DHARMA VIJAYA AGENCY Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS reference arises from proceedings for assessment of income - tax in respect of asst. yrs. 1951 - 52, 1952 -53, 1953 -54 and 1954 -55. Four brothers Tulsidas Kilachand, Ramdas Kilachand, Ambalal Kilachand and Chinubhai Kilachand -whom I will hereafter refer to collectively as "Kilachand brothers" -entered into a partnership agreement for carrying on business -the nature whereof is not clear on the record -in the name and style of Dharma Vijaya Agency. There was no formal deed recording the terms of this partnership agreement. By an agreement, dt. 28th Sept., 1950, the firm was appointed as from 1st Sept., 1950, the principal agents of the New Great lnsurance Co. of India Ltd. The appointment was made by a letter setting out certain terms and conditions addressed by the insurance company to the firm, and the terms and conditions were accepted by the firm. By the first condition of the letter the firm was to act as the principal agent on behalf of the insurance company and was at all times to be the holder of a certificate from the Controller of Insurance to act as principal agent. By condition No. 6 the appointment was subject to termination at the will of either party by one party giving to the other one month's notice in writing. By the seventh condition the company invited the attention of the firm to ss. 41 and 102(1) of the Insurance Act, 1938. On 17th Feb., 1951, Kilachand brothers styling themselves as "the founders" executed a deed of trust of the business carried on by them in the name of Dharma Vijaya Agency as principal agents of the New Great Insurance Co. of India Ltd. It was recited by the first paragraph of the deed that the "founders" so long as they shall respectively remain trustees of the deed and all persons thereafter becoming trustees held and shall hold the business of principal agency and all the benefits and profits to arise from the said business and the realisation and proceeds thereof and all sums of money thereafter received by the trustees and all investments at any time representing the same or any part thereof and all monies arising therefrom upon trust "to pay and apply the same for the relief of the poor, education, medical relief and the advancement of any other object of general public utility as the trustees shall from time to time think fit :" and by a parenthetical clause the "founders" and the survivors or survivor of them were included in the expression "trustees". By paragraph 12 it was provided that "all moneys received by the trustees on account of the said trust, except such sums as may be reasonably required to be kept for current expenses, shall be -deposited forthwith on receipt thereof in the trustees' banking account". By paragraph 13 it was provided:

(2.) THERE is no dispute that the trust was created for purposes exclusively charitable. On 21st July, 1951, a banking account was opened with the Bank of Baroda Ltd., in the name of "Dharma Vijaya Agency" with a special instruction that the account will be operated upon by any one of the trustees according to cl. 13 of the deed of trust, and under the specimen signature of each of the trustees the word "trustee" was appended. On 21st Aug., 1951, another account was opened also with the same bank under the name and style of "Dharma Vijaya Agency Account No. 2". This account was to be operated upon by any one of the Kilachand brothers who were described as "attorneys", and the specimen signature was to be in the form of "Per Pro Dharma Vijaya Agency."

(3.) (3)(i), i.e., " the business income can only be exempt from taxation if the business was carried on in the course of the actual carrying out of the primary purpose of the institution:" and "in the present case the business not being carried on in the course of carrying out the primary purpose of the trust," the income was not exempt from liability to pay tax. The Tribunal has, at the instance of the assessee the Dharma Vijaya Agency, referred the following question: