words "in applying the income as aforesaid". This takes us back to sub-clause (a). The meaning of the proviso obviously is that in applying the income for the purpose of sub-clause (a), the trustees shall give preference to the poor and indigent relations or members of the family of Sir Sassoon David, Bart. The proviso does not operate independently but comes into play only "in applying the income as aforesaid". The provision for giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the primary class from which the trustees could select the beneficiaries contained the necessary element of benefit to the public and that it was when that class was ascertained that the validity of the trust had to be determined, so that the subsequent direction to prefer, as to the 75% of the income, a limited class did not affect the validity of the trust which was accordingly a valid and effective charitable trust. Referring to the first part of the will Upjohn J. at p. 257 said : "If the will concluded there, the trust would clearly be a valid charitable trust, having regard to the admission that a gift for commercial education is for the advancement of education." Then after stating that the next task was. to make a selection from that primary class of eligible persons, the learned judge continued : "It is only when one comes to make a selection from that primary class that the employees of John Batt Co. and the members of their families come into consideration, and the question is, does that direction as to selection invalidate the primary trust ? In my judgment it does not do so." Further down be said : "In my judgment it is at the stage when the primary ..... X X X X Extracts X X X X X X X X Extracts X X X X
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