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1967 (3) TMI 18 - SC - Income Tax


Issues:
Interpretation of trust deed clauses for tax exemption under Income-tax Act, 1922.

Analysis:
The judgment concerns a trust deed dated April 4, 1936, settling properties for specific purposes and appointing trustees. The deed outlined provisions for the administration and utilization of income from the properties. The trustees claimed tax exemption for certain portions of the income under section 4(3)(i) of the Indian Income-tax Act, 1922. The Income-tax Officer partially accepted the claim, taxing the unspent balance of income from certain properties. The Appellate Assistant Commissioner upheld this decision, but the Tribunal later reversed it, emphasizing that accumulations of income for trust purposes do not disqualify a trust as a public charitable trust. The Income-tax Commissioner sought a reference to the High Court regarding the exemption question.

The Tribunal was asked to interpret clause 13(b) of the trust deed, specifically concerning the utilization of income shares for charitable purposes. The High Court initially declined to direct the Tribunal to submit a statement of case related to a portion of the income from certain properties. However, the Supreme Court found that a legal question arose from the Tribunal's interpretation of the trust deed directions, particularly in clause 13(b). The Court criticized the High Court's failure to direct the submission of a statement of case related to the disputed portion of income from the properties.

The judgment highlighted a previous High Court decision regarding the interpretation of investments in property under the trust deed. The High Court's view was that such investments were accumulations meant to benefit the charitable purposes outlined in the deed, potentially qualifying for tax exemption under the Income-tax Act. The Supreme Court refrained from expressing an opinion on the correctness of this judgment but emphasized that the High Court's role was to determine if a legal question arose from the Tribunal's order, not to decide the final outcome of the case.

Ultimately, the Supreme Court set aside the High Court's order and directed the submission of a statement of case to address the question of whether a specific share of income from properties in schedules B and C was exempt from income tax liability under section 4(3)(i) of the Indian Income-tax Act, 1922. The Court made no ruling on costs for the appeal.

 

 

 

 

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