TaxTMI 
TaxTMI 
1981 (1) TMI 9
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.... for which the trust was created because it has now been found as a fact by the Tribunal that the trust is a public trust for a charitable purpose. The surplus income of the trust properties was to be utilised for charities which according to the trust would include" donations to erect funds for scholarships, prizes, medals, etc.", establishment of technical schools and colleges and other educational institutions and hostels for students of either sex, medical relief of all kinds, help to the destitute and poor and aid for people stricken by calamities such as floods, fire, etc., and no distinction was to be made on the basis of caste, creed or religion in respect of beneficiaries who would benefit by the trust. So far as "Kale Bhawan" is concerned, it appears that the property was transferred to the trust subject to the trust accepting the liability of .Rs. 50,000 which was the encumbrance in the form of a mortgage debt on the said property. The settlors were themselves to be the trustees. 2. One of the clauses of the trust deed provided that the managing trustee or managing trustees were to be paid" 25 per cent. of the trust income as emoluments for him or them for managing th....
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....rned with the other assets which consisted mainly in the form of goodwill in certain firms. 4. The Zonal Appellate Controller took the view that on the terms of the trust deed it could not be said that the settlor had reserved any benefit from the estate. It may be mentioned that s. 12 of the E.D. Act, was invoked by the Assistant Controller on the ground that the trust was advancing monies out of trust funds to the Provincial Automobile Company Limited., Nagpur, in which the deceased partner was holding 8 annas share. During the lifetime of the deceased one of the trust properties was sold and the sale proceeds were advanced as loans to the wife of the deceased and the trust funds have been invested in various firms in which the deceased was the partner. He bad also taken the view that under cl. 10 of the trust deed, the children of the settlors as well as descendants were also entitled to receive educational scholarships or medical help and marriage bounties and, therefore, the Explanation to s. 12(1) of the E.D. Act was applicable. All the reasons given by the Asst. Controller for holding that the deceased had reserved interest in the trust properties were held by the Appella....
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.... effect as a will whereby an interest in such property for life or any other period determinable by reference to death is reserved either expressly or by implication to the settlor or whereby the settlor may have reserved to himself the right by the exercise of any power, to restore to himself or to reclaim the absolute interest in such property shall be deemed to pass on the settlor's death ...... .." 7. The rest of the provisions of s. 12 are not relevant for our purpose. Section 12(1) is in two parts : the first part deals with the reservation of interest in the trust property for life or any other period determinable by reference to death, whether expressly or by implication ; and the second part deals with the reservation by the settlor by the right to revoke the trust, with the ultimate result of restoring to the settlor the trust property or enabling him to reclaim the absolute interest in such properties. In any one of these contingencies such property, though a trust may have been created in respect thereof has been provided to deem to pass on the death of the settlor. 8. The first question referred is a composite question turning on the applicability of the two ....
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....of trust. If for such work, any remuneration is provided for by the terms of the trust deed, that would not, in our view, amount to the reservation of any interest for the purposes of s. 12(1). Though no authority for this proposition is really needed, we may refer to the decision of this court in CED v. Sultan Alam Khan [1979] 116 ITR 360, to which one of us was party. In that case, we were dealing with a wakf, one of the clauses of which was that the settlor, who was himself the trustee, was permitted to occupy one of the flats in the trust property in order to manage the trust properties and it was held that a provision permitting occupation of the trust property by the trustee for the purposes of the management of the trust property did not amount to a reservation of any interest in the property settled by the settlors. The Department was, therefore, not entitled to rely on cls. 6 and 19 to contend that there was reservation of interest of the trust property and, therefore, the value of Kale Bhawan was liable to be treated as a part of the dutiable estate. 9. Second limb of the argument of the learned counsel for the Department is based on cl. 23. Clause 23, which we have re....
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....at cl. 23 of the trust deed is a repository of the express power of revocation which could be exercised after the period of 10 years from the date specified therein and if the trust cannot function for any reason. If the mere reservation in the case of a public trust was sufficient to bring the case within the latter part of s. 12(1) of the E.D. Act, the Revenue would be entitled to succeed if the decision is to be given only on a reading of the document of trust. It appears to us, however, that the reference cannot be decided merely on the footing that the deed of trust contains clause reserving the power of revocation to the trustees by the settlors, who were themselves the trustees. We are dealing with a public trust and unless we are satisfied that a public trust can be validly put to an end to or that it lies within the power of the settlors to retrace their steps leading to the creation of the public trust with or without the power of revocation, it will be difficult for us to hold that merely because in the case of a public trust a power to revoke is reserved by the settlor, such property must be deemed to pass on the death of the settlor for the purposes of s. 12(1) of the ....
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....here is power of revocation reserved by the author of the trust and the instant case, therefore, is one in which revocation can be brought about and, therefore, s. 12(1) will apply. 13. Now, a reference to the provisions of ss. 77 and 78 of the Indian Trusts Act, 1882, seems to us to be wholly out of place. The Trusts Act, 1882, does not apply in the case of a religious or a charitable trust. Section 1 of the Trusts Act is in two parts. The first part gives the title of the commencement of the Act. The second part deals with the legal extent and savings provision. The material portion of s. 1 reads as follows : This Act may be called the Indian Trusts Act, 1882, and it shall come into force on the first day of March, 1882. It extends to the whole of India... But nothing herein contained affects the rules of Muhammadan law as to Wakf, or the mutual relations of the members of an undivided family as determined by any customary or personal law, or applies to Public or private religious or charitable endowments, or to trusts to distribute prizes taken in war among the captors ; and nothing in the second chapter of this Act applies to trusts created before ....
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....trust is created. Whether the trust is in favour of an idol and is of a religious nature or whether the trust is intended to achieve charitable purposes would in that context be wholly irrelevant. The real question is whether in such a case, it would be permissible for a settlor to revoke the trust so as to undo the trust itself and thus affect not only the trust property settled by him but certain other properties also which may have been endowed in favour of the trust or dedicated to that charity. There is no express provision of law permitting this to be done. On first principles, permitting such a power to be exercised by the settlor would open the floodgates of a device which would enable people to use the creation of the trust as a means for getting back larger property than what was originally settled as trust property. In Halsbury's Laws of England, 4th Edn., Vol. 5, while dealing with creation of charitable trusts in para. 624, it has been observed as follows: "Charitable trusts have sometimes been declared subject to express powers of revocation, but there has apparently been no decision on the validity of such a power except as regards the rule against perpe....
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....dedicated absolutely to a public temple of Shri Ramchandra Swamy within the Dudhadhari Math in Raipur, MP. The controversy was whether by the award embodying the partition that took place between the members of a joint Hindu family an absolute dedication of the village was made in favour of the temple or whether the village was given in full proprietorship to one of the members with only a charge on it to meet the expenses of the temple. After holding on construction of the award that the village was dedicated absolutely to the temple and the concerned member of the family was given possession of it as manager and trustee of the temple, the Supreme Court observed (p. 896): "Once an absolute dedication of the property had been made in favour of Shri Ramchandra Swamy temple the former owners of the property had no legal authority to go behind that dedication." 21. These observations thus indicate that even according to the Supreme Court, once there is a dedication of property to charity, that dedication cannot be undone by the original settlors. Tudor in his Treatise on Charities (5th Edn., p. 83) has observed as follows : " In cases not covered by the Mort. and ....