S. Obul Reddy, C.J.
1. The following four questions, the first question at the instance of the assessee and the other questions at the instance of the revenue, have been referred to this court for its opinion :
'1. Whether, on the facts and in the circumstances of the case, the corpus proportionate to the incomes of Rs. 50,000 and Rs. 25,000, respectively, allocated under Clauses 6 and 7 of the trust deed, is liable to be assessed in the hands of the assessee separately as a distinct and separate trust ?
2. Whether, on the facts and in the circumstances of the case, the portion of the trust fund which bears the same porportion as the aggregate amount of annuities payable to the beneficiaries under the Second and Third Schedules of the trust deed bears to the total income of the fund is liable to be excluded from the assessments ?
3. Whether, on the facts and in the circumstances of the case, the trust fund proportionate to the sum of Rs. 75,000 allocated under Clauses 6 and 7 of the trust deed should be treated as held by the trustees on behalf of the beneficiaries specified in Clauses 6 and 7 and assessed under Section 21(4) of the Wealth-tax Act ?
4. Whether, on the facts and in the circumstances of the case, the corpus proportionate to the balance of income falling for consideration under Clause 8 of the trust deed should be treated as held for charitable purposes and accordingly should be exempted under Section 5(1) of the Wealth-tax Act? '
2. Questions Nos. 1 and 3 are covered by the decision of this court in Trustees of Sahebzadas of Sarf-e-khas Trust v. CIT : 44ITR332(AP) . Therefore, having regard to the view expressed therein, we answer these two questions against the assessee. Mr. Anjaneyulu, appearing for the assessee, made an oral application for a certificate of leave to the Supreme Court under s. 29 of the W.T. Act, hereinafter referred to as 'the Act.' It is stated by him that the decision of this court in Trustees of Sahebzadas of Sarf-e-khas Trust v. CIT : 44ITR332(AP) is pending in appeal before the Supreme Court in C.A. No. 2742(NT) of 1972. We, therefore, certify under Section 29 of the W.T. Act, that this case, in so far as the said two questions are concerned, is a fit one for appeal to the Supreme Court.
3. Question No. 2 is analogous to question No. 1(i) in R. C. Nos. 50 and 54 of 1976, which was decided by us on February 2, 1978 [CWT v. Trustees of H.E.H. the Nizam's Miscellaneous Trust : 126ITR233(AP) ] and the answer, therefore, given in the those two references will govern the second question.
4. Mr. Anjaneyulu, in this connection, sought to invite our attention to the illustrations given by the Supreme Court at pages 595 and 596 in CWT v. Trustees of H.E.H. Nizam's Family Trust : 108ITR555(SC) . We made it very clear in the said references that we answered the questions on the basis of what the Supreme Court decided and observed in that case. Therefore, it is unnecessary for us to once again refer to the reasoning given by us in those two references to answer this question.
5. The only question that remains to be answered by us is the fourth question. It is the case of the revenue that the conditions imposed by Section 5(1) of the Act are not fulfilled so as to entitle the trust for exemption. The facts necessary for answering the question raised are these: The erstwhile Nizam of Hyderabad settled Govt. Securities of the face value of Rs. 2,50,00,000 on trust by an indenture dated June 14, 1950. The trust is named as ' Sahebzadas of Sarf-e-Khas Trust '. The objects of the trust are mentioned in Clauses 3, 4, 5, 6, 7 and 8. Clause 8 is the relevant clause for the purpose of discussion here. But, we would, however, like to briefly refer to the contents of Clauses 3, 4, 5, 6 and 7 also. Clause 3 deals with payment of certain amounts every month to 663 persons mentioned in the second schedule to the deed of trust. Clause 4 deals with the payment of pensions and the names of the beneficiaries to whom such pensions are to be paid are mentioned in the third schedule. Clause 5 deals with the consolidated payments to the legal representatives of the beneficiaries when any one mentioned in the second schedule dies. Under Clause 6 a sum of Rs. 50,000 is set apart out of the income of the trust for giving scholarships to such of the dependants and their issues for education either in this country or outside. Clause 7 stipulates setting apart of a sum of Rs. 25,000 so that the trustees, in their absolute discretion, may pay monthly increased allowance to any of the dependants mentioned in the trust deed. Clause 8 enjoins on the trustees to utilise the balance of the income after meeting the liabilities contemplated under the aforesaid clauses to be spent for general charitable purposes and this clause reads as follows :
' (1) for advancement of education preferably technical education by giving scholarships or fees or monetary help to poor and deserving students or by giving donations to any recognised institution or institutions or otherwise promoting education amongst the poor ;
(ii) for giving free medicine and free medical aid to the poor and deserving;
(iii) for relief amongst the poor by giving monetary aid, food, clothing and the like preference being given in the absolute discretion of the trustees to the poor widows and orphans.
