Full Judgment Text
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PETITIONER:
GENGABAI CHARITIES
Vs.
RESPONDENT:
COMMISSIONER OF INCOME-TAX AND ANR.
DATE OF JUDGMENT24/07/1992
BENCH:
KULDIP SINGH (J)
BENCH:
KULDIP SINGH (J)
YOGESHWAR DAYAL (J)
CITATION:
1992 AIR 1765 1992 SCR (3) 626
1992 SCC (3) 690 JT 1992 (4) 216
1992 SCALE (2)79
ACT:
Income tax Act, 1961-Section 11(1)(a)-Construction of
trust deed-Kalyana Mandapam and Printing press-Income
derived by trust-Whether exemption entitled.
HEADNOTE:
A trust namely, "Ganga Bai Charities" was created on
13.9.1958, to construct and provide a building for the
benefit of the public to be used for religious, charitable
cultural and social purposes.
The founder of the trust contributed Rs. 34,000 to the
trust fund. With that fund a plot of land was purchased and
the construction of a building was begun. The fund was
augmented by her son from his own contribution as well as
from outside donations.
The building was completed at the cost of about Rs. six
lakhs and it was let out as a marriage mandapam to be used
by the members of the public. The income derived from
letting out the Kalyana Mandapam came to Rs.1,06,392.00 in
the year ending March 31, 1963. For the subsequent years
also the income was substantial. The trust was also running
a printing press and seizable income was being from the
press.
Income-tax proceedings were initiated against the
trust.
The appellant-trust contended that the income derived
from the property was being held wholly for religious and
charitable purposes and as such was exempt under Section 11
of the Income Tax Act.
The Income-tax Officer holding that the income earned
by the trust was taxable, rejected the contention of the
trust.
On appeal the Appellate Assistant Commissioner reversed
the Income-tax Officer’s order, holding that the trust was a
charitable trust and its income was entitled to exemption
under Section 11 of Act.
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On further appeal by the department, the Tribunal
upheld that decision of the Commissioner but remitted the
assessment to the Income-tax Officer to find out as to what
extent in each year the trust income or accumulation were
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expended for charitable purposes.
The Income Tax Appellate Tribunal referred the
following question to the High Court under Section 256(1) of
the Act:-
"Whether it had been rightly held that the income of
the trust would be entitled to exemption under Section 11 of
the Income Tax Act, 1961?"
The High Court answered the question in the negative
and in favour of the department, against which these appeals
were filed by the assessee-trust by special leave before
this Court.
On the question, whether the Gengabai Charities, a
trust was entitled to exemption under Section 11(1)(a) of
the Income Tax Act, 1961, this Court dismissing the appeals
of the assessee-trust,
HELD : 1.01. The crux of the statutory exemption under
Section 1(1)(a) of the Income Tax Act, 1961 is not the
income earned from property held under the trust but the
actual application of the said income for religious and
charitable purposes. It is, therefore, necessary to
indicate in the trust-deed the broad objectives for which
the income derived from the property is to be utilised.
There is no mention in the trust-deed as to how the income
derived from the trust property is to utilised. The public
uses the building on payment of rent to the trustees. What
is to be done with the money so collected has not been
provided in the trust deed. There is no mandate in the
trust deed that the income derived from the trust property
is to be spent on religious or charitable purposes. [632 C-
D]
1.02. On a careful reading of the trust-deed it is not
possible to cull-out in clear terms a specific
charitable/religious object to conclude that the trust was
set up wholly for or religious purposes. The "religious,
charitable, cultural and social" purposes referred to in the
deed are not avowed as the objectives of the trust itself.
What the founder of the trust intended to convey was that
the building to be constructed out of the funds provided by
her and supplemented from other sources, must be heed for
the benefit of the public for being used by them for
religious, charitable, cultural or social purposes. [631 F-
G]
628
1.03. The intention of the founders was to provide a
building for the benefit for the benefit of the public to be
used by them for religious, charitable and/or cultural and
social purposes. It is nowhere stated in the trust deed
that the trust itself has been created for the purpose of
carrying out any of such objectives. The holding and
conducting of religious discourses and the running of
schools for the development of Sanskrit have also been
mentioned from the point of view of the users of the trust
property. These are some of the purposes for which the
public can be permitted to use the property. [631H-632B]
1.04. On a proper construction of the trust deed it
does not meet the requirements of Section 11(1)(a) of the
Act. [632E]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 10803
to 10805 of 1983.
