SINHA J. - This is a reference under section 66(2) of the Income-tax Act. The facts are shortly as follows : Sri Rai Satab Chand Nahar Bahadur executed a deed of trust dated 19th January, 1918, by which he conveyed certain properties and funds for the purposes mentioned therein. An English translation of the deed is annexed to the statement of case dated 13th July, 1959, and marked as annexure 'A'. In the deed it is stated that with the object that the pious acts relating to the management, etc., of the Sadabrata, the family religious rites and the Dharamsala set up by the ancestors of the settlor and himself might be properly performed after his death, he the settlor had created a trust known as the 'Nahar Family Trust'. It recites that he was making provision for the appointment of trustees for giving effect to the same. Although it is stated that the settlor had already created a trust, and that this document was an appointment of trustees, the statement of case accepts it as the trust itself and no prior trust is mentioned. As a deed of trust, the document leaves much to be desired. Although there is the above-mentioned recital of the objects, yet it has not been specifically stated anywhere that the trust was for the purpose of benefiting members of the public. Indeed, no mention of the public is made anywhere in the deed. There is a schedule entitled 'Schedule of pious and religious acts', but it merely sets out a list of certain immovable properties and mentions certain expenditures and against each item a sum is mentioned as the sanctioned expenditure. In this case we are not concerned with the other properties or assets vested in the trustees, but only with one particular property known as the 'Kumar Singh Hall' at No. 46, Indian Mirror Street, in the town of Calcutta. Under the deed of trust the settlor constituted himself the sole trustees for the term of his life and provided, inter alia, that after his death the eldest of his lineal descendants in the male line, who professed the faith of the Swetamber Jains, would be the trustees. The schedule shows that the 'Kumar Singh Hall' is a two-storied house standing on about 14 cottahs of land at No. 46, Indian Mirror Street. It is stated that on the first floor of this premises there is the Derasar of a temple of Sree Adinath Thakur, a Jain Tirthankar, which was established in 1917. To the south of the said building there is a two-storied outhouse. The amount of expenditure sanctioned against this premises for the 'upkeep of the said hall, Derasar and provision for the necessary puja and worship' is Rs. 2,000.
I now come to the relevant clause in the trust deed which runs as follows :
'5. As trustee I am performing all pious acts relating to the Dharamsala at the holy place called Pawapuri in the District of Patna, and the Derasar (consecrated place) of Sree Adinath Thakur installed in the house known as Kumar Singh Hall at No. 46, Indian Mirror Street, in the town of Calcutta, and I shall continue to perform those acts as long as I am alive. Afterwards these acts shall be performed according to the rules laid down in this deed of trust. Be it declared that each of my sons, grandsons and other descendants shall have right to use the house known as the Kumar Singh Hall and its outhouse and court-yard on the occasions of marriages, social engagements and festivities. My eldest son, Sreeman Rai Manilal Nahar Bahadur, and my second son, Sreeman Puran Chand Nahar, have established the Nahar Family Exhibition and a library known an Golab Kumari Library in the said hall. They and their descendants shall be entitled to use the said hall for purposes of the said exhibition and library. The trustees for the time being shall allow such user and shall not be competent to put forward any manner of objection thereto.'
It is stated in the statement of case that the 'Kumar Singh Hall' is used by the trustees for holding public meetings. The library and the museum contain collections on works of Jain art and culture and are open to the public. Be notification dated 27th March, 1953, issued by the Government of West Bengal, in exercise of the power conferred by the Explanation to sub-section (1) of section 157 of the Calcutta Municipal Act, 1951, the premises No. 46, Indian Mirror Street, Calcutta, has been declared to be used 'solely for the purpose of education and advancement of an object of public utility, namely, the holding of public meetings'. In the year 1953-54, Sri Keshari Singh Nahar, trustee of the said trust was assessed to income-tax and the Income-tax Officer disallowed the claim for exemption made under section 4(3) (i) of the Income-tax Act, in respect of the income of the properties conveyed under the deed of trust, on the ground that the settlement was not wholly for religious and charitable purposes. He assessed the income at the maximum rate under section 4(1) (1) of the said Act. The Appellate Assistant Commissioner observed that as the members of the settlors family had been given a right to use the building at No. 46, Indian Mirror Street, for private purposes, the building could not be considered as reserved solely for public charitable purposes. He, therefore, held that the amount of Rs. 2,000 which was set apart for expenses in connection with the property at No. 46, Indian Mirror Street, was not exempt from taxation, but the balance of the income had been set apart wholly for public charitable purposes and was exempt from taxation. When the matter came up before the Appellate Tribunal, it held that clause 5 of the deed dated 19th January, 1918, did not make the settlement a mixed trust but that the trust was wholly for public charitable purposes and, therefore, the appeal was allowed. Upon this, an application was made for a reference to the High Court, which was rejected in the first instance, but in accordance with the direction of the High Court, the following question has been referred :
'Whether, on the facts found, the Tribunal was justified in drawing the inference that the trust created by the trust deed dated the 23rd day of January, 1918, was wholly for a public charitable purpose ?'
