COMMISSIONER OF INCOME TAX Vs. THANTHI TRUST

JUDGEMENT

(1.) ONE Sri S. B. Adityan was carrying on the business of printing and publishing the Tamil daily newspaper "Dina Thanthi" as sole proprietor thereof since 1942. On March 1, 1954, he executed a deed of declaration of trust whereby he constituted a trust called "Thanthi Trust" and transferred thereto the property, namely, the business of the newspaper "Dina Thanthi" as a going concern with all its assets and liabilities. In clause 2 of the trust deed the purposes for which the trust was constituted were mentioned as (a) to establish the Dina Thanthi or Daily Thanthi as an organ of educated public opinion for the Tamil reading public, (b) to disseminate news and to bentilate opinion upon all matters of public interest through the said newspaper, and (c) to maintain the said newspaper and its press in an efficient condition devoting the surplus income of the said newspaper and its press after defraying all expenses, in improving and enlarging the said newspaper and its services and placing the same on a footing of permanency. Sri S. B. Adityan, hereinafter referred to as "the founder", appointed himself, his brother, S. T. Adityan, and his son, B. R. Adityan, as the first set of trustees to administer the trust. Clause 3(j) of the said deed provided that the founder may "by supplementary instruments confer upon the trustees such additional powers as may be required or found necessary for the proper administration of the trust". Clause 3(k) provided that "if for any reason the Daily Thanthi becomes defunct or its publication is discontinued, the properties of the trust may, at the discretion of the then trustees, be employed for any charitable purposes". On July 9, 1957, the founder executed a supplementary deed whereunder he declared that the trust created by the document dated March 1, 1954, was irrevocable. On May 22, 1959, two other trustees were co-opted.

(2.) THE said Thanthi Trust claimed exemption under s. 4(3)(i) of the Indian I.T. Act, 1922, in respect of its income for the assessment years 1955-56 to 1961-62 on the strength of the trust deed dated March 1, 1954. THE Indian I.T. Act, 1922, was replaced by the I.T. Act, 1961, on April 1, 1962. Section 11 of the 1961 Act was slightly different from the corresponding provision in s. 4(3)(i) of the 1922 Act. While the expression "charitable purposes" has been defined in s. 4(3)(i) of the 1922 Act as including relief of the poor, education, medical relief and the advancement of any other object of general public utility, s. 2(15) of the 1961 Act defined "charitable purposes" as including relief of the poor, education, medical relief and the advancement of any other object of general public utility "not involving the carrying on of any activity for profit". Presumably, taking note of the aforesaid change in the definition of "charitable purposes", the founder of the trust executed a supplementary deed dated June 28, 1961, wherein it was recited that the newspaper "Daily Thanthi" and its services had been placed on a footing of permanency and had been enlarged and improved as contemplated by the original trust deed dated March 1, 1954, and that the trust was in possession of sufficient funds and properties for continuing all improvements and enlargements and directed that the surplus income of the said trust after defraying all the expenses should be devoted by the trustees for the following purposes, namely :-

(3.) AGGRIEVED by the orders of the AAC, the Revenue preferred appeal to the Tribunal contending, inter alia, (1) that the supplementary deed dated June 28, 1961, which was the subject-matter of C.S. No. 90 of 1961, was invalid and ineffective inasmuch as the founder who had divested himself of his interest in the newspaper business and had created an irrevocable trust in respect thereof had no power to alter the terms of the trust deed and that clause 3(j) of the original deed only empowered the founder to confer additional powers on the trustees for the proper administration of the trust and had not conferred any power on the founder of the trust to alter the objects of the trust, (2) that the judgment and decree in C.S. No. 90 of 1961 not being a judgment in rem was not binding on the Revenue, that the judgment was rendered in originating summons wherein complicated questions of law and fact could not be gone into, that without going into the question of the validity of the supplementary deed dated June 28, 1961, it cannot be relied on by the trust, and that the institution of such a suit was not genuine but collusive and fraudulent, (3) that even if the supplementary deed was valid and effective, no property having been separately endowed for the said objects, there was no scope for the application of s, 11 of the 1961 Act inasmuch as there was a trust for charitable purposes of the income only and not of the property, which yields the income, and (4) that in any event, there being no application of the income for the assessment years in question for such objects as contemplated in s. 11, the trust was not entitled to claim exemption thereunder. The trust, however, contended before the Tribunal that in view of the judgment and decree of this court in C.S. No. 90 of 1961 it was no longer open to the Revenue to contend that the supplementary deed was not valid, that as a result of the decree in the said suit the trustees were under a legal obligation to apply the income fro the objects mentioned in the schedule to the decree and they had no discretion to apply the entire income for the maintenance of the newspaper business, that the press already in existence should be considered as one constituted by the original deed as modified by the decree of the High Court and that even if the original objects set out in the original trust deed continued to be the objects of the trust, they were to be considered only as ancillary and incidental in view of the modifications made by the High Court. As regards the question of the application of the income, the trust urged that it had been throughout adopting the practice of applying 75% of its income for the purpose of education by making credit entries in favour of the Adityanar College of Arts and Science in its books and debiting itself with the same, that the ITO and accepted the same as amounting to a proper application of the amount from the year 1962-63 and that there was no jurisdiction to insist on an actual application of the surplus income, only for the assessment years in question.