From the Judgment and Order dated 17.12.1980 of the
Madras High Court in Tax Cases Nos. 261 of 1974 and 9 & 10
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of 1977.
K. Parasaran, G. Umapathy, Mrs. Indu Malini
Ananthachari for C.S. Vaidyanathan for the Appellant.
Ranbir Chandra for Ms. A Subhashini for the Respondent.
The Judgment of the Court was delivered by
KULDIP SINGH, J. The question for our consideration in
these appeals is whether Gangabai Charities, a trust
operating in the city of Madras, is entitled to exemption
under Section 11(1)(a) of the Income Tax Act, 1961 (the
Act).
Gangabai executed a document dated September 13, 1958
which was described as a deed of trust. The trust was named
as "Ganga Bai Charities". In the trust-deed Ganga Bai gave
effect to her desire to construct and provide a building for
the benefit of the public to be used for religious,
charitable, cultural and social purposes. She contributed
Rs.34,000 to the trust fund. With that fund a plot of land
was purchased and the construction begun. The fund was
augmented by her son Seetha Rama Rao from his own
contributions as well as from outside donations. The
building was completed at the cost of about Rs. six lakhs.
Ever since the construction of the building it is being let
out as a marriage mandapam to be used by
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the members of the public as such. the income derived from
letting out the Kalyana Mandapam came to Rs.1.06,392.00 in
the year ending March 31, 1963. For the subsequent years
also the income was substantial. The trust was also running
a printing press and sizable income was being earned from
the press.
The Income-tax Officer took the view that the income
earned by the trust was taxable. The contention of the
trust that the income derived from the property was being
held wholly for religious and charitable purposes and as
such was exempt under Section 11 of the Act, was rejected.
On appeal the Appellate Assistant Commissioner reversed the
Income-tax Officer and held that the Ganga Bai Charities was
a charitable trust and its income was entitled to exemption
under Section 11 of the Act. On further appeal by the
department, the tribunal upheld the decision of the
Commissioner but remitted the assessment to the Income-tax
Officer to find out as to what extent in each year the trust
income or accumulations were expended for charitable
purposes. The Income Tax Appellate Tribunal referred the
following question to the High Court under Section 256(1) of
the Act:-
"Whether is has been rightly held that the income
of the trust would be entitled to exemption under
Section 11 of the Income Tax Act, 1961?"
The High Court by its judgment dated December 17, 1980
answered the question in the negative and against the
assessee. These appeals by way of special leave for against
the judgment of the High Court.
Section 11(i)(a) of the Act, to the relevant extent, is
reproduced hereunder:-
11. Income from property held for charitable or
religious purposes-(I) 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.........
The above quoted provisions make it clear that a trust
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has to satisfy
630
the following conditions in order to claim benefit of
Section 11(1)(a) of the Act:-
(1) The income is derived from property held under
the trust.
(2) The trust is wholly for charitable or
religious purposes.
(3) The exemption is permissible to the extent to
which such income is applied to such purposes in
India.
The appellant-trust has been created under a deed of
trust dated May 30, 1978 and as such we have to look into
the contents of the trust deed of find out as to whether the
conditions precedent for claiming exemption under section
11(1)(a) of the Act are satisfied. The tribunal and the
High Court have also based their conclusions on the
interpretation of the trust deed.
It is not disputed that the appellant-trust derived the
income from the property held under it but the existence of
other conditions necessary to claim exemption under Section
11(1)(a) of the Act have been seriously disputed by the
Revenue before us. We have minutely examined the trust deed
and have given our thoughtful consideration to its contents.
The relevant paragraphs of the trust deed from where the
purposes of the trust can be spelled out are reproduced
hereunder:-
"WHEREAS the Settler, has long cherished a 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, to secure religious
benefit for herself and satisfy a long felt need of
the Public in this part of this city."
"NOW THIS INDENTURE WITHNESSTH that in pursuance of
the premises the settlor above named doth hereby
declare that the plot of land above mentioned and
more particularly described in the schedule below
was purchased by her for Rs.24,000 on 9.9.1957 for
the express purpose of constructing a building
thereon and dedicating the same for use by the
public inter alia for Religious, Charitable and
Cultural purposes and doth hereby create an
irrevocable Trust of the said property for the
purposes aforesaid."
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"The settlor further declares that immediately
after such purchase she, the settlor relinquished
all her rights thereto and dedicated the said plot
of land for the use of the public for the purposes
above-mentioned and put the said plot of land in
the possession of her son Shri K. Seetharam Rao,
with a direction to construct a building thereon
for the use of the public for religious,
charitable, social, cultural and other allied
purposes."
