R. L. Gulati, J. - The Income-tax Appellate Tribunal, Allahabad Bench Allahabad, has at the instance of the Commissioner of Income-tax, Kanpur referred the following question for our opinion :-
'Whether on the facts and in the circumstances of the case, the trust created by the instrument dated 21-10-1955 when read with the deed dated 6-9-1955 is an irrevocable trust and income of the trust for the assessment years 1956-57 to 1962-63 is exempt from tax under section 4(3)(i)/11 of the Income-tax Act, 1922/1961 ?'
2. Moti Chandra and Shrimati Shanti Devi executed a registered trust deed on 26-9-1950. The two settlors contributed an amount of Rs. 20,000/- to be used only for charitable purposes to commemorate the memory of late Lala Ram Chandra. The preamble to this deed stated that this amount would be used for running a charitable store styled 'Lala Ram Chander Charitable Store' and for other business and the income from the aforesaid business would be utilised for charitable purposes. The object of the trust, inter alis included the utilisation of the income from the business carried out with the aforesaid amount of Rs. 20,000/- (1) for the purposes of granting scholarships to students; (2) opening schools and colleged and classes in existing schools and colleges, (3) granting aids to any schools and colleges, (4) granting maintenance to needy widows and poors; (5) helping and assisting or establishing any orphanage; (6) helping other charitable and religious institutions; and (7) spending the amount on such other charitable and religious purposes as the trustees may deem fit. Clauses 4 and 5 of the deed inter alis permitted the trustees to carry on additional or further business, on condition that the income from such business full discretion in employing the income of the trust for such object or objects as they might consider proper and expedient at my particular time. The trustees under this clause were also entitled to wind up the Charitable Stores in case the business was unremunerative, and invest the sum some other business, according to their discretion. Clause 11 provided for the revocation of the trust by the executants. A question had arisen earlier as whether the trust deed was irrevocable and by a decision of this Court dated 10-10-1968 on reference, it was held that the trust was revocable and the income from the trust property was to be assessed in the hands of the two settlors, Shrimati Shanti Devi and Modi Chandra. On 21-10-1955 another registered deed was executed by these two persons. The object of the second trust deed was palpably to make the trust irrevocable, and to make an unequivocal declaration about the charitable purpose of the earlier trust The dispute in the present case relates to the assessment years 1956-57 to 1962-63. The contention of the assessee in these assessment years that the trust was irrevocable and as such its income was exempt, was repelled both by the Income-tax Officer and the Appellate Assistant Commissioner. The Tribunal has upheld this contention and as has been noticed earlier, referred the aforesaid question.
3. The question as to whether the trust created by the instrument of 21-10-1955 is irrevocable or not, depends upon a consideration of the relevant clauses of the trust deed of 26-09-1950 and the trust deed of 21-10-1955. It is necessary to take into account the deed of 26-9-1960 also, as the deed of 1955 is more or less a supplementary instrument which sought to rectify the lacuna in the earlier trust deed. The last portion of the deed which has been noticed by the Tribunal runs as follows :-
'And whereas it is deemed expedient to declare that notwithstanding the fact that the declaration of trust was made to commemorate the memory of late Lala Ram Chandra, the income derived from business carried on behalf of the aforesaid trust will be wholly and exclusively spent for public charitable purposes mentioned in the said Trust shall be employed for the private benefit or use of the executants and their families.'
In clause 1, there is a declaration of the executants that the trust deed of 26-9-1950 is irrevocable. Clause 2 lays down that the income from the business carried on behalf of the said trust would be wholly applied to the charitable purposes mentioned in the deed 26-9-1950 and that no part of the said income would be utilised for private purposes or benefit of the executants or their family members. Clause 3 gives a right to the trustees to invest the trust fund and the accretions thereto in such business as they might deem fit. Clause 8 runs thus :-
'That the specific powers of the Trustees mentioned hereinbefore are mere amplification in the Deed of Declaration of trust dated 26th September, 1950 and shall not in any manner be construed to derogate from the Trustees the general powers vested in them as mentioned in the Deed of Declaration of Trust dated 26th September, 1950.'
The fact whether a trust deed is revocable or not has to be gathered from the instrument. In the earlier trust deed, clause (11) gave a specific power of revocation of the trust. That power as has been seen was withdrawn by the deed of 1955. This being so, the Tribunal was right in holding that the trust deed was not revocable. In view of the clear declaration of the intention of the executants that the trust deed was not revocable, it is idle to consider the other clauses of the two trust deeds which do not deal with this aspect of the matter. It must, therefore, be held that the Tribunal was right in holding that the trust affected by the instrument dated 21-10-1955 was not revocable.
4. Counsel for the Revenue, then contended that in any event, the income from the trust not liable to exemption under section 4(3) as the requirements of section 4(3) (i) of 1922 Act were not satisfied. No such contention appears to have been raised before the Tribunal, and as such it is not open 4(3) (i) (b) of the Act cannot apply to the present case for before this clause comes into play, the income from business carried should be on behalf of the Religious or charitable institution. The word Institution has not been defined in the Act. It is a word of wide import. This Court had occasion to consider the ambit of this word in the case of Commissioner of income tax vs . Radhaswami Satsang Sabha : 25ITR472(All) . It was held that the import of this phrase was wider than a mere trust. In view of this decision, inasmuch as the only activity which the trustees were carrying on was business, it must be held that the income such business could not be said to be income derived from the business carried on by a religious or charitable institution although, it is not feasible, nor necessary to give an exhaustive resume of what is comprised in the phrase 'religious or charitable institution', the legislature seems to have in mind institution like school and hospitals etc. run by religious or charitable trusts.
5. It was then contended on behalf of the revenue that the business carried on by the trusteed may be said to be the business carried on behalf of the trust, but inasmuch as the business itself was not held under trust, the income derived therefrom would not enjoy the exemption granted under section 4(3) (i) of the 1922 ACT, It is pertinent to point out that this contention too, does not appear to have been raised before the Tribunal.The only contention that was raised was that inasmuch as the trust was revocable, income thereform would not be exempt under section 4(3)(i) of the Act. We are, however, of the view that even on merits, this contention has no force. It has been found that the two executants donated, an amount of Rs. 20,000/- to the utilised for starting a business, and by that deed and by the subsequent deed of 1955 ordained that the income from that business and accretion thereto has to be utilised for charitable purposes set out in the two deed. Inasmuch as the founders of the trust had from the inception of the trust contemplated the utilisation of the amount of Rs. 20,000/- for business, on a fair reading of the two deeds, it must be held that the business run by the trust deeds was also held on trust subject to the conditions laid down in the two instruments. Then income received from the business as such was also exempt.
6. The reference is answered in the affirmative, against the Department and in favour of the assessee. The assessee is entitled to his costs which we assess at Rs. 200/-.