Charitable trust can accept gifted shares without express power, and exempt dividend income remains refundable.

A public charitable trust may accept a gift of shares for its charitable objects even without an express trust-deed clause authorising receipt of gifts, provided the gift does not alter or impair the trust's purposes; the shares then vest in the trust. Dividend income arising from those vested shares is income of the trust and, where the trust is charitable, falls within the section 4(3)(i) exemption under the Indian Income-tax Act, 1922, making tax deducted at source on that income refundable to the trust. The questions were answered in favour of the assessee.

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Issues: (i) Whether a public charitable trust could validly accept a gift of shares in the absence of an express clause in the trust deed authorising receipt of gifts; and (ii) whether the dividend income arising from the gifted shares was exempt under section 4(3)(i) of the Indian Income-tax Act, 1922, so as to entitle the trust to refund of tax deducted at source.

Issue (i): Whether a public charitable trust could validly accept a gift of shares in the absence of an express clause in the trust deed authorising receipt of gifts.

Analysis: The trust was a public charitable trust created for charitable objects, and nothing in the trust deed prohibited the trustees from receiving further gifts for advancing those objects. Once the gift was accepted, the shares could not remain neither with the donor nor in a separate, uncreated trust. The acceptance of a gift in aid of the trust's purposes did not require a specific empowering clause where the gift did not alter or impair the trust's objects.

Conclusion: The gift was validly accepted by the trustees and the shares vested in the trust.

Issue (ii): Whether the dividend income arising from the gifted shares was exempt under section 4(3)(i) of the Indian Income-tax Act, 1922, so as to entitle the trust to refund of tax deducted at source.

Analysis: Since the shares had vested in the trust, the dividends accrued as the trust's income. The trust being a charitable trust, that dividend income fell within the exemption under section 4(3)(i). The tax deducted at source on such exempt income was therefore refundable to the trust.

Conclusion: The dividend income was exempt and the trust was entitled to the refund claimed.

Final Conclusion: The questions referred were answered in favour of the assessee, the appeal by special leave succeeded, and the trust obtained refund relief on the dividend income from the gifted shares.

Ratio Decidendi: A public charitable trust may accept a gift for its charitable objects without an express empowering clause in the trust deed, and once the gift validly vests in the trust, income arising from the gifted property is assessable in the hands of the trust and any applicable exemption operates accordingly.

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