(iv) for supporting and maintaining any charity that may be established or started by the settlor ;
(v) for any other charitable object or objects for the benefit of the poor as the trustees may, in their absolute discretion, think fit, PROVIDED ALWAYS that notwithstanding anything herein contained to the contrary, the trustees shall be at liberty and have absolute discretion to spend in any year not more than half the net income, under this clause, of that year for any charitable object or objects without reference to caste or creed. '
6. The WTO did not grant exemption in respect of the balance of wealth corresponding to the income and that order was upheld by the AAC. The Tribunal reversed the findings of the authorities below and held that 'the property or the proportionate corpus determined with reference to clause 8 is wholly held for charitable purposes ' and in that view granted exemption under Section 5(1) of the Act.
7. Mr. Rama Rao, appearing for the revenue, contended that a perusal of the sub-clauses of Clause 8 would show that no public purpose is involved in the trust and that no corpus as such was earmarked or set apart for charitable purposes and there is nothing in the above clauses to indicate that the property of the trust was for a public purpose of a charitable or religious nature in India. The trust in question was created by the Nizam on June 14, 1950. The W.T. Act was enacted by Parliament and came into force with effect from April 1, 1957. The Nizam, at that time, could not have foreseen a provision like Section 5(1) which provided that the income from the trust for the purpose of a charitable or religious nature should be utilised only ' in India '. In our view, the absence of the words ' in India ', in the deed of trust, will not disentitle the assessee from claiming exemption, if the other conditions laid down in the section are satisfied. It was never the case of the revenue that the income from the trust referred to in Clause 8 was utilised for any purpose by the trustees outside India. It is not in dispute that the property was endowed by the Nizam for charitable purposes. What the revenue contends is that it is not held for a public purpose of a charitable nature in India. The recitals make it clear that the Nizam had not created this trust to benefit any of his family members or relations. Sub-clause (i) would make it abundantly clear that the balance of the income of the trust property was to be utilised for advancement of education, preferably technical education, by giving scholarships, fees and monetary help to poor and deserving persons. It also provides for giving donations to recognised institutions for promoting education amongst the poor. This sub-clause makes no distinction between one religion and another religion. The scholarships are to be given to all deserving poor students and for promoting education amongst the poor. The other object of the trust is to give free medicines and medical aid to the poor and deserving irrespective of one's religion, class, creed and caste. Similarly, provision is made for giving monetary aid to the poor by providing food and clothing. The widows and orphans are also included in this. The amount was also to be utilised for maintaining any charity which the settlor had earlier established. The trustees were also given absolute discretion to spend in any year not more than half of the net income for any charitable object or objects without reference to caste or community. So, it cannot be said that the property was not for a public purpose of a charitable nature. Our attention has not been invited by the revenue to any material to indicate even remotely that any part of the balance of the income derived from the trust fund was not utilised for the purposes in India.
8. The learned counsel for the revenue, however, sought to invite our attention to the following decisions and particularly relied upon the decision of another Division Bench of this court in CWT v. Trustees of H.E.H. The Nizam's Religious Endowment Trust : 108ITR229(AP) . That was a different trust created by the Nizam and it is known as Nizam's Religious and Endowment Trust. In that case, two out 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. In view of the fact that two out of the four specified purposes required the application of the income outside India, the learned judges were not inclined to hold that the trustees were entitled to seek exemption in respect of that trust fund under Section 5(1) of the Act.
9. In Trustees of Gordhandas Govindram Family Charity Trust v. CIT : 88ITR47(SC) the Supreme Court found that the trust was primarily created for the benefit of the family of Gordhandas Seksaria. That was clear from the title given to the trust as well as from the various provisions in the deed. It was, therefore, held that it was a private trust not entitled to exemption under Section 5(1).
