1. This reference, under Section 66(1) of the Indian Income-tax Act, 1922, has been made in the circumstances hereinafter related.
2. The assesse'e is a public charitable trust, originally constituted under a trust deed, dated December 19, 1944. The trust was renewed by a deed dated January 10, 1951.
3. The year of assessment, with which we are concerned in this reference, is 1960-61, the relevant previous year being the year ended March 31, 1960.
4. Sardar Ajaib Singh, who is himself a trustee of the assessee trust, offered to transfer 640 fully paid-up shares in Indra Singh and Sons Private Ltd., of the face value of Rs. 6,40,000 to the assessee trust, reserving to himself the right to revoke or recall the transfer of either the entire lot of 640 shares or a portion thereof, but not until the expiry of clear seven years from the date of the delivery of the instruments of transfer and the certificates of share to the assessee trust. The offer is contained in his letter, dated January 23, 1959. The trustees accepted the offer on the terms the same had been made, and ratified the same by two resolutions dated February 5, 1959, and March 4, 1959.
5. There is no dispute that the shares were transferred and delivered to the trustees. On the said shares a dividend amounting to Rs. 1,28,000 accrued on which the tax was deducted at the source. There is no dispute that the income of the assessee trust is exempt from taxation under the provisions of Section 4(3J(i) of the Indian Income-tax Act. The assessee claimed a refund of the tax deducted at source which the Income-tax Officer refused to allow, The grounds which weighed with the Income-tax Officer were two-fold, namely :
(a) that the deed under which the assessee trust was formed did not contain any provision for receipt of donations or gifts from outsiders and, therefore, the gift made by Sardar Ajaib Singh was not a valid gift, and
(b) that the transfer of shares being revocable after seven years, it was a conditional transfer precluding the assessee from claiming refund of tax deducted at source.
6. Aggrieved by the order, the assessee appealed before the Appellate Assistant Commissioner, who allowed the appeal on the theory that during the relevant year of assessment, the shares did belong to the assessee and the dividend income accrued thereon was the income of the assessee, entitling the assesses to refund of the tax deducted at source.
7. Aggrieved by the order of the Appellate Assistant Commissioner, the revenue appealed before the Appellate Tribunal. The two-fold consideration which weighed with the Income-tax Officer against the assessee were urged by the revenue before the Tribunal. The Tribunal rejected the contentions being of the opinion, (i) that the assessee being a public charitable trust was not limited in its scope of activities within the four corners of the trust deed, under which it had been created, and was entitled as of right to receive gifts and donations from the public, and (ii) that the revenue being a third party to the transaction was not entitled to agitate the issue regarding the validity or otherwise of the gift. The Tribunal found that the doner had made the offer on certain conditions and the donee accepted the offer on these conditions. The gift was, therefore, valid and complete. Since, under the gift, the assessee became the rightful owner of the shares during the relevant period, the tax deducted at source on the dividend should be returned to the assessee trust.
8. Thereupon, on the prayer of the revenue, the Tribunal referred the following two questions to this court for answer :
'(i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the gift made by Sardar Ajaib Singh was valid and complete in law ?
If the answer to questions No. (i) be in the affirmative, then, (ii) Whether, on the facts and in the circumstances of the case, the assessee was entitled to the refund of tax deducted at source on the dividends accruing on the shares gifted by Sardar Ajaib Singh ?'
9. Mr. S. Mukherji, learned counsel for the revenue, submitted that theassessee being a public charitable trust, the objects of its bounty were notlimited, but it was no proposition of law to say that because the assesseewas a public charitable trust it was entitled as of right to receive gifts anddonations from the public. He further submitted that trustees of a publiccharitable trust, created by a document, are bound by the terms of the document. Unless there was anything in the document itself entitling thetrustees to accept gifts from outside, the trustees were not lawfully entitledto do so and to augment the original trust by mixing up with it later gifts,donations or endowments. Mr. Mukherji, in his fairness, did not disputethat it was possible to augment a Hindu religious endowment by subsequentgifts. He, however, submitted that the same analogy should not be appliedto the instant case, because a Hindu deity was a juristic personality and wasat liberty to receive gifts ; a trust was not such a personality and was not,where there was no authorisation in the trust deed, entitled to receive giftsand donations from the public and augment the original trust thereby.Mr. Mukherji, lastly, submitted that the endowment made by Sardar AjaibSingh may form a fresh and a separate trust in the hands of the trustees ofthe assessee trust. The same trustees, as trustees of the trust created byAjaib Singh, may claim exemption from taxation under Section 4(3)(i) of theIndian Income-tax Act. He, however, strongly disputed their right to claimexemption of an income from the trust created by Sardar Ajaib Singh, astrustees of the assessee trust.
