1997 (5) TMI 393 - HC - Income Tax

Summary

Issues:
Entitlement of Bhriguraj Charity Trust to exemption from income tax under sections 11 and 12 of the Income-tax Act, 1961 for the assessment years 1965-66 to 1969-70 and 1971-72.

Analysis:
The judgment of the court, delivered by DEVINDER GUPTA J., pertains to the entitlement of Bhriguraj Charity Trust to exemption from income tax under sections 11 and 12 of the Income-tax Act, 1961. The primary issue revolves around whether the trust qualifies as a charitable trust within the meaning of the relevant provisions. The Revenue contended that the trust was a private charitable trust, not entitled to the exemptions provided under sections 11 and 12 of the Act. The Income-tax Officer, after examining the trust deed, concluded that the objects of the trust were only partly charitable, leading to the denial of exemption for the assessment years in question. The Appellate Assistant Commissioner and the Tribunal upheld this decision, citing precedents like CIT v. Jaipur Charitable Trust [1971] 81 ITR 1. However, the Tribunal admitted additional documents submitted by the assessee, including a decree from a civil court allowing rectification of the trust deed with retrospective effect. Despite this, the Appellate Assistant Commissioner and the Tribunal maintained that the trust was not entitled to exemption under sections 11 and 12 of the Income-tax Act.

The central question referred to the court was whether the Tribunal was correct in holding that the income of the trust was not exempt under sections 11 and 12 of the Income-tax Act, 1961, on the grounds of the trust not being a public charitable trust. The court examined the impact of a rectification order issued by a civil court on the Income-tax Department's assessment. Referring to Jagdamba Charity Trust v. CIT [1981] 128 ITR 377, the court highlighted that a civil court's decree for rectification of a trust deed binds the trustees, requiring them to administer the trust in accordance with the amended deed. This principle was affirmed by the Supreme Court in CIT v. Kamla Town Trust [1996] 217 ITR 699, emphasizing the legal obligation of trustees to adhere to rectified terms. The court concluded that the rectification order, having prospective effect only, did not impact the assessment years preceding its issuance.

In light of the precedents set by Jaipur Charitable Trust's case [1971] 81 ITR 1 and Yogiraj Charity Trust v. CIT [1976] 103 ITR 777 (SC), the court held that the trust's claim for exemption for the assessment years 1965-66 to 1969-70 and 1971-72 was governed by previous decisions denying such exemptions. Therefore, the court ruled against the trust's claim for exemption, aligning with the decisions in Jaipur Charitable Trust's case and Yogiraj Charity Trust's case.