1946 (8) TMI 22 - HC - Income Tax

Assessment of trust income based on deity's income. Charitable spending not excluded. Costs awarded to assessees.

Sri Sri Jyotishwari Kalimata And Others Versus Commissioner of Income Tax, Bihar And Orissa

Sri Sri Jyotishwari Kalimata And Others Versus Commissioner of Income Tax, Bihar And Orissa - [1946] 14 ITR 703 (Pat) Issues:Construction of trust deeds for properties dedicated to deities, Assessment of income of trust properties in the hands of the trustee, Exclusion of sums spent by trustees on charitable purposes from taxable income.Analysis:The judgment involves the interpretation of trust deeds dedicated to deities and the assessment of income derived from trust properties. The common question of law across cases was whether the income of trust properties should be assessed at the maximum rate under Section 41(1) of the Income-tax Act. The Appellate Tribunal considered the nature of the trust and concluded that each deity should be separately assessed based on their income, holding the trustee liable for tax. The Tribunal relied on legal precedents to establish that the deities are juristic persons and the income is received on their behalf. The trustee was considered a custodian, and separate assessments for each deity were deemed appropriate.Regarding the exclusion of sums spent on charitable purposes from taxable income, the Tribunal directed an inquiry to determine if any part of the trust's income benefited the public. While the Appellate Assistant Commissioner viewed the trust as private and ineligible for public benefit exemptions, the Tribunal disagreed. It identified expenses for public welfare, such as schools and dispensaries, and exempted them from taxation. However, the Tribunal's decision was challenged, arguing that the trust deeds did not mandate spending on public charity, thus disqualifying the exemption. The court agreed with this argument, emphasizing that vague provisions in the trust deeds did not establish a clear intention for public benefit expenditure exemptions.In conclusion, the court ruled that the income of trust properties should be assessed based on individual deities' income, not at the maximum rate. Additionally, sums spent on charitable purposes, without specific mention in the trust deeds, were not to be excluded from taxable income. The Commissioner of Income-tax was directed to pay costs to the assessees due to the substantial failure in the references. The judgment was unanimous, with Justice Ray concurring without additional comments.