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Trustees of the Princess High Vs. Third Income-tax Officer - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Mumbai
Decided On
Judge
Reported in(1984)9ITD500(Mum.)
AppellantTrustees of the Princess High
RespondentThird Income-tax Officer
Excerpt:
1. these four appeals by the trustees of the princess high school for girls building fund trust are raising certain common contentions. as such, the four appeals are disposed of by this consolidated order.2. shri s.e. dastur for the assessee stated that in terms of his consolidated order dated 18-11-1982 the aac upheld the ito's decision that the trust was not entitled to exemption under section 11 of the income-tax act, 1961 ('the act'). the only issue raised in these appeals is whether the income of the trust is exempt within the provisions of sections 11, 12 and 13 of the act.3. the facts giving rise to the present dispute, as brought to our notice, were as under. one ardeshir rustomji dubash was the founder of princess high school for girls which is housed in the building known as.....
Judgment:
1. These four appeals by the Trustees of the Princess High School for Girls Building Fund Trust are raising certain common contentions. As such, the four appeals are disposed of by this consolidated order.

2. Shri S.E. Dastur for the assessee stated that in terms of his consolidated order dated 18-11-1982 the AAC upheld the ITO's decision that the trust was not entitled to exemption under Section 11 of the Income-tax Act, 1961 ('the Act'). The only issue raised in these appeals is whether the income of the trust is exempt within the provisions of Sections 11, 12 and 13 of the Act.

3. The facts giving rise to the present dispute, as brought to our notice, were as under. One Ardeshir Rustomji Dubash was the founder of Princess High School for Girls which is housed in the building known as 'Father's Gift' at 301, Lamington Road, now known Dr. Bhandarkar Road, Bombay 400002. The school was founded sometime in 1895. It was stated that the building in which the school was housed are rented premises.

The owner of the building was not prepared to undertake the necessary repairs. It may be added that the school is the proprietary school run by a partnership. Realizing that if the owner of the building could not undertake or would not undertake the necessary repairs of the school building, the school may be required to be shifted to some other place or circumstance may arise such that the school may even be closed down, there was some apprehension in the locality. It was stated that in 1968 the partners of the proprietary school were Ardeshir Rustomji Dubash, Soli Ardeshir Dubash and Zarin Soli Dubash. Since the school was founded way back in 1895, naturally there were large number of past students. Equally there was large number of parents of the girls taking education in the school. These persons and a few other parents and well-wishers living in the locality had great personal regard and esteem, for Ardeshir Rustomji Dubash, the founder of the school. Shri Dastur stated that with a view to enable the school be maintained properly, several past students, the parents of the past students and friends and well-wishers expressed a desire that an appeal should be issued for collection of funds and donations to purchase the building in which the school is housed and to renovate and repair the same so as to make the building more suitable for a school in the present circumstances of the day. Shri Dastur stated that, accordingly, sometime in 1968 the body of persons indicated above came together and collected certain funds. These persons had by 1968 in fixed deposits with Grand Road Branch of the Central Bank of India a sum of Rs. 59,000 and balance in the Home Savings Account No. 1011 with the same branch of an amount of Rs. 7,823. Since these funds were collected for a specific purpose, viz., to purchase of school building known as 'Fathers Gift', Ardeshir Rustomji Dubash, Soli Ardeshir Dubash and Zarin Soli Dubash did not claim the funds as their personal funds. Shri Dastur added that these three along with two others, one Irash Sorabji Kuka and Phiroze Kaikhusroo Shroff, declared a trust, the terms of which were reduced to writing by document dated 26-4-1968. Shri Dastur pointed out that the trust was granted exemption under Section 80G of the Act by the Commissioner. In evidence of this statement. Shri Dastur undertook to produce and subsequently the assessee has filed a copy of certificate No. BRC/Sec. 80(G) Ch. 565-P/B.C. No. J-I/295 (2)/69 (435) 6-7/69-70, dated 1-1-1970, issued by the Commissioner to the effect that-- The Princess High School for Girls Building Fund Trust, Bombay, is an institution/a fund established in the taxable territories for a charitable purpose, that it satisfied the requirements of Section 80G of the Income-tax Act, 1961, and that any sum within prescribed limits paid by any assessee as donation to the aforesaid institution/fund will be exempt under Sub-section (1) of Section 80G of the Income-tax Act, 1961.

