MESSRS LAXMI NARAIN LATH TRUST MANDRELLA JHUNJHUNU Vs. COMMISSIONER OF INCOME TAX DELHI AND RAJASTHAN

JUDGEMENT

(1.) WE have before us a reference by the Income-tax Appellate Tribunal (Delhi Branch 'b') under sec. 66 (1) of the Indian Income Tax Act, hereinafter to be referred as the "act"; which was so made at the instance of the assessee Messrs Laxmi Narain Lath Trust, Mandrella, Jhunjhunu, hereinafter to be referred as the "assessee". The question formulated by the Tribunal was in the following terms: - "whether on the facts and in the circumstances of the case, the income from the Trust in question was exempt from income-tax under sec. 4 (3) (i) of the Indian Income-tax Act?"

(2.) THE assessee was taxed as an association of persons and the assessment covered four assessment years namely, 1954-55, 1955-56, 1956-57 and 1957-58. THE Trust was created by one Laxmi Narain Lath who had executed the indenture of trust on 25. 8. 1948. THE settler of the trust Laxmi Narain Lath was residing at Banaras. Four trustees were appointed; one was the settler himself, the other trustee was the son of the settler, and there were two other trustees who belonged to the Lath family. A sum of Rs. 5. 000/- was set apart for charity and upon the trust as mentioned in the deed. THE objects of the trust were as follows: - " (2) THE objects of the trust shall be: [i] To advance promote and encourage education amongst the Hindus (a) literal, (b) physical, (c) scientific, (d) industrial, (f) religious, (g) cultural (in fine arts) and (h) general education of all kinds at Mandrella in the Jaipur State or any other place in India. [ii] To establish and promote the establishment of and or to render aid to schools, colleges and other educational institutions at Mandrella, in the Jaipur State and grant scholarships, stipends and prizes and other helps to students, teachers and other persons. [iii] To arrange for or grant aid for the Seva and Puja of the deity Shiva and any other deities already installed or hereafter to be installed. [iv] To maintain and arrange for proper supply of water for cattle and maintain "posala" for serving water to passersby from the pucca well situated in the Trust Property. [v] To maintain and keep in repairs the immovable properties forming part of the Trust Estate. [vi] To render aid to any persons belonging to the family of Laths and to grant monthly and other periodical aids to them. [vii] To establish and or promote the establishment of and or to render aid to temples, Dharamshalas, hospitals, Orphanage homes and other institutions for the benefit of the Hindus. [viii] To grant aid for the establishment or maintenance of tube-wells and constructions or repairs to paths, roads, bridges, etc. [ix] To provide medical aid relief to the suffering people by aiding establishing and maintaining hospitals, dispensaries, nursing houses, clinics, sanatorium and other institutions meant for rendering medical relief. [x] To help people during natural calamities, such as flood, famine, pestilence, also during civil commotion and other distress. [xi] To grant aids for marriage of poor girls or for the shelter of homeless people. [xii] To grant aid to maternity homes and child welfare centres orphanges and widows homes. [xiii] To help helpless widows and Nari-kalyan Samitis. [xiv] To help in the preservation and improvement of cows and other cattle, to improve their breed and to take all steps for the increase of milk supply, to arrange for the same by establishing dairies and other organisations and for the protection of cows and for their improvement and taking all steps conducive to the welfare of the cows. [xv] To do such other acts deeds and things for the uplift of the Hindus in all ways and for the educational medical and social welfare and culture as the Trustees may think fit and proper. "

(3.) BOTH the learned counsel placed reliance on Commissioner of Income-tax, Kerala and Coimbatore vs. P. Krishna Warriar (5 ). The material passage on which both the learned counsel lean is as follows: "the expression 'in part' does not refer to an aliquot part; if half a house is held in trust wholly for religious or charitable purposes, it would be covered by the first part of the substantive clause of S. 4 (3) (i), for in that event the subject-maker of the trust is only the said half of the house and that half is held wholly for religious or charitable purposes. The expression in part', therefore, must apply to a case other than a property a part of which is wholly held for religious or charitable purposes. In India there are a variety of trusts wherein there is no complete dedication of the property but only a partial dedication. A property may be dedicated entirely to a religious or charitable institution or to a deity. This is an instance of completed dedication. A property may be dedicated to a deity, subject to a charge that a part of the income shall be given to the grantor's heirs. A property may be given to the an individual subject to, or burdened with, a charge in favour of an idol or or a religious institution or for charitable purposes. An owner of property may retain the property for himself but carve out a beneficial interest therefrom in favour of the public by way of easement or otherwise. There may be many other instances where though there is a trust, it involves only a partial dedication of the property held under trust in the sense that only a part of the income of that property is utilized for religious or charitable purposes. The dichotomy between the two expressions 'wholly' and 'in part' is not based upon the dedication of the whole or a fractional part of the property but between the dedication of the said property wholly for religious or charitable purposes or in part for such purposes. If so understood, the two limbs of the substantive clause fall into a piece. The first limb deals with a property or a part of it held in trust wholly for religious or charitable purposes, and the second limb provides for such a property held in trust partly for religious or charitable purposes. Clause (1) of S. 4 (3) of the Act takes in every property or a fractional part of it held in trust wholly for religious or charitable purposes. It also takes in such property held only in part for such purposes. " "it cannot therefore be held that as the expression 'in part' in cl. (1) applies only to a case where an aliquot part of property is vested in trust that is not legally possible in the case of business because a business is one and indivisible. " On its basis Mr. Bhargava contends that even if the property is to be utilised only in part for religious or charitable purposes it can qualify for exemption. To our mind, this passage shows that where in respect of a property, a clearly indicated portion of the property, is dedicated in trust then that portion considered as a unit by itself will constitute the whole of the property as can be said to have been dedicated within the meaning of S. 4 (3) (i) of the Act. The distinction is also pointed out between cases where there is complete dedication of a property and cases where there is dedication of a property, but it is burdened with a charge laying down that a portion of its income will be given to grantor's heirs; likewise there may be properties which are given to individual but a charge is created for a religious or charitable purpose. The division between the two expressions "wholly" and "in part" is not based on the question whether the property as a whole is dedicated or only a part of it is dedicated for religious or charitable purpose. But, the distinction is based between the dedication of the said property wholly for religious or charitable purposes or in part for such purposes. This passage, to our mind, is hardly applicable to a case where there is no division either of the property or of its income. In the present case the property as a whole is dedicated in trust and nothing is reserved by the settler. Therefore, in terms of this passage the whole of the property is dedicated property, but this passage is hardly sufficient to solve the problem before us, which is to the effect that several objects in the trust deed are set out and one of such objects is said to be a secular one as opposed to that of public utility and neither the property has been divided or ear-marked for the several purposes between the charitable and secular purposes, nor has the income been divided. To get over this difficulty Mr. Bhargava submitted that the purpose indicated in clause 2 (vi) of the trust deed can itself be regarded as a charitable purpose. He laid particular emphasis on the term 'aid' occurring therein. In this view, 'aid' means help to a person who really needs it and this object takes its hue from the other objects of public utility indicated therein. Mr. Lodha, on the contrary joins issue on such a narrow interpretation of the word 'aid'. Mr. Bhargava also submitted that this object was very much similar to the object set out in the trust deed executed by one Sir Sassoon David, Bart. The case is reported as Trustees of the Charity Fund v. Commissioner of Income-tax, Bombay (3 ).