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Commissioner of Wealth-tax Vs. H.E.H. the Nizam's Supplemental and Religious Endowment Trust (26.11.1971 - APHC) - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAndhra Pradesh High Court
Decided On
Case NumberCases Referred Nos. 12, 13, 32 and 41 of 1970
Judge
Reported in[1973]89ITR80(AP)
ActsIncome Tax Act, 1922 - Sections 4(3); Income Tax Act, 1961 - Sections 11; Wealth Tax Act, 1957 - Sections 5(1)
AppellantCommissioner of Wealth-tax
RespondentH.E.H. the Nizam's Supplemental and Religious Endowment Trust
Appellant AdvocateP. Rama Rao, Adv.
Respondent AdvocateY.V. Anjaneyulu and ;K.N. Raju, Advs.
Excerpt:
.....into force of the amended provision. - 2. the first of these two trusts is known as the azakhana zohra trust created by the nizam under a trust deed dated march 29, 1951. in or about 1941, after the death of his mother, zohra begum, popularly known as madar-e-deccan, the nizam in her sacred memory had constructed the azakhana zohra (mourning house) with niazkhana (poor-feeding house) and shafakhana (inpatient hospital) attached to it on the banks of the river moosi in the vicinity of dar-us-shaffa. , azakhana zohra (mourning house), and the niazkhana (poor-feeding house) and shafakhana (hospital) attached to it, were obviously meant for religious and charitable purposes, though named in memory of the mother of the nizam, zohra begum, popularly known as madar-e dcccan, as azakhana..........to tax under either of those statutes.2. the first of these two trusts is known as the azakhana zohra trust created by the nizam under a trust deed dated march 29, 1951. in or about 1941, after the death of his mother, zohra begum, popularly known as madar-e-deccan, the nizam in her sacred memory had constructed the azakhana zohra (mourning house) with niazkhana (poor-feeding house) and shafakhana (inpatient hospital) attached to it on the banks of the river moosi in the vicinity of dar-us-shaffa. the nizam, for purposes of the completion of that work, had set apart a sum of two lakhs of rupees from his private fund, sharf-e-khas funds. it is with regard to this that the trust deed dated march 29, 1951, came into existence. in addition to the sum of rs. two lakhs, another sum of rs......
Judgment:

A.D.V. Reddy, J.

1. His Exalted Highness Nawab Mir Sir Osman Ali Khan Bahadur, the ex-Nizam of Hyderabad and Berar, had created a number of trusts, public and private, during his lifetime. We are now, in these references ma.de under the Income-tax Act and Wealth-tax Act, concerned with two such trusts with regard to the income from the trust properties being assessable to tax under either of those statutes.

2. The first of these two trusts is known as the Azakhana Zohra Trust created by the Nizam under a trust deed dated March 29, 1951. In or about 1941, after the death of his mother, Zohra Begum, popularly known as Madar-e-Deccan, the Nizam in her sacred memory had constructed the Azakhana Zohra (mourning house) with Niazkhana (poor-feeding house) and Shafakhana (inpatient hospital) attached to it on the banks of the river Moosi in the vicinity of Dar-us-Shaffa. The Nizam, for purposes of the completion of that work, had set apart a sum of two lakhs of rupees from his private fund, Sharf-e-khas funds. It is with regard to this that the trust deed dated March 29, 1951, came into existence. In addition to the sum of Rs. two lakhs, another sum of Rs. 1,50,000 invested in the Government bonds was also endowed as a fund to provide for the management, upkeep and maintenance of the said buildings. It was also further provided that a sum of Rs. 4,500 should be given for such management from the Sharf-e-khas funds, besides a sum of Rs. 500 to be paid from the same source as an annual offering to cover the expenses of the annual ceremonies to be performed at the said Azakhana during the mourning period of Moharram. The further direction given was that the income from the Government securities are to be accumulated and could be used at the absolute discretion of the trustees which they think fit.

3. The second trust we are concerned with is what is known as 'The H.E.H. the Nizam's Supplemental Religious Endowment Trust' created by him under a trust deed dated January 27, 1952, whereunder a sum of Rs. 50,000 was set apart for completing the construction of the Azakhana Zohra, Niazkhana and Shafakhana attached thereto and for the management, maintenance and upkeep of the same. This is in addition to the provisions made under the earlier trust deed. In the same deed he had set apart a sum of Rs. 8 lakhs made up of 8,000 cumulative preference shares of the face value of Rs. 100 each in Greaves Cotton and Company Ltd., as a further fund for the upkeep and maintenance of the sacred buildings mentioned in the second schedule as additional provision, as he had under an earlier deed dated September 14, 1950, settled a sum of Rs. 40 lakhs for their upkeep and maintenance.

