P KRISHNA WARRIER Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) These references relate to the assessment of Shri Krishna Warrier, the Managing Trustee of the Arya Vaidyasala, Kottakkal. The main question involved is whether the income derived from the Arya Vaidyasala is liable to be excluded under S.11(1)(a) of the Income tax Act, 1961, read with S.2(15), or S.4(3) of the Indian Income tax Act, 1922. The questions arising in these references and the circumstances under which they have come up are as follows: ITR 95 of 1974 and 40 of 1976 relate to the assessment year 1964-65. For the year 1964-65 the assessee was assessed in the status of an association of persons. The other members of the Association consisted of the trustees appointed under the Will dated 30th October 1939 of the late Vaidya Ratnam P. S Warrier who died on 30th June 1944. The will provided that the A schedule properties were tarwad properties and all the other properties, movable and immovable and all outstanding transactions and the institutions known as Arya Vaidyasala, the Arya Vaidya Hospital and allied institutions together with all outstandings relating to them are the testator's private acquisitions. The B Schedule properties were given to the tavazhi of Lakshmi Warassiar, daughter of the testator's mother's younger sister, and her children then existing and to be born in future; the C Schedule, to the tavazhi of Kunchi Warassiar (another daughter of the mother's sister) and her children born and to D born; the D Schedule properties were left in common to the two tavazhies . Clause.7 of the Will constituted all the remaining properties into a Trust to be managed by the trustees. These were described in the E Schedule to the Will. Clause.7 may well be extracted:

(2.) Upto the assessment year 1951-52, excluding the 40% of the income earmarked for the two tavazhies, exemption was being granted to the other 60% of the income. For the years 1952-53 and 1953-54 after the amendment to the Indian Income tax Act, 1922, in respect of S.5(1)(b) of the Act, the Department took the view that the exemption granted should be withdrawn except regarding the 25% granted to the Vaidyasala. At the instance of the revenue a reference came up to this Court against the tribunal's decision which was adverse to the Department. The decision of this Court is reported - vide Commissioner of Income tax v. Krishna Warriar (44 ITR 828). The question referred was:

(3.) On appeal against the said decision, the judgment of this Court was affirmed vide Commissioner of Income tax, Kerala and Coimbatore v. P. Krishna Warrier (53 ITR 176). Subha Rao J. who spoke for the Court extracted the terms of the Will. After noticing S.4(3)(i) of the Indian Income tax Act, 1922, and clauses (b) of the proviso to the Section, the Supreme Court examined the decisions which had considered the scope of this provision including the decision of the Division Bench of this Court in Dharmodayam Co. v. Commissioner of Income tax ( 1962 (45) ITR 478 ). It stated thus: