2005 (10) TMI 78 - HC - Income Tax

Trust property - 1. Whether Tribunal was justified in excluding the income from property at 16/72 Civil Lines, Kanpur, from the hands of the assessee? 2. Whether, transfer of an immovable property by any person without any consideration to a trust which is not regarded as charitable trust, is covered under the definition of dedication/endowment? 3. Whether, to complete such transfer there is no need of an instrument duly registered as prescribed in section 123 of the Transfer of Property Act as well as under section 17 of the Indian Registration Act, 1908? Held that the Tribunal was justified on the facts and circumstances of the case to exclude the income from the property from the hands of the assessee; there was no need to execute registered instrument for dedication of the aforesaid property for public religious and charitable trust. We answer all the three questions, referred to us, in the affirmative, i.e., in favour of the assessee

Summary

Issues Involved:
1. Exclusion of income from property in the hands of the assessee.
2. Definition and validity of dedication/endowment of property to a trust.
3. Necessity of a registered instrument for the transfer of property to a trust.

Detailed Analysis:

1. Exclusion of Income from Property in the Hands of the Assessee:
The assessee, a medical practitioner, did not include income from property No. 16/72 Civil Lines, Kanpur, in her returns for the assessment years 1978-79 and 1979-80, claiming it was dedicated to a public charitable trust. The Income-tax Officer rejected this, asserting the property was not legally transferred to the trust due to the absence of a registered deed, thus the income should be assessed in the hands of the assessee. The Tribunal, however, found that the property was dedicated by the assessee by renouncing her rights in favor of the trust on April 1, 1977, and hence the income was not liable to be taxed in her hands.

2. Definition and Validity of Dedication/Endowment of Property to a Trust:
The main question was whether a Hindu can create a religious and charitable endowment orally. The court noted that the Trusts Act excludes public trusts or charitable endowments from its applicability. Citing Supreme Court precedents, it was established that a Hindu can dedicate property to charity without a written instrument. The dedication must show a clear and unequivocal intention to create a trust, and the property must be completely relinquished by the settlor.

3. Necessity of a Registered Instrument for the Transfer of Property to a Trust:
The court examined whether a registered deed is necessary for such a dedication. It was found that for public charitable purposes, a dedication can be made orally, supported by sufficient evidence of complete relinquishment by the settlor. The Tribunal recorded that the assessee dedicated the property on April 1, 1977, and confirmed it through a declaration on April 7, 1977. This dedication was accepted by the trustees and followed by actions such as mutation in municipal records and a declaratory decree by the Civil Judge, Kanpur, confirming the trust's ownership.

Conclusion:
The Tribunal was justified in excluding the income from property No. 16/72 Civil Lines, Kanpur, from the hands of the assessee. The dedication of the property to the trust did not require a registered deed, as it was sufficiently evidenced by the assessee's actions and subsequent legal affirmations. All three questions were answered in the affirmative, in favor of the assessee and against the Revenue.