I must say that the statement of case and the order of the Tribunal are far from satisfactory. As I have stated above, no investigation was made in connection with the statement in the deed of trust itself that the settlor had already created a trust known as the 'Nahar Family Trust.' The user of the 'Kumar Singh Hall' as a place for holding public meetings is not mentioned in the deed itself. It is curious to state that Rs. 2,000 is the expenditure sanctioned by the schedule to the deed in respect of the premises No. 46, Indian Mirror Street, and then seek to exempt if from taxation. Obviously, it is not the expenditure which is taxable but the income. In fact, there is no indication in the trust deed itself as to what the trust property consists of, and no mention is made of the income. We have been informed that subsequent to the execution of the trust, the settlor purchased various Government securities and vested the same in the trustees, and there is some house-rent realised from investments made by the trustees in real property. Really, therefore, it is a part of the income which is sought to be exempted and not the expenditure. For the purposes of this case, however, we are not able to go into these various aspects of the matter ourselves. We must take it that the 'Kumar Singh Hall' is a two-storied house with an outhouse and court-yard, where there is a temple of Sree Adinath Thakur. There is a hall in which the public are allowed to hold meetings. There is also a library and a museum open to the public. Rs. 2,000 out of the income of the trust estate is expended in respect of this property to carry out the trusts in respect thereof. The relevant section of the Income-tax Act is section 4(3) (i) Section 4(1) lays down as to what is deemed to be the total income of an assessee. The relevant part of sub-section (3) runs as follows :
'4. (3) Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them :
(i) Subject to the provisions of clause (c) of sub-section (1) of section 16, any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, in so far as such income is applied or accumulated for application to such religious or charitable purposes as relate to anything done within the taxable territories, and in the case of property so held in part only for such purposes, the income applied or finally set apart for application thereto.'
Briefly speaking, the provision means this : If a property yielding income is held under a trust or other legal obligation, 'wholly' for religious or charitable purposes, then the whole of it is exempted. If, however, the property is held in part only for such purpose, then the part of the income which is actually applied or finally set apart for such application is exempted. In the present case, the trust should have been taken as a whole, in order to find out whether it is a trust wholly for religious or charitable purposes or partly so. I do not know why only No. 46, Indian Mirror Street, was taken into consideration. It can only be on the footing that it is admitted that the rest of the properties are held for religious or charitable purposes. Coming now to the exact problem that has arisen in this case, it is in a small compass, and may be stated as follows. The 'Kumar Singh Hall' together with outhouse and court-yard is partly used for housing the temple. In another part there is a library and exhibition. The hall itself is utilised for allowing the public to hold meetings. The descendants of the settlor, however, have been given some rights in the said hall, namely, to use the house known as the 'Kumar Singh Hall' and its outhouse and court-yard on the occasion of marriages, social engagements and festivities. The Income-tax Officer and the Appellate Assistant Commissioner were of the opinion that this premises was not dedicated wholly for a religious or a charitable purpose; because certain private rights have been conferred upon the descendants this sum of Rs. 2,000 set apart for the expenditure in connection with this property could not be exempted. Assuming that it is mixed trust, this direction is of course not in accordance with law. If the trust is a mixed trust, then only the actual amount that has been spent for the trust or finally set apart for being so spent, can be exempted and not a hypothetical amount, even if it is specified in the trust deed itself as being the sanctioned expenditure. Be that as it may, the only question that has been propounded before us is as to whether, on the facts found, the Tribunal was justified drawing the inference that the trust created by the said trust deed was 'Wholly' for a public charitable purpose. The facts to be considered are very simple. We have the 'Kumar Singh Hall' in which the public are given the right to call meetings as well as to enjoy the amenities of an exhibition and a library. It is not disputed that these objects as well as the Derasar of Sree Adinath Thakur are purposes which may