1973 (7) TMI 42 - HC - Income Tax

Trust's Religious/Charitable Income Exempt under Income-tax Act

Commissioner Of Income-Tax, Bombay City II Versus Trustees Of Abdulcadar Ebrahim Trust

Commissioner Of Income-Tax, Bombay City II Versus Trustees Of Abdulcadar Ebrahim Trust - [1975] 100 ITR 85 Issues Involved:1. Whether the income of the assessee-trust is exempt under section 4(3)(i) of the Income-tax Act, 1922.Issue-wise Detailed Analysis:1. Validity of the Trust and its Objectives:The court acknowledged that the trust, Abdulcadar Ebrahim Trust, was validly constituted by a deed of wakf dated January 25, 1937, and that its objectives were religious and/or charitable. This was undisputed by the revenue.2. Interpretation of Clause 6 of the Trust Deed:The revenue contended that clause 6 allowed the Mullaji Saheb to use the income for purposes beyond religious, pious, or charitable purposes due to the phrase 'or otherwise.' However, the court applied the ejusdem generis rule, stating that 'or otherwise' must be read in the context of the preceding terms, which are religious, pious, and charitable. Thus, the income could only be used for purposes similar in nature to those specified.3. Interpretation of Clause 14 of the Trust Deed:The revenue argued that clause 14 conferred absolute power on the Mullaji Saheb to use the trust income for personal purposes, which would override other provisions. The court disagreed, noting that clause 14 contained standard covenants found in conveyances and should not control or override the operative parts of the deed. The court emphasized that the operative parts clearly stated the properties were to be used for charitable purposes, and clause 14 did not grant the Mullaji Saheb personal use of the income.4. Legal Position of the Mullaji Saheb:The court referred to previous judgments, including Advocate-General of Bombay v. Yusuf Ali Ebrahim and Hasanali v. Mansoorali, which clarified that the Mullaji Saheb, as Dai-ul-Mutlak, held the properties as a trustee for the Dawoodi Bohra Community and was obligated to use the income for charitable purposes. The court reiterated that the Mullaji Saheb could not use the income for personal purposes.Conclusion:The court concluded that the income of the trust was indeed exempt under section 4(3)(i) of the Income-tax Act, 1922, as it was held under a legal obligation to be used for charitable purposes. The Tribunal's decision to allow the assessee's claim for exemption was upheld.Costs:The department was directed to pay the costs of the reference to the assessee. The notice of motion was dismissed with no order as to costs.