Shri Dastur pointed out that this certificate was valid up to 19-8-1972 or until such date as it is cancelled by the Commissioner, whichever is earlier. Shri Dastur further submitted that till the assessment year 1973-74, the ITO was not assessing the trust to income-tax, but had allowed the trust exemption. Shri Dastur pointed out that sometime after the ITO had finalised the assessment for the years 1973-74 and 1974-75, the Commissioner (Appeals) initiated proceedings under Section 263 of the Act. Shri Dastur undertook to produce and produced after hearing a copy of the notice under Section 263, bearing BC No.IV/263/20 and 21/77-78, dated 3-9-1977, issued by the Commissioner, whereby the Commissioner observed as under : A perusal of your income-tax records reveal that the assessments for the years 1973-74 and 1974-75 have been completed by the ITO under Section 143(3) read with Section 11 of the Income-tax Act, 1961, on 23rd September, 1975. It is also seen from the records that the trust has been given exemption under Section 80G of the Income-tax Act, 1961. However, it is noticed from the trust deed that the trust seeks to assist in all possible ways to maintain and continue and promote the interest and benefit of 'Princess High School', a partnership concern of (1) Ardeshir Rustomji Dubash, (2) Soli Ardeshir Dubash, and (3) Zarin Soli Dubash, who also happen to be the trustees of the trust. The objects of the trust, therefore, cannot be considered as a charitable nature within the meaning of Section 2(15) and Section 11 of the Income-tax Act, 1961. The trust is also not entitled to exemption under Section 80G of the Income-tax Act, 1961.

Accordingly, the Commissioner (Appeals) considered the original assessment made by the ITO for the assessment years 1973-74 and 1974-75 on 23-9-1975 as erroneous and prejudicial to the interest of the revenue. To enable him to pass the appropriate order under Section 263, the Commissioner (Appeals) fixed the hearing on 12-9-1977.

4. Shri Dastur pointed out that by an order under Section 263 pissed on 12-9-1977, the Commissioner (Appeals) cancelled the assessment for the two years as made by the ITO on 23-9-1975. It may be added that the copy of the Commissioner's order was undertaken to be filed and was filed subsequently. This order of the Commissioner shows that, prima facie, according to the Commissioner : It is noticed, however, from the trust deed that the trust seeks to assist and promote the interest of 'Princess High School,', which is a partnership concern of Ardeshir Rustomji Dubash, Soli Ardeshir Dubash and Zarin Soli Dubash, who also happen to be the trustees of the trust. The objects of the trust, therefore, cannot be considered to be of a charitable nature within the meaning of Section 2(15) and Section 11 of the Income-tax Act. The trust cannot in the circumstances be entitled to exemption under Section 80G of the Income-tax Act, 1961.

Shri Dastur added that the representative of the assessee-trust Mr.

Gandevia, as noted by the Commissioner, "agreed to the cancellation of the assessments made with a direction to the ITO to redo them after giving an opportunity to the assessee to produce all the evidence in its possession and to put its case before him in support of its claim that the trust is entitled to exemption under Section 80G of the Income-tax Act." Shri Dastur added that, accordingly, the Commissioner cancelled the assessments of the two years as made on 23-9-1975.

5. Shri Dastur further submitted that on the assessment of these two years being restored to his file, the ITO considered the assessee's claim for exemption and in terms of his order dated 10-12-1979 for the assessment years 1973-74 and 1974-75 brought to charge in the hands of the trust, respectively, amounts of Rs. 69,664 for the first year and Rs. 24,910 for the second year. Shri Dastur then added that for the assessment years 1975-76 and 1976-77, the ITO made similar assessments on an income of Rs. 65,090 and Rs. 53,725, respectively. Shri Dastur added that whereas the assessment for the year 1975-76 was made on 22-3-1978, for the year 1976-77 the assessment was made on 15-3-1979.