4. The dispute now relates to the exigibility to tax of the corpus as wealth under the Wealth-tax Act and the income from the endowed amounts under the Income-tax Act, the investments made under the above deeds. The claim of the department is that these are not religious and charitable trusts and the corpus and the income from the endowed amounts are not, therefore, exempt from the levy of either wealth-tax or income-tax, whereas the contention of the trustees is to the contra.

5. The provisions that are attracted in these references are Section 4(3)(i) of the Indian Income-tax Act 1922, Section 11 of the Income-tax Act of 1961 and Section 5(1)(i) of the Wealth-tax Act, 1957, as they are the provisions which relate to the exemptions to be granted, if the property held is for any public purpose of a charitable and religious nature. The only difference between the provisions of the Wealth-tax Act and the provisions of the Income-tax Act, both old and new, is that under the Income-tax Act, the provision referred to is that the trust must be 'wholly' for religious or charitable purpose.

6. With regard to the first of the trusts, i.e., the Azakhana Zohra Trust, the question of taxability of the income from the trust arose before the income-tax authorities for the assessment year 1952-53. The Income-tax Officer accepted the contention of the assessee that it was a place of public worship for all Muhammadans and was a public religious institution and exempted it from tax under Section 4(3)(i) of the Indian Income-tax Act of 1922. Since the income was exempt from payment of tax, the assessee did not file returns for the following years. But in the assessment year 1959-60 the income was shown and the exemption was claimed. The contention was rejected and the assessment for the prior years was also reopened and for all the years the income was subjected to tax. On appeal, the Inspecting Assistant Commissioner held that it was a public trust and directed the deletion of the tax, while on further appeal, the Appellate Tribunal held that it was not created for public charitable purposes and upheld the levy. Along with this tax, the trust property was also subjected to wealth-tax for the years, i.e., 1959-60 to 1965-66.

7. With regard to the second trust, i.e., the Nizam's Supplemental Religious Endowment Trust, the department held that for the assessment year 1957-58 the trust was exempted from tax as it is entitled to the exemption under Section 4(3)(i) of the Indian Income-tax Act of 1922, but subjected the income to tax for the years 1954-55 to 1956-57 and 1958-59 to 1961-62 under Section 4(3)(i) of the Indian Income-tax Act of 1922 and for the assessment years 1962-63 to 1965-66 under Section 11 of the Income-tax Act of 1961. Here also, the Inspecting Assistant Commissioner, following the decision of the Tribunal with regard to Azakhana Zohra Trust held that it was not a public religious trust. On appeal by the trustees, the Tribunal held that the trust was of a public religious and charitable nature and the income therefrom is exempt from tax, both under Section 4(3)(i) of the 1922 Income-tax Act and under Section 11 of the 1961 Income-tax Act. The property endowed was also subjected to wealth-tax for the years 1957-58 to 1965-66.

8. The only question to be determined in the above reference is whether the two trusts we are concerned with are charitable and religious trusts.

9. The first of these is the Azakhana Zohra Trust. The three buildings constructed by the Nizam, viz., Azakhana Zohra (mourning house), and the Niazkhana (poor-feeding house) and Shafakhana (hospital) attached to it, were obviously meant for religious and charitable purposes, though named in memory of the mother of the Nizam, Zohra Begum, popularly known as Madar-e Dcccan, as Azakhana Zohra. One of the contentions raised by the, department is that it was done to perpetuate the memory of the Nizam's mother and, therefore, it is a private trust. There is no force in this contention. It is common knowledge that many of the public charities endowed with funds by private individuals like hospital, choultries, schools and colleges are of either religious or charitable nature, though named either after the donor or in the name of someone in whom he is interested and whose memory he desires to perpetuate. From the fact that the institution bears the name of a private person, the nature of the trust cannot be determined to be a private one. It is the object of the trust that has to be looked into. In this case, the trust deed itself says:

'..... of the religious and charitable considerations thereunto moving he the settlor doth hereby transfer and assign unto the Trustees the said sum of Rs. 2 lakhs, etc....'

10. Though no words to the effect that they are meant for religious and charitable purposes are found in the deed itself, the buildings themselves by reason of the purpose for which they are intended indicate that they are meant for religious and charitable purpose. It is not denied that Azakhana Zohra is a mourning house, Niazkhana is a poor-feeding house and Shafakhana is a hospital. The names themselves are suggestive of the purpose for which they have been built. Further, describing them in the deed as a religious and charitable nature may be redundant and unnecessary.