be described as a trust wholly for a religious or charitable purpose. The trouble comes in because of the creation of a private right in the sons, grandsons and other descendants of the settlor, since they have been given the right to use the house on the occasions of marriages, social engagements and festivities. The Income-tax Officer and the Appellate Assistant Commissioner have come to the conclusion that these are private objects and, therefore, the trust in respect of the 'Kumar Singh Hall' is not one wholly for a religious or a charitable purpose. Prima facie this seems to be correct. If 'wholly' means one hundred per cent., then it is apparent that out of the hundred per cent. user of the said property, a small percentage has been carved out in favour of the descendants of the settlor. In section 167 of the Calcutta Municipal Act, 1951, the words used are 'land or building used exclusively for the purpose of public worship... or used exclusively for the purpose of public charity'. In such cases, the question of exemption from payment of the consolidated rates arises. It will be observed that the Government has considered the hall as being used exclusively for the purpose of education and advancement of an object of public utility and thus for a public charitable purpose. As I have stated above, prima facie, a trust cannot be wholly for a religious or a charitable purpose if a part of the purpose is private. This rigorous test has, however, not been applied to trusts for public, religious or charitable purposes so far as section 4(3) (i) is concerned. The principle to be applied has been declared by the Supreme Court in Trustees of the Charity Fund v. Commissioner of Income-tax, The facts in that case were as follows : Sir Sassoon David, Baronet of Bombay, created a trust by means of a charity fund known as 'The Charity Fund founded by Sir Sassoon David, Baronet of Bombay.' By a deed of declaration of trust dated June 8, 1922, it was declared that the trust fund would be held by the trustees for the public charitable purposes mentioned therein. The trust fund was to be held by trustees upon trust to apply the net income thereof for all and any of the following purposes, that is to say : (a) the relief and benefit of the poor and indigent members of Jewish or any other community of Bombay or other parts of India or of the world, either by making payments to them in cash or providing them with food and clothes and/or lodging or residential quarters or in giving education including scholarships to, or setting them up in life, or in such manner as to the said trustees may seem proper, or (b) the institution, maintenance and support of hospitals and schools, colleges or other educational institutions, or (c) the relief of any distress caused by the elements of nature such as famine, pestilence, fire, tempest, flood, earthquake or any other such calamity, or (d) the case and protection of animals useful to mankind, or (e) the advancement of religion, or (f) other purpose beneficial to the community not falling under any of the foregoing purposes, provided always that in applying the income as aforesaid the trustees shall give preference to the poor and indigent relations or members of the family of the said Sir Sassoon David Bart., including therein distant and collateral relations.
A question arose as to whether this was a trust wholly for a religious and charitable purpose, so as to attract the exemption provided for in section 4(3) (i) of the Income-tax Act. The High Court held that it was not so, because there was a mandatory obligation on the trustees to give preference to the poor and indigent relations and members of the family of the settlor and the trustees could spend the entire income if they so chose, for the benefit of the relations and members of the family, without committing any breach of trust. This finding was, however, set aside by the Supreme Court. Das C.J. held, upon a consideration of the terms of the trust deed, that there was a general charitable intention, involving an element of public utility and the proviso did not curtail this nature of the trust. The learned Chief Justice said as follows :
'The first proviso opens with the words in applying the income as aforesaid. This takes us back to sub-clause (a). The meaning of the proviso obviously is that in applying the income for the purpose of sub-clause (a), the trustees shall give preference to the poor and indigent relations or members of the family of Sir Sassoon David Bart. The proviso does not operate independently but comes into play only in applying the income as aforesaid. The provision for giving preference involves the idea of selection of some persons out of a bigger class envisaged in sub-clause (a). The poor and indigent relations or members of the family can claim to participate in the benefits under the trust only if they come within one of the several clauses enumerated in sub-clause (a).'