Shri Dastur then pointed out that the first order of the ITO wherein the assessee's claim for exemption was denied, was the one for the year 1975-76, dated 22-3-1978. Shri Dastur submitted that the assessment order dated 22-3-1978 and the order for the year 1973-74, dated 10-12-1979 give the reasons on the basis of which, according to the department, the assessee was not entitled to the exemption under Section 11.

6.. Analysing the two main orders, Shri Dastur submitted that the thrust of attack of the department was on Clause (2) of the trust deed.

Clause (2) of the trust deed, Shri Dastur pointed out, reads as under : 2. The trustees shall hold the building trust fund and all the income, interest, benefit and profit thereof for the following purposes : (a) To negotiate for, acquire and purchase the building known as 'Father's Gift' in which the school is at present housed and to renovate and make additions and alterations and repair the same as may be necessary or required and if it is not possible to do so, to purchase a building and/or to take on lease a building and renovate and repair the same if necessary and required and/or purchase land and construct a building and to make additions or alterations necessary or required for the purpose of housing and using the premises for the said school as soon as sufficient amounts are collected to enable the trustees to carry out the said object and to lease or let out on standard rent or concessional rent the said premises for use of and by the said school so long as the said school is run and conducted and on such terms as to payment of taxes and outgoings as the trustees may from time to time determine.

(b) To provide and give in consultations with the Principal for the time being of the said school who is at present Mrs. Zarin Soli Dubash to girls attending school without any distinction of community, caste or creed, free or assisted studentships or aids, grants and other benefits for imparting or receiving education in art, languages, science, history, music, sports, physical training and other subjects allied to female education.

(c) After carrying out the principal objects as set out in Sub-para (a) above to provide finance to purchase or otherwise acquire, equipments, furniture, fixtures, fittings and accessories, books and other equipments for a library and science laboratory required for use in the said school.

(d) To the extent permitted after carrying out the aforesaid objects for subsiding the said school towards the establishment expenses of the maintenance and running and conduct of the said school.

(e) To hold entertainment and other functions to obtain collections for the building fund and assist in all possible ways to maintain and continue and promote the interest and benefit of the said school.

7. Now, in the first order dated 22-3-1978, Shri Dastur pointed out that the ITO has observed as under : It is noticed from the trust deed that the trust seeks to assist and promote the interest of 'Princess High School' which is a partnership concern assessed by the Second ITO D-X Ward, Bombay. The partners of that firm are also the trustees of this trust. The object of the trust, therefore, cannot be said as of a charitable nature within the meaning of Section 2(15) of the Income-tax Act, 1961. Thus, the trust is not entitled or exemption under Section 11 of the Income-tax Act, 1961.

Shri Dastur, submitted that in the reassessment order, for the year 1973-74, the ITO referred to the representative's letter dated 28-10-1977 wherein it was pointed out that the trust was a wholly charitable trust which satisfied all the conditions of Sections 11, 12 and 13. Shri Dastur submitted that it was the assessee's case that the trust was not created out of any funds contributed by the partners of the Princess High School but the same was created by the several past students parents of the past and present students and friends and well-wishers not of these partners of the school but the school as an institution. Shri Dastur urged that unfortunately the ITO confused between the school as an institution imparting education to a number of girls living in the area and the firm which runs the school. Shri Dastur pointed out that in the other order dated 10-12-1979 that ITO had not made any other points.

8. On appeal, the AAC considered all the appeals in terms of his consolidated order in appeal Nos. ER/IT/TC/483A, 482A, 846, 568A, 101, 100 of 1979-80, dated 18-11-1982. Shri Dastur pointed out that the AAC took note of the recital brought to his notice and particularly recitals Nos. 7, 8 and 9 which read as under : 7. The trustees shall have power from time to time at their discretion and upon such terms and conditions as they may think fit to accept any donation or contribution and either in money or in kind and whether consisting of materials, accessories or other objects or of land or building or any interest in land and buildings to enable the trustees to carry out the purposes and objects of the trust.

