Trust validity and taxability of trust income cannot be negated by inconsistent conduct or Charity Commissioner certification

Trust deeds that satisfied section 6 of the Indian Trusts Act, 1882, and were not shown to have been extinguished under section 77, supported the legal existence of the trusts. The Charity Commissioner's certificate did not prevent the tax authority from examining whether the receipts were taxable, because assessment of income remains within the income-tax authority's jurisdiction and the doctrine of judgment in rem could not be extended to bind that inquiry. Inconsistent conduct, absence of renewed registration, and alleged non-fulfilment of charitable conditions did not, on the stated analysis, negate the trusts or justify treating trust income as the assessee's income.

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Issues: Whether the income from the schools could be treated as the assessee's income despite the existence of trusts, whether the Income-tax Officer could go behind the Charity Commissioner's certificate, and whether the assessee's conduct or the procedural objections under the income-tax provisions displaced the legal existence of the trusts.

Analysis: The trust deeds satisfied the requirements for creation of a trust under section 6 of the Indian Trusts Act, 1882, and the revenue did not establish any mode of extinguishment under section 77 of that Act. The decision of the Charity Commissioner did not bar the Income-tax Officer from examining the assessability of the receipts, because the statutory authority retains exclusive jurisdiction to determine what constitutes taxable income, and the doctrine of judgment in rem could not be extended to bind the Income-tax Officer in these assessment proceedings. The assessee's inconsistent conduct, the absence of renewed registration, and the alleged non-fulfilment of charitable conditions did not negate the legal existence of the trusts or justify attributing the trust income to the assessee.

Conclusion: The income of the trusts could not be assessed as the assessee's income, and the substantive issue was decided in favour of the assessee.

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