"That the Trust property , more particularly
described in the schedule below shall be used for
religious, charitable, social, cultural and other
allied purposes".
"That the Trustee shall have, as the construction
proceeds, power to make any suitable alterations in
the plan already submitted by him and sanctioned
the Corporation of Madras, in such manner as to him
may seem necessary and that the Trustee may after
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the completion of the building let or allow the
said building or such portion of portions of the
said building for the use of the public for social
cultural, religious educational etc., purposes,
free or at such rents and such terms and conditions
as he thinks proper in the interests of the Trust;
for holding and conducting religious discourses,
for running schools for the development of Sanskrit
learning free or at such rents and on such terms
and conditions as the Trustee things reasonable and
proper in the interests of the Trust".
On a careful reading of the above quoted paragraphs of
the trustdeed it is not possible to cull-out in clear terms
a specific charitable/religious object to conclude that the
trust was set up wholly for charitable or religious
purposes. The "religious, charitable, cultural and social"
purposes referred to in the deed are not avowed as the
objectives of the trust itself. What the founder of the
trust intended to convey was that the building to be
constructed out of the funds provided by her and
supplemented from other sources, must be held for the
benefit of the public for being used by them for religious,
charitable, cultural or social purposes. We cannot read the
contents of above quoted paragraphs as the objects of the
trust, these are only the objects of those who wish to put
the trust property to use. On a careful consideration of
the language of the trust deed, we are of the view that the
intention of the founder was to provide a building for the
benefit
632
of the public to be used by them for religious, charitable
and/or cultural and social purposes. It is no where stated
in the trust deed that the trust itself has been created for
the purpose of carrying out any of such objectives. The
holding and conducting of religious discourses and the
running of schools for the development of Sanskrit have also
been mentioned from the point of view of the users of the
trust property. These are some of the purposes for which
the public can be permitted to use the property.
The crux of the statutory exemption under Section
11(1)(a) of the Act is not the income earned from property
held under the trust but the actual application of the said
income for religious and charitable purposes. It is,
therefore, necessary to indicate in the trust-deed the broad
objectives for which the income derived from the property is
to be utilised. There is no mention in the trust-deed as to
how the income derived from the trust property is to be
utilised. The public uses the building on payment of rent
to the trustees. What is to be done with the money so
collected has not been provided in the trust deed. There is
no mandate in the trust deed that the income derived from
the trust property is to be spent on religious or charitable
purposes.
We are satisfied that on a proper construction of the
trust deed it does not meet the requirements of Section
11(1)(a) of the Act. We find no infirmity in the judgment
of the High Court. We entirely agree with the reasoning and
the conclusions reached therein.
Mr. Prasaran invited our attention to paragraphs 5 and
6 of the special leave petition wherein it is stated that
Mr. Justice V. Balasubrahmanyan who delivered the judgment
in this case on behalf of the two-Judge Bench of the High
Court had given opinion in this case as special counsel for
the Income-tax Department and in the said opinion the
Department was advised to go to the High Court by seeking a
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reference. It was also opined that the trust was ineligible
for the exempltion for the reasons which were given therein.
It is further mentioned inthe special leave petition that
the petitioner came to know about this aspect only after the
judgment was pronounced on December 17, 1980. None of the
parties brought this aspect to the notice of the learned
Judge at the hearing or at any time before or after the
conclusion of the hearing. Mr. Prasaran contends that it
would be in the interests of justice if the matter be
remanded back to High Court for rehearing. We are not
inclined to agree with the learned counsel. The
633
tribunal pronounced its order on February 28, 1974 and the
High Court decided the reference seven years thereafter.
The opinion must have been given immediately after the
tribunal’s order and as such due to lapse of time the
learned Judge could not have remembered the ‘routine
opinion’ he gave as a busy lawyer several years ago. The
judgment was delivered by the High Court after hearing
detailed arguments from both sides. All the points raised
by the assessee have been dealt with and decided on the
basis of judicious reasoning. In any case we have heard mr.
K. Prasaran, learned Senior Advocate for the appellant and
have examined the trust deed minutely and carefully. The
view taken by the High Court is the only view which can be
taken in this case and we affirm the same.
The appeal is, therefore, dismissed with costs. We
quantify the costs as Rs. 10,000.
V.P.R. Appeals dismissed.
634