8. The trustees shall have power to enter into any arrangement or agreement with Government or any local authority for acquisition of any lands buildings or any interest in land buildings and for that purpose to give such guarantees make such deposits and enter into agreements for purchase or acquisition of any land or buildings or any interest therein as the trustees may in their discretion think fit, and carry out and agree to carry out the covenants and conditions as may be imposed or required by Government under any such agreement or agreements or variation thereof.

9. The trustees shall have power to apportion and allocate as they shall think fit the building trust fund for the time being in their hands to pay all outgoings whatsover and determine whether any part of the building trust fund is corpus or income and generally settle and determine all such matters.

Now, according to the AAC, on a proper appraisal of the recitals, it was 'clear that the past students, parents of past and present students and friends and well-wishers on account of personal regard and esteem in which Mr. A.R. Dubash is held expressed only a desire to issue an appeal for collections of funds and donations to purchase the building in which the school is housed and to renovate and repair the same if possible or to acquire other suitable premises for the said school. The AAC then considered Clause (2) of the trust deed to which our attention was drawn by Shri Dastur and to which we have already made a reference earlier. Now, considering these submissions, the AAC observed that-- A reading of the object clause as a whole along with preamble and other recitals, it becomes clear that the predominant object is either to acquire and purchase the buildings known as 'Father's Gift' in which the school is at present housed and carry out necessary repairs and renovation or to acquire, purchase, repair and renovate any other buildings for giving it on rent to Princess High School and to maintain and continue and promote the interest and benefit of the said School. Thus, Clauses (2)(a), (c), (d) and (e) are for the benefit of Princess High School, which is owned by a partnership of which Shri A.R. Dubash, Shri S.A. Dubash and Smt.

Z.S. Dubash are partners and Clause 2(b) is for the benefit of the students of this school.

According to the AAC, properly understood, Sub-clauses (a), (c), (d) and (e) of Clause (2) 'were not of public character as envisaged under Section 2(15)'. As such, the AAC confirmed the assessments as made by the ITO.9. Shri Dastur pointed out that though the lower authorities had confused between the school as an institution which imparted an education to girls and the firms which ran the school Shri Dastur fairly conceded that the firm ran the school for profit. However, Shri Dastur added that when the trustees would have purchased the building, the trustees as a new owners could never have evicted the partnership firm who were the tenants of the premises known as 'Father's Gift'.

Shri Dastur submitted that even by this time, that is to say 1984, the trust has been able to accumulate approximately an amount of Rs. 5,00,000. It is urged that for the last six years, the sword of taxation has been hanging so that the assessee could not collect as large funds as it could have been hopeful to collect.

