1968 (7) TMI 6 - HC - Income Tax

Trust's Public Purpose Exempt from Income Tax, Exception for Specific Sum

The court held that the trust, except for clause (d), is for public religious and charitable purposes. Consequently, the income of the trust, if properly ... Trust - public religious and charitable trust - exempt u/s 4(3)(I) of the IT Act, 1922 Issues Involved1. Whether the trust in question was a public religious and charitable trust and thus exempt under section 4(3)(i) of the Income-tax Act, 1922.2. If the trust is not a public religious and charitable trust, whether section 41 of the Indian Income-tax Act, 1922, is applicable and the assessment of tax should be at the maximum rate.Detailed AnalysisIssue 1: Public Religious and Charitable Trust ExemptionConstruction of the Trust Deed:The primary issue revolves around the interpretation of the trust deed dated 15th September, 1941. The trust, named 'Sreemati Ganeshi Debi Sreemati Rami Debi Charitable Trust,' outlines various purposes including worship of deities, maintenance of a Dharamsala, and operation of a Sanskrit Patasala. The Income-tax Officer initially determined that the trust was not a public religious and charitable trust, citing reasons such as the exclusivity of the Sanskrit Patasala to Brahmin students and the dilapidated state of the Dharamsala.Analysis of Trust Purposes:- Deities and Worship: The deities (Rama, Sita, and Lakshman) were installed in a bazar area, accessible to the public, and not confined to a family residence. The provision for 'sadabrata' implies that the food offerings (prasad) are meant for the public, including poor people and mendicants, indicating a public benefit.- Dharamsala: By its nature, a Dharamsala is intended for public use, allowing any member of the public to stay. This implies a public charitable purpose.- Sanskrit Patasala: Although primarily attended by Brahmin boys, the patasala is open to the public, fulfilling an educational purpose.- Piyau and Kund: These were acknowledged by all authorities as serving a public purpose.Provisions for Private Benefit:- Clause (d): This clause directs payment of annuities to two females, which does not serve a public purpose and is not considered charitable.- Clause (e): Although it allows the settlors to spend Rs. 50 each for charitable and religious purposes, it is still directed towards public charitable purposes.Conclusion on Public Benefit:The court concluded that, except for clause (d), the trust deed serves public religious and charitable purposes. The control of the trust fund by family members does not negate its public charitable nature under the Income-tax Act. The essential factor is whether the fund enures to the public benefit, which it does.Issue 2: Applicability of Section 41 and Maximum Rate of TaxGiven the conclusion on the first issue, the second issue regarding the application of section 41 and the assessment of tax at the maximum rate becomes irrelevant. The court declined to answer this question, deeming it unnecessary.Summary JudgmentThe court held that the trust, except for clause (d), is for public religious and charitable purposes. Consequently, the income of the trust, if properly applied or accumulated, would be exempt under section 4(3)(i) of the Income-tax Act, 1922, except for a sum of Rs. 900 per year. The first question was answered affirmatively, making the second question irrelevant and thus not addressed. The assessee was awarded costs.