The learned Chief Justice relied on an English case, In re Koettgens Will Trust. In that case, the testatrix bequeathed her residuary estate upon trust for the promotion and furtherance of commercial education. It was however provided that the trustees shall give preference to any employees of John Batt & Co. (London) or a member of their family, to the extent of seventy-five per cent. of the total available income for that year. It was held, on a construction of the will, that the gift to the primary class from which the trustees could select the beneficiaries contained the necessary element of benefit to the public and that it was when that class was ascertained that the validity of the trust had to be determined, so that the subsequent direction to prefer a limited class did not affect the validity of the trust which was a valid and effective charitable trust. The learned Chief Justice held that the provisions for giving preference to the poor and indigent relations or the members of the family of Sir Sassoon David, Bart, could not affect the public charitable trust constituted under the trust deed which came within the exemption provided for in section 4(3) (i). A similar question came to be considered by the Privy Council in Caffoor v. Commissioner of Income-tax. In that case a trust was created but it was provided that in the first instance the educational benefits conferred by the trust deed were to be provided for the grantors own family and it was only when no such members of the family existed that the public would be able to enjoy the benefits. Lord Radcliffe said as follows :
'It was argued with plausibility for the appellants that what this trust amounted to was a trust whose general purpose was the education of deserving young people of the Islamic Faith, and that its required public character was not destroyed by the circumstance that a preference in the selection of deserving recipients was directed to be given to members of the grantors own family. Their Lordships go with the argument so far as to say that they do not think that a trust which provides for the education of a section of the public necessarily loses its charitable status or its public character merely because members of the founders family are mentioned explicitly as qualified to share in the educational benefits or even, possibly, are given some kind of preference in the selection. They part with the argument, however, because they do not consider that the trust which is now before them comes within the range of any such qualified exception. Considering what is in effect the absolute priority to the benefit of the trust income which is conferred on the grantors own family be clause (i) of sub-head (b), the only fair way to describe this is as a family trust under which the income is made available to provide for the education or training of relatives of the propositus,... Such a trust is not a trust of a public character solely for charitable purposes.' The learned judges referred to In re Koettgens Will Trusts and stated that is was inconsistent with the House of Lords decision in Oppenheim v. Tobacco Securities Trust Co. Ltd. In that case, a trust was executed for certain charitable purposes, to be enjoyed by the children of the employees or former employees of a certain limited company or its subsidiaries. It was held that this could not be considered as a trust for public charitable purposes. In All India Spinners Association v. Commissioner of Income-tax the Privy Council was dealing with the question as to whether the All India Spinners Association was a body formed for a public charitable purpose. Incidentally the Judicial Committee had to consider the question as to how far the English authorities were to be relied on and what was the principle to be applied under section 4(3) (i) of the Indian Income-tax Act. Their Lordships proceeded to observe as follows :
'It is now recognised that the Indian Act must be construed on its actual words and is not to be governed by English decisions on the topic. The English decisions on the law of charities are not based upon definite and precise statutory provisions. They have been developed in the course of more than three centuries of the Chancery courts..... The Indian Act gives a clear and succinct definition which must be construed according to its actual language and meaning. The English decisions have to binding authority on its construction and though they may sometimes afford help or guidance, cannot relieve the Indian courts from their responsibility of applying the language of the Act to the particular circumstances that emerge under conditions of Indian life..... Their Lordships see no sufficient reason to doubt the conclusion that the primary object of the association was the relief of the poor. That would be enough prima facie to satisfy the statute.'