10. As stated earlier, Shri Dastur had brought to our notice that for the first year under consideration, viz., 1973-74, the assessee has been taxed on gross income of Rs. 69,624. At the time of hearing of these appeals, Shri Dastur showed to us a copy of the income and expenditure account for the year 1973-74 as filed with the Charity Commissioner, a copy of this account was directed to be filed for our record and was filed after the hearing of the case. The same have already been filed with the ITO. Now, these accounts show that the assessee-trust has been registered with the Charity Commissioner under No, E.3776/BOM. The balance sheet as at 31-3-1973 shows the total assets of Rs. 2,88,500.62, the investment being of an amount of Rs. 2,43,600.77, bank balance of an amount of Rs. (sic) and income-tax deducted at source of an amount of Rs. 3,233.00. This balance sheet shows that the opening balance of the corpus was Rs. 1,29,507.00, and that the opening balance (sic) Rs. 4,166.85 balance with the income and expenditure account was Rs. 89,423.32 to which was added the surplus of the year being Rs. 69,570.30. The income and expenditure account shows the gross income of Rs. 69,664.40, the details of which are as under : The trust had, it is seen, during the year held a charity dance and earned net income from that dance a sum of Rs. 34,123. On the debit side were the expenditure for bank charges and printing and stationery of an amount of Rs. 94. Shri Dastur added that the ITO had not allowed deduction even for this expense and brought to charge the gross income of Rs. 69,664. Shri Dastur stated that the picture for the other assessment was not much different. Shri Dastur's main submission in support of the assessee's case was that neither large group of persons who collected the funds nor the trustees had any intention of making income so as to derive any personal benefit. Shri Dastur submitted that the predominant object of the various persons who came together to collect the funds and collected the funds for the period from 1968 onwards has been to collect the necessary funds so as to enable the trustees to purchase the building known as 'Father's Gift' which has housed a school giving education to female way back from 1895. Shri Dastur added that even after the trust could have purchased the building, so far as the firm was concerned, the firm would have continued to pay the same rent and the mere fact that the trust would have purchased the building would not have enabled the firm to make any additional income. Shri Dastur submitted that the large body of parsons who collected the funds had no intention of benefiting in any manner whatsover from the proprietary of the school, that those persons were interested in ensuring that the girls of the locality attend a neighbourhood school. Shri Dastur submitted that one must take a practical view of the present circumstances and realise that if on account of the failure of the present owners to repair the building, the circumstances would have arisen so that the school was de-housed, the school would have perhaps closed down or there was a possibility of proprietary's running the school in a different locality. Shri Dastur submitted that in either of the two contingencies, the girls of the area could have been required to find admission in different school other than the school of the locality and he wonders how that would have been possible in the present circumstances when it is widely known that it is extremely difficult to get school admission. Shri Dastur pointed out that because the University runs an educational institution which provides of private employment to large number of persons either as professionals or as staff, it could not mean that the University is run for profit. In this regard, Shri Dastur specifically relied on the observations of the Supreme Court in the case of CIT v. Bar Council of Maharashtra [1981] 130 ITR 28. Shri Dastur brought to our notice the headnote, as under : In view of the preamble to the Advocates Act, 1961, and the nature of the various obligatory functions, including the one under Clause (d), viz., safeguarding the rights, privileges and interests of advocates on its roll, enjoined upon every State Bar Council under Section 6(1) of that Act, the primary or dominant purpose of a State Bar Council is the advancement of an object of general public utility within the meaning of Section 2(75) of the Income-tax Act, 1961.

It will be wrong to pick out one amongst the obligatory functions of a State Bar Council and say it is the primary or dominant object or purpose. All the clauses of Section 6(1) of the Advocates Act have to be considered in the light of the main objective sought to be achieved as indicated in the preamble. The dominant purpose of a State Bar Council as reflected by the various obligatory functions is to ensure quality service of competent lawyers to the litigating public, to spread legal literacy, promote law reforms and provide legal assistance to the poor, while the benefit accruing to the lawyer-members is incidental.

Shri Dastur emphasised that what one has to consider is. as the Supreme Court observed, the main objective sought to be achieved, as explained in the preamble and not the subsidiary object which in Bar Council of Maharashtra's case (supra) was 'provide legal assistance to the poor.

While the benefit accruing to the lawyer-members is incidental.' According to Shri Dastur, in the event of the trust purchasing the building and the main object for which the trust was formed was achieved, it would have ensured the continuance of school as a school in the locality, any benefit to the partner was merely incidental and has to be considered of the same character as observed by the Supreme Court, viz., 'benefit accruing to the lawyer-members', because the legal assistance is being provided to the poor.

11. In reply, Shri D. Agarwala for the department submitted that both the ITO and the AAC were justified in reading the trust deed in the manner in which they did. According to Shri Agarwala, the main purpose of the trust is not education but the main purpose of the trust is to collect funds to purchase the building in which the School is housed.

Shri Agarwala stressed the fact that the school is run by a partnership firm and as such any benefit arising from the purchase of the building known as 'Father's Gift' by the trust will practically go to the firm running the school so that what is prominent in the trust is the profit motive. Shri Agarwala further submitted that the objects 2(b), 2(c) and 2(d) are in the natural course of the events too distant and as such have to be ignored. Shri Agarwala further stressed the fact that the AAC has analysed in para (7) of his order, the various items of receipts and expenditure of the trust which would show that the trust has not spent any money for which the trust was brought into existence.

