Full Judgment Text
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PETITIONER:
THE TRUSTEES OF GORDHANDAS GOVINDRAM FAMILYTRUST, BOMBAY
Vs.
RESPONDENT:
THE C.I.T. BOMBAY
DATE OF JUDGMENT28/11/1972
BENCH:
HEGDE, K.S.
BENCH:
HEGDE, K.S.
VAIDYIALINGAM, C.A.
ALAGIRISWAMI, A.
DUA, I.D.
VAIDYIALINGAM, C.A.
REDDY, P. JAGANMOHAN
KHANNA, HANS RAJ
CITATION:
1973 AIR 623 1973 SCR (2)1050
1973 SCC (3) 346
CITATOR INFO :
R 1977 SC2103 (12)
ACT:
Wealth Tax Act, 1957, Ss. 3 and 5(1)(i)-Charging section not
expressly mentioning association of persons as a chargeable
entity-Trustees of a trust whether can be charged as
individuals-Construction of deed Trust whether a charitable
trust within meaning of S. 5 (1) (i) of Act.
HEADNOTE:
Four persons constituted on June 11, 1941 a Trust known as
’Gordhandas Govindram Family Trust’. In respect of the
assessment years 1957-58 and 1958-59 the following two
questions were referred to the High Court under S. 27(1) of
the Wealth Tax Act 1957; (a) Whether on a true construction
of the indenture of trust dated 11-6-1941 the trustees of
the Trust constitute an assessable unit under the provisions
of the Wealth Tax Act; (b) Whether the property held by the
trustees under the indenture of trust dated 11-6-1941 is
held for any public purpose of a charitable or religious
nature in India within the meaning of Sec. 5(1)(i) of the
Wealth-Tax Act? The High Court answered both the questions
against the assessees.. In appeal by certificate it was
contended before this court in respect of the first question
that the charging section of the Act did not expressly
mentions ’association of persons’ as a chargeable entity and
therefore the trustees could not be taxed.
HELD : (i) Section 21 (1) as well as S. 5 (1) (i) of the Act
proceed on the basis that a trust property comes within the
scope of the Act. Sec. 3 of the Act does bring within its
scope an individual which expression in view of the Central
General Clauses Act includes individuals as well, unless the
context otherwise indicates. in this case, the context, far
from not indicating that the individual does not include
individuals, clearly shows at any rate so far as the
trustees are concerned that it includes individuals. As the
Indian Income-tax Act provides for the assessment of an
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association of persons’ the context therein may indicate
that individual does not include individuals. But such an
interpretation is not permissible when we deal with See. 3
of the Act. Therefore joint trustees can be taxed as
individual under the Act. Accordingly, the trustees of the
trust in the present case constitute an assessable unit
under the provisions of the Act. [105 H E]
Commissioner of income-tax, Madhya Pradesh and Bhopal v.
Sodra Devi, 32, I.T.R. 615 at 620 and V. Venugopala Ravi
Varma Rajah v. Union of India and Another, 74. I.T.R. 49,
applied.
Subashini Karuri and Another v. Wealth-tax Officer, Calcutta
and Another, 45 I.T.R. 953 and Abhay L. Khatau and Others v.
Commissioner of Wealth-tax, Bombay City II, 57 I.T.R. 202,
approved.
Commissioner of Wealth-tax, Bihar and Orissa v. Kripashankar
Dayashanker, Worah, 81 I.T.R. 763 referred to.
(ii) The trust in question war. created primarily for the
benefit of the members of the family of Gordhandas Govindram
Seksaria. This is clear from the title given to the Trust
as well as from the various provisions of the trust deed.
Therefore it was not possible to hold that
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the Trust in question is a Trust for any public purpose. It
is clearly a private Trust. (1055 F]
Trustees of Gordhandas Govindram Family Charity Trust v.
Commissioner of Income-tax (Central), Bombay, 21 I.T.R. 231
at 237 applied.
Trustees of the Charity Fund v. Commissioner of Income-.tax,
Bombay, 36 I.T.R. 513 referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 2382- 2383
of 1969.
Appeals by certificate from the judgment and order dated
14th and 15th February 1968 of the Bombay High Court in
Wealth Tax Reference No. 1.
S. T. Desai, A. G. Menezes, J. B. Dadachanji, O. C. Mathur
and Ravinder Narain for the appellant.
T. A. Ramachandran, S. P. Nayar and R. N. Sachthey _ for
the respondent.
The Judgment of the Court was delivered by
HEGDE, J.-These are appeals by certificate. They arise from
a reference under s. 27(1) of the Wealth Tax Act, 1957 (To
be hereinafter referred to as the Act). Thest appeals
relate to the Wealth Tax assessment of the appellant
assessee for the assessment years 1957-58 and 1958-59, the
relevant valuation date& being December 31, 1956 and
December 31, 1957.
The two questions of law referred to the High Court are
"1. Whether on a true construction of the
indenture of trust dated 11-6-1941 the
trustees of the Trust constitute an assessable
unit under the provisions of the Wealth-tax
Act ?