10. Mr. Mukherji limited his argument within this short compass and did not choose to canvass the other point that because the transfer of shares was revocable after the expiry of 7 years, the same was a conditional transfer and was not liable to exemption.
11. Mr. S. R. Banerjee, learned counsel for the assessee, tried to meet the arguments advanced by Mr. Mukherji with the contention that the Indian Trusts Act, although applicable to Hindus, expressly saved from its operation all religious and charitable endowments. He further contended that there need not be a proper deed of gift or signification of the intention to accept the donation by the donee as required by the Transfer of Property Act. He relied in support of the above contention on the Full Bench decision of this court in Bhupati Smrititirtha v. Ram Lal Maitra,  I.L.R. 37 Cat. 128 (F.B.) in which Mookerjee J. held, on a review of all the relevant texts, that according to Hindu law the rule about the acceptance of a gift as a necessary condition for its validity, was applicable to secular gifts only. There was no foundation for its assumption that the dedication to a deity or for a religious purpose stood on the same footing.
12. The submission made by Mr. Banerjee is correct. But we wonder how this contention meets the argument advanced on behalf of the revenue. When Sardar Ajaib Singh intended to transfer the shares to the assessee-trust, it was not necessary for him to do so by a deed. In order to judge the validity of the gift, it may not be necessary to establish that the trustees signified their assent to accept the gift. In this case, however, there is enough evidence that the trustees signified their assent to accept the offer of gift on the terms purposed by the donor. The question for our consideration, however, is whether the gift as accepted by the trustees, had the effect of augmenting the assessee-trust for taxation purposes, or whether the effect of it was that it remained a separate trust in the hands of the trustees of the assessee-trust, with liberty to them to apply income of the subsequent trust for the benefit of the assessee-trust.
13. Mr. Banerjee urged that it was not necessary to expressly empower the trustees of a public trust to accept gifts, donations or endowments. That, he submitted, was a power inherently vested in them. We have our doubts. Trust is a confidence reposed in a person or persons, with respect to property of which he has or they have legal possession or over which he or they can exercise power, to the intent that he or they may hold the property or exercise the power for the benefit of some other person or object. Now, this confidence may not necessarily include in itself the liberty that the trustees would go on accepting donations and try to augment the trust to such dimensions that the purpose for which the original trust was created may be swamped or modified or qualified. If a settlor wants to invest the trustees with such a power, it is but reasonable to expect that the power should be conferred by the deed which created the trust. The trust that we have to consider does not appear to confer upon the trustees the further power to accept donations, gifts or endowments. We, therefore, do not think that the trustees have the liberty or the right to accept further gifts, in the absence of specific authorisation, augment the original trust and then claim the benefit of Section 4(3)(i) of the Indian the Income-tax Act.
14. Mr. Banerjee invited our attention to an unreported judgment this court in Wealth-tax Reference No. 444 of 1963 (Commissioner of Wealth-tax v. Sardar Ajaib Singh) in which the question arose whether even after the gift of the 640 shares by Ajaib Singh to the assessee-trust the shares remained part of the wealth of the assessee, for the purpose of computation of wealth-tax, or stood transferred to somebody else. We answered the question in favour of the asses-see because we had no ground to question the gift itself. Mr. Banerjee submitted that, since the gift was upheld, we should hold that the gift was in favour of the assessee-trust and went to augment the same, because that must be the effect of the judgment in the wealth-tax reference case. We are unable to uphold this argument. It did not come up for our consideration whether the gift by Sardar Ajaib Singh had the effect of augmenting the assessee-trust or had the effect of constituting some other trust in the hands of the satire assessee. We do not find anything contained in the above judgment which in any way helps the assessee in getting a favourable answer to the question referred to this court.
15. In the view that we take we answer question No. 1 in the following manner:
(1) The gift made by Sardar Ajaib Singh was a valid and complete gift but did not have the effect of augmenting the assessee-trust ;
(2) the assessee was not entitled to the refund of tax deducted at source on dividends accrued on the shares gifted by Sardar Ajaib Singh,
16. Since both the questions are answered against the assessee, the assessee must pay the costs of this reference to the Commissioner of Income-tax.
K.L. Roy, J.
17. I agree.