10. Mr. Rama Rao also sought to place reliance upon Chintamani Ghosh Trust v. CWT : 80ITR331(All) . The learned judges, having regard to the particular clauses of the trust deed, said that the property was held in part only for a public purpose of a charitable nature. That is not the case here. That case will have no bearing on the facts of this case. It was never the case of the revenue before the lower authorities that what has been endowed for a public charitable purpose constitutes only a part of the fund. It is only with reference to the recitals in Clause 8 that the question has been referred to this court. The revenue, therefore, cannot be permitted to make out a new case which was not before the lower authorities.
11. For the purpose of interpreting the words 'property held' occurring in Section 5(1) of the Act, the learned counsel for the revenue sought to place reliance upon the case of Raja P. C. Lall Chaudhary v. CIT : 31ITR226(Patna) . That was a case where the assessee sought exemption under Section 4(3)(i) of the Indian I.T. Act of 1922 by installing an idol in the temple and executing a deed under which he allowed a sum of Rs. 200 per month for puja, archana, etc., and Rs. 1,000 every year for repairs and other works out of the income of Gulabhaghat (market). The amount to be spent on puja and repairs was to be the first charge on the income of the hat. It was, therefore held by the Patna High Court that the assessee had not created a trust or obligation on only property, but had only created a charge over part of the income accruing from a particular source and, therefore, he was not entitled to exemption on the amount spent. That case can have no application because, in this case, the balance of the income, as provided under the trust deed, was to be spent wholly for the purposes detailed in Clause 8 of the trust deed and, in fact, in the statement of the case, the Tribunal gave the figures regarding the net wealth determined in the assessment year for the years 1957-58, 1958-59 and 1959-60. The corpus proportionate to the total amount payable to the beneficiaries was also determined. Therefore, there is no merit in the contention of the revenue that the property was not held by the trustees under the trust.
12. In Trustees of The Charity Fund v. CIT : 36ITR513(SC) , a case where exemption was claimed under Section 4(3)(i) of the 1922 I.T. Act, the Supreme Court held that where members of the family of the settlor did not figure as direct recipients of any benefits under the sub-clauses, and the fact that in selecting the beneficiaries under the particular sub-clause preference had to be given under the provisos to the relations or members of the family of the settlor could not affect the nature of the trust, namely, that it was a public charitable trust.
13. The view expressed by the Supreme Court in CIT v. Smt. Kasturbai Walchand Trust : 63ITR656(SC) also fortifies the conclusion reached by us. That was a case where, under a trust created by Seth Walchand Hirachand and Ms wife, Smt. Kasturbai, the trustees were to pay the income from the trust properties, after defraying the expenses, to Kasturbai during her lifetime and after her death the income was to be applied by the trustees at their discretion to certain public charitable purposes. After the death of Walchand, Kasturbai executed a deed surrendering, releasing and quitting all claims to her rights and assigned to the trustees all the income from the trust funds. She also relinquished her beneficiary interests and other rights, claims and demands including the liberty to occupy and enjoy rent-free, all lands, hereditaments, messuages and premises. The question was whether the income from the trust property subsequent to the execution of the deed was exempt from tax under Section 4(3)(i) of the Indian I.T. Act, 1922. The Supreme Court held that the deed executed by Kasturbai was valid in view of Section 58 of the Indian Trusts Act and she made a valid surrender of her rights. The income which accrued from the trust properties after the execution of the deed was income which could be applied or allowed to accumulate for application to the charitable purposes mentioned in the trust deed and for no other purposes, and such income was, therefore, exempt from tax under Section 4(3)(i). Even if Clause 8 of the deed did not come into operation until the death of Bai Kasturbai and the trustees would be incompetent to apply the income for charitable purposes during her lifetime, the only effect would be that the income would accumulate during her lifetime and on her death would have to be applied by the trustees for charitable purposes. In that view, it was held that the income would be exempt from tax under Section 4(3)(i).
14. As in that case, in this case too, the income from the trust fund was to be spent wholly for public charitable purposes mentioned in Clause 8. Therefore, the trustees would be entitled to claim exemption under Section 5(1) of the Act. We, therefore, agree with the view expressed by the Tribunal and answer the question in the affirmative and in favour of the assessee. The reference is answered accordingly. No costs. Advocate's fee Rs. 250.