2. Whether the property held by the
trustees under the indenture of trust dated
11-6-1941 is held for any public purpose of a
charitable or religious nature in India within
the meaning of Sec. 5 ( 1 ) (1) of the Wealth-
tax Act ?"
The High Court has answered both these questions in favour
of the Department and against the assessees. Hence these
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appeals.
The facts of this case lie within a narrow compass.
Govindram Gordhandas Seksaria, Ramnath Gordhandas Seksaria,
Makhanlal Gordhandas Seksaria and Bholaram Gordhandas
Seksaria constituted a Trust on June 11, 1941 in respect of
a sum of Rs. 1 1 lacs (Rupees eleven lacs). That Trust was
known as’ ’Gordhandas Govindram Family Trust’. Clause (2)
of the Trust deed says that it was created "for giving help
or relief to such poor Vaishaya Hindoos or other Hindoos as
the trustees may consider deserving
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of help in the manner and to the extent hereinafter
specified and subjects to the conditions and directions
stated in the next following clauses and/or for the
charitable object or objects hereinafter mentioned." Clause
(3) (a) of the Trust deed provides that the conditions and
directions to be observed and followed by the Trustees in
the execution of the Trusts herein declared as follows
"Poor Vaishaya Hindoos who are members of Sek-
saria families shall be preferred to poor
Vaishaya Hindoos of Navalgadh not belonging to
that family."
Sub-clauses (b) to (q) provide for the payment
of maintenance and marriage expenses of the
poor male or female descendants of Seksaria
family.
We shall now set out sub-clauses (r) to (u) of
clause (3). They read :-
(r) Rs. 5/- (Rupees five) per month may be
paid as and by way of maintenance of any poor
male Vaishaya Hindoo who may be deserving of
help.
(s) Rs., 5/- (Rupees five) per month may be
paid as
and by way of maintain to any poor unmarried
female Vaishaya Hindoo or a poor Vaishaya
Hindoo or a poor Vaishaya Hindoo widow who may
be deserving of help.
(t) Rs. 500/- (Rupees five hundred) may be
expended or given for the purpose of meeting
the expenses of marriage of any poor female
Vaishaya Hindoo who may be deserving of help."
(u) Rs. 500/- (Rupees five hundred) may be
expended or given for the purpose of meeting
the expenses of marriage of any poor female
Vaishaya Hindoo who may be deserving of help."
The deed further provides :-
"If the income of the Trust Estate is not
sufficient to carry out the charities
specified in sub-clauses (a) to (u) above the
charity specified in an earlier sub-clause
shall be given priority over a charity
specified in a later subclause."
From the above,, it is clear that charity provided was
primarily for the benefit of the members of the family of
Seksaria, no doubt including both male and female
descendants. It is also clear from the deed that the
amounts provided for the payment of maintenance and marriage
expenses for the poor members of the Seksaria family is
bound to take away a substantial part of the income of the
trust, if not the whole of it.
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As mentioned earlier, the Trust is known as "Gordhandas
Govindram Family Trust". That is a clear pointer. That
shows that the Trust was primarily intended for the benefit
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of the family of Gordhandas Govindram. This is made further
clear from the various provisions in the Trust deed. A
reading of the Trust deed as a whole clearly goes to prove
that the charity under that deed begins with the family of
Gordhandas Govindram and possibly ends with it. Charity in
favour of the Vaishaya Hindoos other than the members of the
family of Gordhandas Govindram is not: only marginal, but
also quite tenuous.
We shall now take up the two questions of law referred to
the High Court to ascertain its opinion. It was contended
before the High Court that the Wealth-tax Act does not
provide for levy of any tax on Trusts. As seen earlier,
this contention did not find, favour with the High Court.
But that contention was repeated before this Court. In
order to decide that contention, it is necessary to refer to
three provisions in the Act viz. Sections 3, 5 (1) (1) and
21. Section 3 is the charging section. It says :-
"Subject to the other provisions contained in
this Act, there shall be charged for every
assessment year commencing on and from the
first day of April, 1957, a tax (hereinafter
referred to as wealth-tax) in respect of the
net wealth on the corresponding valuation date
of every individual, Hindu "undivided family
and company at the rate or rates specified in
the Schedule."
Section 5 provides for exemption in respect of certain
assets. One of the exemptions provided is in respect of any
property held by an assessee under Trust or other legal
obligation for any public purpose of a charitable or
religious-nature in India. Section 21 to the extent
material for our present purpose may be recast thus :-
"In the case of assets chargeable to tax under
this Act which are held by a Trustee appointed
under a Trust deed by a duly executed
instrument in writing, whether testamentary or
otherwise, the wealth-tax shall be levied upon
and recoverable from the trustee in the like
manner and to the same extent as it would be
leviable upon and recoverable from the persons
on whose behalf the assets are held, and the
provisions of this Act shall apply
accordingly."
