TaxTMI 
TaxTMI 
2005 (8) TMI 90
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....t, maintain and repair on the said two plots of land and any other land that may hereinafter be acquired by the trustees on behalf of the trust. (i) Residential quarters, chawls or buildings for the workmen in the town of Kanpur and the surrounding areas and extensions and for their respective families and dependents and for such other skilled and unskilled workmen, craftsmen, traders, merchants, technical or professional men whom the trustees may permit to reside or work in the said two plots provided that the benefit in this clause shall be granted only to those persons who on account of poverty are in need of help and really deserve help. (ii) Public schools, pathshalas, colleges, libraries, public halls, hostels or bearing houses. (iii) Hospitals, dispensaries, museum, places of recreation, instruction, swimming baths, lakes, parks, playgrounds, temples, mosques, churches, a market or markets and, such other works and institutions of general public utility. (iv) Such other works, buildings and installations as the trustees may in their discretion think fit to provide for the advancement of any other similar object of general public utility." The trust set up with....
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....e glaring in its agreement with M/s. J.K. Synthetics Ltd. As per the agreement, the said company wanted to utilise the land for constructing suitable residential quarters and workmen's settlement. The plan and designs were to be approved by the appellant-trust. The trustees in their meeting held on November 12, 1966, considered it beneficial to allow the construction and installation to be made by the said company as it was being built to provide for the achievement of objects of the trust. The said company, however, proceeded to make residential bungalows for the top executives of the said company and its allied concerns belonging to the J.K. Organisation, which is known as Kamla Nagar. The residential bungalows were allotted to the top executives of the company who by no stretch of imagination, can be considered either workmen, poor workmen or workmen really in need on account of poverty. Since the construction was to be made with the approval of the trustees, the trustees, in my opinion, have gone back even on their lease agreement and allowed the construction to be made for residences of top executives of J.K. Organisation. From the utilisation of the property of the trust, it ....
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....lementing the real object of the trust will not entitle the income-tax authorities to deny the exemption to the trust and that the remedy against the trustees, if there was a genuine breach of trust, itself, lay somewhere else. It was not for the Income-tax Officer to take note of such alleged breaches of the trust objects and hold on that basis that the trust was not a charitable trust. As to the violation of section 13(1)(c), the assessee contended that the said clause provided for failure of the exemption to a public charitable trust if it could be shown that any income of such trust was, during the previous years, used or applied directly or indirectly for the benefit of any person referred to in sub-section (3) or any property of the trust was so utilised or applied during the previous year. The finding of the authorities below has been that J.K. Synthetics was a company belonging to the J.K. group and that concession given to it was sufficient to bring the assessee's case within section 13(1)(c). This approach of the learned Commissioner of Income-tax (Appeals), according to learned counsel for the assessee, was wrong because the Revenue had not been able to show that J.K.....
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....that the trust properties are being used for the benefit of the members of J.K. Organisation, it would not be correct to deny benefit of exemption to the assessee in terms of section 13(1)(c). The Department has to be specific about the name of the beneficiary and has thereafter to place facts on record to establish that such a person falls in the category of prohibited persons. No such attempt has been made by the departmental authorities. One has not even cared to find out the number of shares of J.K. Synthetics, which might be held by the trustees or the settlor or both of them combined together, and whether the said holding would bring M/s. J.K. Synthetics within the provisions of section 13(3)." We have heard Sri Shambhu Chopra, learned standing counsel appearing on behalf of the Revenue, and Sri R.S. Agarwal, learned counsel appearing on behalf of the respondent/assessee. Learned standing counsel submitted that as the fund of the trust was invested and the land was given for construction of building and flats of the employees of the companies in which, the trustees were interested, the provision of sections 13(1)(c), 13(2)(b), section 13(3) were attracted and, therefore....
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....cation of income for the benefit of specified person. It provides that if any land, building or other property of the trust or institution is, or continues to be made available for use of any person referred to in sub-section (3), for any period during the previous year without charging adequate rent or other compensation be deemed to have been used for the persons referred to in sub-section (3). The persons referred to in clause (c) of sub-section (1) and sub-section (2) are mentioned in sub-section (3). For ready reference clauses (a) and (c) of sub-section (1) of section 13, clause (b) of sub-section (2) of section 13, clauses (a), (b), (c), (cc) (d), and (e) of sub-section (3) of section 13 and clauses (i) and (ii) of Explanation 3 to section 13 of the Act are reproduced below: "13.(1) Nothing contained in section 11 or section 12 shall operate so as to exclude from the total income of the previous year of the person in receipt thereof- (a) any part of the income from the property held under a trust for private religious purposes which does not enure for the benefit of the public; (b) in the case of a trust for charitable purposes or a charitable institution created or....
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....y or adequate interest or both ; (b) if any land, building or other property of the trust or institution is, or continues to be, made available for the use of any person referred to in sub-section (3), for any period during the previous year without charging adequate rent or other compensation; (3) The persons referred to in clause (c) of sub-section (1) and subsection (2) are the following, namely:- (a) the author of the trust or the founder of the institution; (b) any person who has made a substantial contribution to the trust or institution, that is to say, any person whose total contribution up to the end of the relevant previous year exceeds five thousand rupees; (c) where such author, founder or person is a Hindu undivided family, a member of the family; (cc) any trustee of the trust or manager (by whatever name called) of the institution; (d) any relative of any such author, founder, person, member, trustee or manager as aforesaid; (e) any concern in which any of the persons referred to in clauses (a), (b), (c), (cc) and (d) has a substantial interest... Explanation 3.- For the purposes of this section, a person shall be deemed to have a substantia....