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Commissioner of Income-tax Vs. Estate of B.P. Kayan Trust (Through B.P. Kayan, Trustee) - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 259 of 1972
Judge
Reported in(1985)47CTR(Cal)366,[1985]155ITR60(Cal)
ActsIncome Tax Act, 1922 - Section 4(3)
AppellantCommissioner of Income-tax
RespondentEstate of B.P. Kayan Trust (Through B.P. Kayan, Trustee)
Appellant AdvocateB.K. Bagchi, Adv.
Respondent AdvocateNone
Excerpt:
- .....expenses mentioned in clauses 2(a) and 2(b) would be spent in a certain manner. clause 3 of the trust deed was to the effect that:'3. any balance remaining after defraying or disbursing the above expenses to be applied as follows : firstly, for the establishment and maintenance of a dharamshala, for providing food and other amenities to the pilgrims, adequate staff for such purposes. secondly, for the establishment of a sanskrit chatuspati, for paying the salaries of the necessary pandits, for providing scholarships to the students for their lodging and boarding expenses, etc.' 2. the case of the revenue was that the trust was a private trust and the exemption must be limited to the amount that was actually spent for the purpose of charity. the tribunal accepted this contention of the.....
Judgment:

Suhas Chandra Sen, J.

1. R.P. Kayan of 103 Park Street, Calcutta, installed two deities known as Radha Krishna Jew and Ladoo Gopal and erected a temple at Villa Rose being premises No. 156, Victoria Road, Baranagore. By a deed of settlement dated February 14, 1951, the settlor dedicated certain properties unto the said deities. He constituted himself as the first trustee/shebait with a right of residence for himself and hisfamily. It was provided in the deed that the net income of the properties after defraying the expenses mentioned in Clauses 2(a) and 2(b) would be spent in a certain manner. Clause 3 of the trust deed was to the effect that:

'3. Any balance remaining after defraying or disbursing the above expenses to be applied as follows :

Firstly, for the establishment and maintenance of a Dharamshala, for providing food and other amenities to the pilgrims, adequate staff for such purposes. Secondly, for the establishment of a Sanskrit chatuspati, for paying the salaries of the necessary pandits, for providing scholarships to the students for their lodging and boarding expenses, etc.'

2. The case of the Revenue was that the trust was a private trust and the exemption must be limited to the amount that was actually spent for the purpose of charity. The Tribunal accepted this contention of the Revenue. The Tribunal, however, allowed 20% of the income that was remained unspent as exempt from income-tax under Section 4(3)(i) of the Indian I.T. Act, 1922. On that aspect of the matter, the Revenue has raised the following question of law :

'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that 20% of the balance net income of the trust property reserved for constructing a Dharmashala at Loharu, a Sanskrit Patashala and other maintenance was exempt from income-tax under Section 4(3)(i) of the Indian Income-tax Act, 1922 ?'

3. On behalf of the assessee, two questions have been raised :

'1, Whether, on the facts and in the circumstances of the case, and on a proper interpretation of the deed of trust dated February 14, 1951, the Tribunal was justified in holding that the assessee was a private religious trust and, therefore, only that part of its income was exempt which was applied, accumulated or finally set apart for application to public charitable purposes under Section 4(3)(i) of the Indian Income-tax Act, 1922 ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee's income from property was liable to be assessed under Section 9 of the Indian Income-tax Act, 1922?'

4. Since nobody has appeared on behalf of the assessee, the question raised by the assessee need not be answered. We are only concerned with the case of the Revenue that the Tribunal was not justified in holding the 20% of the balance of net income of the trust property was exempt from income-tax' under Section 4(3)(i) of the Indian I.T. Act, 1922. The trust deed is very clear. The unspent income has to be kept for the two purposes mentioned in the trust deed. The first purposes is establishment and maintenance of a dharamsala for providing food and other amenities to pilgrims and adequate staff for such purposes. The second purpose is for establishment of a Sanskrit chatuspati, for paying salaries of the necessary pandits, for providing scholarships to students and for their lodging and boarding expenses. Both are charitable objects. There is no reason to presume that the trustees will not act in conformity with the obligation cast upon them by the trust deed. The Tribunal has held that the money that was accumulated must be taken to have been accumulated for those purposes. There is no reason why this finding should be disturbed. In our opinion, the Tribunal has not committed any error of law. The fact is that a portion of the income of the trust was not spent for charity.

5. It was also not spent for any non-charitable object. Whether the balance that was carried forward can be described as having been set apart is not the real issue. The money has been carried forward. Any excess of income over expenditure which has been carried forward to the next year must be regarded as accumulation of income. Whether it has been finally set apart for a particular purpose or not is immaterial for the controversy before us. Requirements of the section have been fulfilled. Moreover, there is no reason to presume that the trustee will act contrary to the direction given in the trust deed which is to accumulate the excess income for the purpose of specific charities. If in case it is found that the trusts are actually applying the money for non-charitable purposes, then the ITO has sufficient power to take steps in accordance with law but on the facts as found by the Tribunal there is no scope for presuming that the monies that have been accumulated will not be spent for the purpose of charity. In that view of the matter, the question is answered in the affirmative and against the Revenue.

6. In the facts of the case, there will be no order as to costs.


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