It was urged that unlike the charging section in the income-
tax Act, the charging section in the Act does not provide
for the levy of tax on association of persons. It merely
provides for assessing an individual or Hindu undivided
family or a company, Trustees cannot be considered either
individual or as Hindu Un-
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divided Families or Companies. They could have been charged
as an association of persons. But that body is not
assessable under the Act. Hence, the trustees are not
chargeable under the Act. It Wu conceded at the hearing
that sec. 5 (1) (i) as well as s. 21 proceed on the basis
that a Trust property is also liable to be taxed under the
Act. But what was urged before us was that there is a
lacunae in the charging section and, therefore, the trustees
of a Trust cannot be taxed under the Act. We see no merit
in this contention.
In Commissioner of Wealth-tax, Bihar and Orissa v. Kripa-
shankar Dayashanker Worah, (1) the contention raised was
that trustees could not be assessed under the Act as Sec. 21
(1 ) of the Act provides for assessing the trustees who held
the Trust property " on behalf of" others. In law, a
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trustees does not hold the trust property "on behalf of"
others. Hence, trustees cannot be assessed to tax under the
Act. That contention was rejected by this Court. No
contention was raised in that case that trustees did not
come within the scope of sec. 3 of the Act. The judgment in
that case proceeded on the basis that trustees can be
assessed to wealth-tax in respect of the trust property of
which they are trustees.
There is also no dispute that s. 5 ( 1 ) (i) of the Act
proceeds on the basis that a trust property comes within
the scope of the Act. Sec. 3 of the Act does bring within
its scope an individual which expression in view of the
Central General Clauses Act includes individuals as well,
unless the context otherwise indicates. In this case, the
context, far from not indicating that the individual does
not include individuals, clearly shows at any rate so far as
the trustees are concerned that it includes individuals. As
the Indian Income-tax Act provides for the assessment of "an
association of persons", the context therein may indicate
that individual does not include individuals. But such an
interpretation is not permissible when we deal with sec. 3
of the Act.
In Commissioner of Income-tax, Madhya Pradesh and Bhopal v. Sodr
a
Devi,(2) this Court observed :-
"The word assessee is wide enough to cover not
only an "individual" but also a Hindu
undivided family, company and local authority
and every firm and other association of
persons or the partners of the firm or the
members of the association individually."
In V. Vnugopala Ravi Varma Rajah v. Union of
India and Another,($) a question arose whether
s. 3 of the Expenditure-tax Act, 1957, which
reads
(1) 81 I.T.R. 763. (2) 32
I.T..R. 615 at 620.
(3) 74 I.T.R. 49.
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"(1) Subject to the other provisions contained
in this Act, there shall be charged for every
financial year commencing on and from the
first day of April, 1958, a tax (hereinafter
referred to as expenditure-tax) at the rate or
rates specified in the Schedule in respect of
the expenditure incurred by any individual or
Hindu undivided family in the previous
year........ "
brought within the not of taxation a Mappilla
Marumakkattayam family. As seen earlier, under s. 3 of the
Expenditure Tax Act, the only entities which are mentioned,
are individuals or Hindu undivided family. This Court came
to the conclusion that Mappilla Marumakkattayam Family could
also be assessed as an individual.
In Subashini Karuri and Another v. Wealth-tax Officer, Cal-
cutta and Another, (1) the Calcutta High Court opened that
the joint trustees could be assessed as individuals under
the Act. A similar view was taken by the Bombay High Court
in Abhay L. Khatau and Others v. Commissioner of Wealth-tax,
Bombay city II. (2). We are in agreement with that view.
We, accordingly, agrees with the High Court and hold that
the trustees of the trust, with which we are concerned in
these appeals, constitute an assessable unit under the
provisions of the Act.
Now, let us turn to the other question viz. whether the
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trust in question can be considered as a trust created for
public purpose of a charitable or religious nature. As seen
earlier, the trust in question was created primarily for the
benefit of the members of the family of Gordhandas Govindram
Seksaria. That is clear from the title given to the Trust
as well as from the various provisions to which we have
made reference earlier. Therefore, it is not possible to
hold that the Trust in question is a Trust for any public
purpose. It is clearly a private Trust. The character of
the Trust in question came to be considered by the Bombay
High Court in Trustees of Gordhandas Govindram Family
Charity Trust v. Commissioner of Income-tax (Central).
Bombay, (3) under sec. 4 (3) (1) of the Indian Income-tax
Act. After examining the I various provisions, the High
Court opined that it was not a trust
(1) 46 I.T.R. 953.
(2) 57 I.T.R. 202.
(3) 21 IT.R. 231 at 237.
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for charitable purpose within the meaning of Indian Income-
tax Act, 1922. It was held that the primary purpose of the
settlor was to benefit the members of his family and
remotely and indirectly to benefit the general public. We
agree with that conclusion. The decision in the above case
came up for consideration by this Court in Trustees of the
Charity Fund v. Commissioner of Income-tax, Bombay(1). This
Court did not differ from the view taken by the High Court.
But distinguished the same.
In the result, these appeals fail and they are dismissed
with costs-one hearing fee.
G.C. Appeal dismissed.
(1) 36 IT.R. 513.
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