12. Having heard the parties and examined the record, we find that the dispute lies in a narrow compass. The first thing to be considered is as to what is the predominant object with which, as observed in seventh preamble, money was proposed to be collected. It is true that as that preamble at the very beginning states the money was being collected due to personal regard and esteem in which the said Ardeshir Rustomji Dubash, the founder of the school, is held. However, to us it appears clear that if several past students, parents of the past and present students and friends and well-wishers of Ardeshir Rustomji Dubash wanted to express in intangible manner, their personal regard and esteem for the founder of the school, viz., Ardeshir Rustomji Dubash, nothing would have been easier than presenting the purse to that gentleman. However, the later portion of the very same seventh preamble shows 'several past students, parents of the past and present students and friends and well-wishers expressed a desire that an appeal should be issued for collection of funds and donations to purchase the building in which the said school is housed and to renovate and repair the same if possible or to acquire other suitable premises for the said school. In our opinion, it would be futile to say that the objects for collection of the funds by the several past students, parents of the past and present students, friends and well-wishers of Ardeshir Rustomji Dubash was not to collect the funds and donations to purchase the building in which the school has been housed and to renovate and repair the same, one of necessity must take note of the fact that owing to the rent restrictions and the steep rise in prices affecting the repairs and maintenance of the buildings, the landlords in Bombay are not in a position to maintain the buildings properly. Proceeding on that basis one equally must take note of a fact that it is always advisable to send young boys and girls to neighbourhood schools rather than make them travel either in a school bus or public transport as that would affect the health of the young children generally. We further find merit in Shri Dastur's submission that the large body of persons who were instrumental in collecting the funds and donations were primarily moved by the object of ensuring that the well established school of more than 70 years' standing does not move out of the locality. In our opinion, one can equally take note of a fact that the proprietors of private schools are not unknown to collect the charges for admission under the guise of collecting donations for school building. On record, there is no charge against the partners of the firm which runs Princess High School. True, three of the trustees are proprietors of the private school, in the sense that they are partners which run the school. However, apart from these three, there are two outsiders who are trustees, viz., Irach Sorabji Kuka and Phiroze Kaikhusroo Shroff. There is nothing on record which would enable one even remotely to doubt the bona fides either of the first three trustees or the two outsider trustees. One cannot be oblivious of a fact that the trust has been registered with the Charity Commissioner and if the trustees infringed any of the objects of the trust, they could be hauled up by the Charity Commissioner. On this issue, one recollects the decision of the Privy Council in the case of All India Spinners'' Association v. CIT [1944] 12 ITR 482. In that case the 'Commissioner of Income-tax held that the income of the Association was not exempt under Section 4(3)(i) of the Indian Income-tax Act inasmuch as (i) the dominant purpose of the Association was a political one, (ii) even assuming it was not political, the dominant purpose was not in any event a valid charitable purpose in law, and (iii) some of the objects were not clearly charitable objects'. It is of interest to note that on reference to the Bombay High Court the assessee lost the reference. On appeal to the Privy Council which was heard in 1944, when perhaps bombs were raining in London, as seen from the head note, the Privy Council held that If an Association is set on foot by a political organisation and is connected with it but still has for its real object the relief of poverty, its connection with the political organisation docs not make its real object any the less charitable.

In the Speech of Lord Wright, the following observations are worth noting : . . It is not really questioned that the practice has been to use the surplus income for the purposes of the Association and that the business has been carried on in pursuance of the primary purpose in addition mainly by beneficiaries of the Association. The practice however is not enough. The purpose is to be ascertained from the constitution. In their Lordships' judgment its provisions already quoted show a trust or binding obligation so to carry it on. The constitution is a written instrument, the terms of which bind not only the trustees and Council, but the members who by their application for membership accept its rules. Any departure either by the trustees of Council or members from the rules would be a breach of trust or legal obligation which the Court could restrain. A formal deed is not necessary to constitute a trust, still less to constitute a legal obligation binding the trustees, the Council and the members inter se. Their Lordships hold that there is such a trust or at least that there is a legal obligation, which is all that the section requires. It is true that the rules may be altered by the unanimous agreement of all the members. But that is immaterial so long as the rules remain unaltered ...

So far the case seems to fall within the exemption of the section.

