SRI JAGANNATH JEW Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) What is the effect of the will dated 21st February, 1887, executed by late Raja Rajendra Mullick ? That is the main question that requires determination in this reference arising out of the assessments made on the assessee. Sri Sri Jagannath Jew, for the assessment years 1956-57 and 1957-58. In response to notice issued by the Income-tax Officer under Section 22(2) of the Indian Income-tax Act, 1922, returns of total income for the aforesaid assessment years showing "nil" income were filed. When the proceedings for the assessment year 1955-56 were pending before the Income-tax Officer, the assessee had filed an application under Article 226 of the Constitution of India and had obtained an interim stay against the said proceedings. It appears that on the 9th October, 1961, in terms of the settlement arrived at between the income-tax department and the assessee the interim stay of proceedings was vacated. It was recorded in the said order that part of the income of the assessee which would be proved before the income-tax authorities to have been applied in connection with, (a) feeding of the poor, (b) subscription to other charities enuring for the benefit of the public, would be exempted under Section 4(3)(i) of the Indian Income-tax Act, 1922. This order, however, was made without prejudice to the rights and contentions of the parties and particularly of the rights of the assessee to claim other exemptions before the income-tax authorities as allowable under the law either under Section 4 of the Indian Income-tax Act, 1922, or under any other section of that Act or any other provision of law.

(2.) For assessment for the year 1956-57, the Income-tax Officer was of the opinion, on the construction of the said will, that besides directions for spending amounts on charitable objects, the will had also provided for payment of certain fixed allowances to the acting shebaits as well as the widows of the deceased shebaits, maintenance of horse drawn carriages and motor cars for the use of the shebaits, medical aids to the shebaits and the members of their families, expenses on account of sradh ceremony of the ancestors of the shebaits and other private charities. On behalf of the assessee it was claimed before the Income-tax Officer that the remuneration of the trustees and the allowances to the widows of the deceased trustees as provided in the will created a charge on the income of the trust estate and should, therefore, be treated as diversion of the income of the trust before it accrued in the hands of the trustees. The Income-tax Officer rejected that contention. The Income-tax Officer held that, reading the will as a whole, it was clear that the remuneration to the shebaits and the allowances to the widows were merely application of the trust income and as such not deductible. According to the Income-tax Officer, under the will, the shebaits and trustees were to collect the income of the whole debutter property in the first instance and after paying the Government revenues and taxes and rates and other outgoings, perform the puja and the other ceremonies for the worship of the family deity and thereafter spend amounts on charitable and public purposes and, lastly, to pay the remuneration, allowances and private donations. The Income-tax Officer, therefore, determined the income of the trust estate under Sections 9 and 12 of the Indian Income-tax Act, 1922, and computed income from property at Rs. 1,94,377 and income from other sources at Rs. 97,248 making a total of Rs. 2,91,625. From the above he deducted the amounts spent on charitable objects such as feeding of the poor, maintenance of art gallery and menagerie for birds and non-carnivorous animals. A sum of Rs. 1,32,023 was subjected to tax for the assessment year 1956-57. The Income-tax Officer followed the same principle for the assessment year 1957-58 and determined the assessable income at Rs. 1,06,067.

(3.) The assessee preferred appeals before the Appellate Assistant Commissioner, who passed a consolidated order dated 25th November, 1963, dismissing the assessee's appeals on all the grounds.