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Commissioner of Income-tax Vs. Mahendra Mohta Sewa Nidi - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtPunjab and Haryana High Court
Decided On
Case NumberIncome-tax Reference No. 4 of 1977
Judge
Reported in[1985]152ITR516(P& H)
ActsIncome Tax Act, 1961 - Sections 11(1)
AppellantCommissioner of Income-tax
RespondentMahendra Mohta Sewa Nidi
Appellant Advocate Ashok Bhan, Senior Adv. and; Ajay Mittal, Adv.
Respondent AdvocateNone
Cases ReferredIn Rex. v. Special Commissioners of Income
Excerpt:
.....(ix) to grant aid to the poor or needy or sick or disabled or handicapped or backward people affected by famine, drought, floods or other calamities. ' 5. it is well settled that in order to determine the true import of a document, its various clauses have to be read as a whole. ' 7. in the instant case, the proviso added to the objects of the trust clearly indicates that in case either of the objects of the trust is held not to be an object of public or charitable nature, the trustees shall not carry out such an object and in that contingency the validity of the trust created as a trust for public and charitable purpgses shall not be affected in any manner :in dharmaposhanam co. it would be a different case where one or more of the objects mentioned in the memorandum of association,..........declared that if any one or more of the objects specified above are held not to be an object of a public or charitable nature, the trustees shall not carry out such object or objects as if the same are not incorporated in these presents but the validity of thetrust created by these presents as a trust for public and charitable purposes shall not be affected in any manner.' 5. it is well settled that in order to determine the true import of a document, its various clauses have to be read as a whole.6. while discussing the creation of a precatory trust, it has been so mentioned in halsbury's laws of england, third edition, vol. 38, at page 834 :'the court must in each case be guided by the intention to be collected from the particular instrument as a whole rather than by the particular.....
Judgment:

Sharma, J.

1. For the assessment year 1972-73, the respondent-trust filed a return showing nil income. However, in Part IV of the return, a sum of Rs. 13,250 had been shown as receipts on account of donations from Shree Bhiwani Cotton Mills Ltd., Abohar. The respondent-trust claimed exemption from payment of tax on the ground that it was a charitable trust. The ITO came to the conclusion that one of the clauses, i.e., Sub-clause (vii) of Clause 4 of the trust deed was of non-charitable nature and, therefore, it could not be termed as wholly for charitable or religious purposes. As a result, the respondent was denied exemption under Section 11(1)(a) of the I.T. Act, 1961 (hereinafter called 'the Act'), and the entire receipts of the trust were subjected to tax in accordance with the provisions of Section 164(1) of the Act. The said Sub-clause (vii) of Clause 4 of the trust deed reads as under :--

'To render monetary help to any person for his personal needs or for the needs of the members of his family as may be decided by the trustees.'

2. An appeal was taken to the AAC by the respondent-trust. The said authority, vide its order dated June 23, 1975, came to the conclusion that the aforementioned clause of the trust deed being of a subsidiary character could not be allowed to override the main purpose of the trust, especially when no part of the income had been spent under the said clause. The appeal filed by the respondent-trust was allowed.

3. The Department went up in second appeal which was partly allowed. The Income-tax Appellate Tribunal decided that the view taken by the AAC was correct in principle, but it referred the case back to him qua the amount of Rs. 5,761 which remained unspent out of the contributions made to the trust. At the instance of the Commissioner of Income-tax, the following question of law has been referred to us for our opinion :

'Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the assessee was a charitable trust and entitled to exemption under Section 11?'

4. We have heard the learned counsel for the parties. At the very outset, we deem it proper to notice the relevant clauses of the trust deed. The objects of the trust shall be I

(i) To establish and promote the establishment of and/or to render aid to schools, colleges and other educational and training institutions.

(ii) To establish, support, maintain or aid technical, engineering and/or commercial colleges and also schools and colleges for science, arts, et cetera and for promotion of science, literature and fine arts and for the diffusion of useful knowledge and for the collection of various works of natural art and natural history or other useful subjects.

(iii) To establish, promote or render aid to schools and educational institutions for the spread or development of technical and/or commercial education.

(iv) To maintain or grant aid to poor deserving students and grant scholarships, stipends, prizes, medals, et cetera and to supply books free of cost or at concessional rates to students, teachers and other persons.

(v) To provide medical aid and relief to the suffering people by aiding, establishing and/or maintaining hospitals, medical schools and colleges, dispensaries, nursing homes, babies homes, clinics, sanatoriums and other institutions meant for rendering medical relief.

(vi) To establish, support, maintain or grant aid to maternity homes and child welfare centres, orphanages and widows' homes, vagrants' homes and such other institutions, associations or societies for public benefit as the trustees may think fit and proper.

(vii) To render monetary help to any person for his personal needs, for the needs of the members of his family as may be decided by the trustees.

(viii) To spend on any public and/or charitable object.

(ix) To grant aid to the poor or needy or sick or disabled or handicapped or backward people affected by famine, drought, floods or other calamities.

(x) To donate to any institution or body for any public and/or charitable purposes.

Provided always and it is hereby declared that if any one or more of the objects specified above are held not to be an object of a public or charitable nature, the trustees shall not carry out such object or objects as if the same are not incorporated in these presents but the validity of thetrust created by these presents as a trust for public and charitable purposes shall not be affected in any manner.'

5. It is well settled that in order to determine the true import of a document, its various clauses have to be read as a whole.

6. While discussing the creation of a precatory trust, it has been so mentioned in Halsbury's Laws of England, third edition, Vol. 38, at page 834 :

'The court must in each case be guided by the intention to be collected from the particular instrument as a whole rather than by the particular words in which the request, etc., is expressed, but having regard to any surrounding circumstances which may legitimately be taken into consideration ; and this is so notwithstanding that there may be a decision to the contrary effect upon words more or less similar.'

7. In the instant case, the proviso added to the objects of the trust clearly indicates that in case either of the objects of the trust is held not to be an object of public or charitable nature, the trustees shall not carry out such an object and in that contingency the validity of the trust created as a trust for public and charitable purpgses shall not be affected in any manner :

In Dharmaposhanam Co. v. CIT : [1978]114ITR463(SC) , it was observed (p. 470): 'Whether a trust is for charitable purposes falls to be determined by reference to all the objects for which the trust has been brought into existence. See Tennent Plays Ltd. v. Commissioners of Inland Revenue [1948] 30 TC 107 and Incorporated Council of Law Reporting for England and Wales v. Attorney-General and Commissioners of Inland Revenue [1971] 47 TC 321. In Rex. v. Special Commissioners of Income-tax [1922] 8 TC 286 , it was pointed out by the Court of Appeal in England that if the settlor reserves to himself the power of appointment under which he might appoint to non-charitable purposes, the trust cannot claim exemption even though the power of appointment is in fact exercised in favour of a charitable object. It would be a different case where one or more of the objects mentioned in the memorandum of association, although included therein, were never intended to be undertaken, ,If there is evidence pointing to that conclusion, clearly the court will ignore the object and proceed to consider the case as if it did not exist in the memorandum. In Commissioner of Income-tax v. Dharmodayam Co. : [1977]109ITR527(SC) , it was that basis on which this court proceeded when it observed that the assessee had never engaged itself in any industry or in any other activity of public interest.'

8. In the instant case there is not only a positive command in the deed that the objects mentioned in it which are found uncharitable shall not becarried out by the trustees but admittedly no amount was spent on an object covered by Clause 4(vii) (supra).

9. For reasons aforementioned, we answer the question of law noted above in favour of the respondent and against the Revenue.

10. No costs.


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