JAGDAMBA CHARITY TRUST Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) YOGIRAJ Charity Trust (the applicant in IT Ref. 147 of 1976) and Jagdamba Charity Trust (the applicant in IT Ref. 183 of 1977) which was formerly known as Dalmia Jain (Jind Estate) Charity Trust, were denied the exemption from income -tax claimed by them on the ground that they were not trusts for religious or charitable purposes. This was confirmed by the judgment of this Court in CIT vs. Jaipur Charitable Trust (1971) 81 ITR 1 (Del) : TC23R.1109 which was also affirmed by the Supreme Court in the case Yogiraj Charity Trust vs. CIT 1976 CTR (SC) 211 : (1976) 103 ITR 777 (SC) : TC23R.1103. Shortly put, the refusal of exemption was for the reason, that, though many of the objects of the trust were religious or charitable in nature, at least one of them was not and since the objects were distinct and distributive and there was nothing to preclude the trustees from utilising the entire income on the non -charitable object(s), the assessee would not be entitled to the exemption envisaged in S. 4(3)(i) of the INCOME TAX ACT, 1961. In a recent decision rendered on 14th April, 1980, in Jaipur Charitable Trust & Ors. vs. CIT (ITR No. 55/72) (1981)127 ITR 620 (Del) : TC23R.1100, where the trust deeds were couched in similar words, a Bench of this Court (consisting of one of us) has held that the above objections would continue to stand in the way of the availability of the corresponding exemption under S. 11(1) r/w S. 2(15) of the INCOME TAX ACT, 1961. In the two cases presently under consideration, which relate to the asst. yrs. 1966 -67 and 1967 -68, respectively, the assessee claimed that the original, "objectionable" trust deed had since been got "rectified" with retrospective effect, by deletion of the offending clauses in appropriate proceedings and that, therefore, there was no longer any justification to reject the assessee's claim for exemption. This argument did not find favour with the AAC and the Tribunal. At the instance of the assessee, however, the Tribunal has referred the following question for our opinion in each of the two cases :

(2.) A few more facts are necessary to appreciate the background in which the question falls to be decided. As the facts in the two references are similar, with only minor and immaterial differences in the language of the relevant clauses and the relevant dates, we shall refer only to the material facts in the case of Yogiraj Charity Trust. The original trust deed in the case was a unilateral document executed by Ram Krishna Dalmia on 9th March, 1949. The objects of the trust were set out in cl. 5, which contained, inter alia, the following sub -clauses :

(3.) IT was primarily with reference to a clause which had been similarly worded that the High Court and the Supreme Court had negatived the earlier claim of the trusts to exemption. The judgment of the High Court was delivered on 26th May, 1970. On 11th Jan., 1972, the founder of the trust, Ram Krishna Dalmia, filed a suit for rectification of the trust deed under S. 26 of the Specific Relief Act. The Yogiraj Charity Trust as well as two of its trustees were made defendants to the suit. In the plaint it was stated that the plaintiff had been desirous of creating a charitable trust for the amelioration of the public and that in order to satisfy his intention, will and understanding the trust had been founded by the deed executed on 7th March, 1949. It was stated that the intention and belief of the plaintiff since the creation of the trust was to maintain the trust as a charitable trust for the well -being of the public. However, the judgment of the High Court had held that due to the provisions contained in certain clauses of the deed the same is non -charitable and that the defendant trust was not entitled to the exemption claimed under the IT Act. The plaintiff stated that from the very beginning he was under the honest belief that the object clause of the trust deed aimed only at public charity and that some bona fide mistake and difference in interpretation seemed to have occurred in the trust deed as reflected in the judgment of the High Court of Delhi. It was stated that since the decision of the High Court had created some doubts regarding the validity of some clauses of the trust deed, it had become expedient and necessary that the trust deed should be rectified by deletion of some clauses and words in some of its clauses and that some words and clauses should be added to remove any doubt of its objects. It is not necessary to set out at length the various rectifications sought to be carried out and it will be sufficient to mention that sub -cls. (iii) and (iv) of cl. 5(a), the offending portions of cl. 5(b) and cl. 11 of the trust deed, were sought to be deleted. Certain other rectifications were also sought and it was prayed that it was expedient to allow the rectifications since the inception of the trust. The plaint in the suit was presented on 11th Jan., 1972. The plaintiff as well as the defendants were represented by counsel and on 24th March, 1972, the Sub -Judge, Delhi granted a decree as prayed for by the plaintiff. In other words the trust deed was directed to be rectified as prayed for by the petitioner and it was also stated that the rectification would have effect from the very inception of the trust. Subsequently, Ram Krishna Dalmia also executed a deed of declaration referring to the rectification and declaring that the trust deed dt. 7th March, 1949, as it stood amended after the order of the Court, should be treated to be the original trust deed dt. 7th March, 1949. This declaration was executed on 2nd June, 1972.