The second and more important point is whether the undertaking is a charity. Their Lordships are fully conscious of th.3 importance of applying correct principle in such a matter and do not repeat the reasons for caution stated by the Board in the Trustees of the Tribune, In re. [1939] 7 ITR 415 (PC). The limits fixed by the section must be strictly observed and its definition must be satisfied by the character of the Association and its activities.

Whether that is so depends on the true construction of the section and on the meaning and effect of the Constitution which defines the character of the Association. The construction of the section is obviously a question of law but so also is the question what is the real purpose of the Association. The Court must make its decision on the latter point on the basis of the facts found for it, but given the fact the question is one of law. In this particular case the principal facts is the constitution, the true construction of which is again a question of law. The High Court were prepared to assume (in the words of Wadia, J.) that--- the real underlying object of the Association was to benefit the poor agriculturists in the villages, specifically at that time of the year when they were not actively engaged in agricultural operations.

...But private profit was eliminated in this case. Though the connexion in one sense of the Association with the Congress was relied on as not consistent with 'general public utility' because it might be for the advancement primarily of a particular party, it is sufficiently clear in this case that the Association's purposes were independent of and were not affected by the purposes or propaganda of Congress. Nor is there any ground for the Court holding that the scheme is not one which 'may be' for the public benefit. The Court might in proper cases refuse to admit as charitable schemes, purposes eccentric or impracticable. But though economists might differ about the wisdom of some aspect at least of the Association's purposes, the Court could not hold that it was beyond the pale of legitimate charitable trusts ....

13. Now viewed from the angle which their Lordships of the Privy Council have stated, we are of the opinion that the object of persons collecting funds was not to honour Ardeshir Rustomji Dubash but to ensure the proper school building for the children of the locality. It may be that on the trust's purchasing the school building, the trust may maintain that building as a school building ought to be maintained so that more students may be attracted to the school which incidentally would enhance profits of the firm which runs the school. However, that may be the result but certainly not an object. This is how we understand the decision of the Supreme Court in Bar Council of Maharashtra's case (supra) relied upon by Shri Dastur. Their Lordships have observed as under : ... In other words, the dominant purpose of a State Bar Council as reflected by the various obligatory functions is to ensure quality service of competent lawyers to the litigating public, to spread legal literacy, promote law reforms and provide legal assistance to the poor while the benefit accruing to the lawyer-members is incidental. It is true that Sub-section (2) provides that a State Bar Council may constitute one or more funds for the purpose of giving financial assistance to organise welfare schemes for the indigent, disabled or other advocates; but it is an optional or discretionary function to be undertaken by the Council. Apart from that, admittedly, the assessee-council has not so far constituted any such fund for the purpose specified in the instant case. As and when such a fund is constituted, a question may arise for consideration and the Court may have to decide whether the function so undertaken by a State Bar Council has become the dominant purpose for which that Council is operating ....

14. In the present case, as we understand, should the trust purchase a building but not charge any rent from the school, perhaps, there will be some substance in Shri Agarwala's arguments. As has been observed both by the Privy Council and the Supreme Court, one will have to consider the facts as they are in the particular accounting year. So far as the years under consideration are concerned the only fact, as we are able to appreciate, is that the persons are desirous of ensuring that the old established school should continue to run peacefully in the locality in which it has been running satisfactorily for more than seven decades.

15. Should there be any merit in the objections taken by the revenue on the basis of the same logic, one could equally and forcefully state that the members of the Government body of Deccan Education Society which, runs Fergusson College, or the members of a similar body established by the several gentlemen after whom has been named to the road on which the office of the Tribunal is located, would be required to pay tax on the excess of income of the institutions. Nobody has suggested that the surplus which Deccan Education Society or similar other societies make is liable to tax merely because the schools and colleges run by such societies provide employment. As we read the trust deed, we do not find any element of private profit and as such the last observation of Lord Wright referred to earlier in para 12 of this order, is fully applicable with slight modification. The observation would be : But private profit was eliminated in this case. Though the connexion in one sense of the Trust with the firm was relied on as not consistent with Charity (Education) because it might be for the advancement primarily of a firm.

Accordingly, we do not find any justification not to accept the appeals.


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