11. It is contended that the public had no free access to these places and, therefore, the trust cannot be construed to be a public trust. Admittedly, these were meant to be used only during the periods of Moharram and Safar. The report of the Income-tax Officer himself, who had visited the place, shows that in the Azakhana Zohra are stored the 'Alams' (Standards) which are used during the religious ceremonies in Moharram and also models of graves of saints and religious leaders venerated by Shias. No doubt, there were guards at the place and, as noted by the officer himself, they were there for the purpose of safeguarding the treasures that were housed in the Azakhana Zohra. It is also admitted that the public were allowed to attend the majlis. The only restriction placed was that, after the Nizam entered, the public are being allowed inside and they are permitted to leave after the Nizam leaves the building during the period. This was obviously meant as a mark of courtesy to the erstwhile Rulers. Therefore, this cannot be a circumstance to be taken into consideration for saying that it is a private trust. There is no recital in the trust deed placing any restrictions on the right of the public to have access to the place during Moharram. The evidence shows that the public had free access to the building during the Moharram period and the fact that one building is meant for mourning, another for the purpose of poor-feeding and a third for a hospital itself shows that they are meant for charitable purposes. Two of the letters received from the trustees also indicate that sacred relies and articles of religious significance which did not belong to the Nizam exclusively are kept there, that the Azakhana Zohra is a building meant for conducting religious ceremonies during the period of Moharram, kept open to the public irrespective of caste or creed and any one desirous of attending these, can do so without any restriction.

12. In Bai Hirbai & Kesarbai Charitable and Religious Trust v. Commissioner of Income-tax, [1968] 68 I.T.R. 821 (Bom.) under similar circumstances, where two sisters of the Khoja community created a trust for holding an annual majlis or a meeting of the whole of the relations and acquaintances of Kesarbai (the settlor), widow of Dharamsey Khakoo, and for arranging a feast for them in Bombay in remembrance of the anniversary of Imam Hussain Saheb in the name of her husband, Dharmsey Khakoo, and incur and pay such expenses in connection therewith, etc., it was held that the dominant intention of the trust was to establish a religious and charitable endowment and the income is exempt from tax under Section 4(3)(i) of the Income-tax Act of 1922. The circumstances of the present case are on a better footing as the entire income has to be used for the purpose of the maintenance of the three buildings which are meant for public purposes. We, therefore, find that it is a trust for religious and charitable purposes.

13. We have next to consider the nature of the second trust, i.e.,. H.E.H. The Nizam's Supplemental and Religious Endowment Trust. As already pointed out, Rs. 50,000 under this trust was set apart for the maintenance of the Azakhana Zohra and the Niazkhana and Shafakhana attached thereto, the subject-matter of the earlier trust. With regard to this we have already found that they are charitable and religious institutions. Another trust created under the same deed is for the maintenance of the sacred buildings mentioned in the schedule. There is no discussion at all with regard to this trust in any of the orders of the Income-tax Officers or even the Tribunal, as all of them had considered the nature of Azakhana Zohra Trust alone, obviously being under the impression that, if any part of the trust deed is for a private purpose, the whole trust is vitiated, forgetting that there are two distinct and separate trusts with two different endowments, though under the same deed. We find the second trust under this deed is for the management and maintenance of (1) Ashoorkhana-e-Kazami constructed by the settlor after the Seventh Imam in memory of the settlor's late son, Kazim Jah ; (2) Imambara where the sacred Alams and sacred relies are kept during Moharrum days and taken out during the procession and brought back for religious ceremonies and worship; (3) Ashoorkhana-e-Abbasi constructed by the settlor after Hazrat All's son (brother of Hazrat Imam Hussain) who carried the flag of Hazrat Imam Hussain in the Battle of Karbala ; (4) Ashoorkhana-e-Zainab being constructed by the settlor and named after the sister of Hazrat Imam Hussain and Niazkhana (feeding place) attached to it; (5) Masiid-e-Quilwat; and (6) Niazkhana Quilwat. As already stated, the names themselves indicate that they are meant for religious and charitable purposes. A further clause in the deed with regard to this trust shows that, if any sum remained after attending to the maintenance and management of these buildings, the trustees shall be at liberty in their absolute discretion either to spend the same or any part thereof for any other religious and charitable objects for the benefit of Mohammadans. It is, therefore, clear that the above trust also is meant for a religious and charitable purpose.

14. We, therefore, on the above considerations find that both the trusts, i.e., Azakhana Zohra Trust and the H.E.H. the Nizam's Supplemental Religious Endowment Trust, are (rusts created wholly for religious and charitable purposes and that they, therefore, attract the provisions of Section 4(3)(D of the Income-tax Act of 1922 and Section 11 of the Income-tax Act of 1961 and also Section 5(1)(i) of the Wealth-tax Act of 1957.

15. The answers to the questions referred to us in all the four references are in the affirmative and against the department. Assessee will be entitled to its costs. Advocate's fee Rs. 250 in each case.


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