We find, therefore, that although the word 'wholly' has been used in section 4(3) (i) of the Income-tax Act, the expression has been watered down so as to mean the 'primary object'. Thus, the fact that some private rights are also given will not by itself take the matter out of the scope of section 4(3) (i). In Trustees of the Charity Fund v. Commissioner of Income-tax cited above, it was held that the fact that some of the relations of the members of the family of the founder of the trust had been granted a preferential claim in the selection of beneficiaries under the trust did not alter the nature of the trust and that it was still a public charitable trust within the scope of section 4(3) (i) of the Income-tax Act. In Andhra Chamber of Commerce v. Commissioner of Income-tax, the Madras High Court had to consider the question as to whether the assessee, the Andhra Chamber of Commerce, came within the scope of section 4(3) (i) of the said Act. It was found that the primary object of the institution was to promote trade, commerce and industry in general public utility, within the meaning of section 4(3) (i) of the said Act, and the fact that individual members derived benefit from its activities did not take it out of its scope. Although it was not a case under the Income-tax Act, the Supreme Court decision in Deoki Nandan v. Murlidhar, throws some light on the village of Bhadesi in the district of Sitapur, constructed a thakurdwara and installed the idol of Sri Radhakrishnaji therein. The public were allowed to worship at the temple. The question was as to whether it was a public trust or a private endowment. That the public were allowed to worship in the temple was not disputed. But it was contended that the public were admitted into the temple not as a matter of right but as a matter of grace and in support thereof the pujari of the temple deposed that while the settlors wife used to do puja in the temple the settlor stopped outsiders from going into the temple as his wife observed purdah. It was held that this fact did not justify the conclusion that the villagers did not worship at the temple as a matter of right. Ayyar J. said as follows :
'We are of opinion that this fact does not afford sufficient ground for the conclusion that the villagers did not worship at the temple as a matter of right. It is nothing unusual even in well-known public temples for the puja hall being cleared of the public when a high dignitary comes for worship, and the act of the pujari in stopping the public is an expression of the regard which the entire villagers must have had for the wife of the founder, who was a pardanashin lady, when she came in for worship, and cannot be construed as a denial of their rights. In the present case, the endowment was in favour of the idol itself, and the point for decision is whether it was a private or public endowment.'
It was held that it was a public endowment.
Upon an examination of these authorities it appears to me that the principles to be applied are as follows : It is true that in section 4(3) (i) of the Income-tax Act the word 'wholly' is used, but it is sufficient if the primary object of the trust or other legal obligations which have been created is one of general public utility. Where the object is wholly for the benefit of the public, no question arises. Where, however, there are reservations of a private nature, the question arises as to whether these restrictions can be considered to be such as are destructive of the primary object of benefiting the public. The Privy Council case of Caffoor v. Commissioner of Income-tax is illustrative of this. The settlor there executed a trust for the education or training in England of deserving youths of the Islamic faith. If the matter stood there, there was undoubtedly an intention of bringing into existence a trust of general public utility. But, there was a condition that in the first instance the trustees were to give preference to the male descendants of the settlor and so long as any such descendants existed, no members of the public could be selected. It was held that this was entirely destructive of the general charitable intent, and reduced the trust to one for the mere benefit of the settlors family. On the other side of the border line we have the Supreme Court case of Trustees of the Charity Fund v. Commissioner of Income-tax, where the settlor created a trust for charitable purposes and the primary intention was to benefit the public, although there was a clause that preference should be given to certain indigent members of the settlors family. This was held not to be destructive of the general intent to benefit the public. It is obvious that each case depends upon its own facts. These being the principles to be applied, let us apply them to the facts of the present case. The trust deed has been discussed above. Although it does not, in so many words, mention members of the public, yet the nature of the trust itself and the finding of the Tribunal, make it amply clear that the general purpose was one of public utility. The trust created or endowed temples, sadabratas, charitable dispensaries, panchayats, etc. Coming to premises No. 46, Indian Mirror Street, we find that in a part there is a temple in which the public are allowed to worship. There is a permanent exhibition and a library which the members of the public are allowed to use and enjoy. Coming to the Hall, it has been found that it is used for holding public meetings. Taking an overall view of the picture, there can be little doubt that the primary object of the trust is to benefit the members of the public. There is, however, a small reservation, namely, that when any of the sons, grandsons and other descendants of the settlor would like to use the half and outhouse, etc., on the occasions of marriages, social engagements and festivities, they should be allowed to do so. In other words, for a limited purpose, preference of user is given to the descendants of the settlor to use the hall, etc., for certain specified purposes. I do not think that this cuts down the general intention to such an extent that we can say that the general intention of benefiting the public has been lost. If 'the primary object' is the test, then there can be little doubt that this is a public and charitable trust, within the meaning of section 4(3) (i) of the Income-tax Act.
For the reasons aforesaid, we are of the opinion that the question asked should be answered in the affirmative. The assessee should get the costs. Certified for two counsel.
DATTA J. - I agree.
Question answered in the affirmative.