9911796707
|
Home
Issues Involved:
1. Whether the income of the trust fund is derived from property held under trust or other legal obligation wholly for charitable purposes within the meaning of Section 4(3)(i) of the Indian Income-tax Act, 1922. 2. Whether the income of the trust is taxable at the maximum rate under the first proviso to Section 41(1) of the Act. Issue-wise Detailed Analysis: Issue 1: Charitable Purpose of the Trust Fund Relevant Question: Whether the income of the trust fund called Shri Kailaje Umamaheshwar Vidya Nidhi is income derived from property held under trust or other legal obligation wholly for charitable purposes within the meaning of Section 4(3)(i) of the Indian Income-tax Act, 1922. Key Points: - The trust deed dated February 10, 1924, is a settlement by two Brahmins for awarding scholarships. - The dominant object is the provision of scholarships for young members of the Arurkar family. - The definition of "charitable purposes" includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility. - The trust, though educational in character, is of a private and limited scope. - The dominant object of the trust is the provision of scholarships for young members of the Arurkar family, with subsidiary objects being the provision of scholarships to the Saraswat community and advances to scholars. - The conception of charitable purposes in India requires benefiting the public, which is not met by a trust limited to family members. Conclusion: The trust is not for public charitable purposes as it benefits a private family, thus not meeting the requirements of Section 4(3)(i). The answer to the first question is in the negative. Issue 2: Taxation at Maximum Rate Relevant Question: Whether the income of the trust is taxable at the maximum rate under the first proviso to Section 41(1) of the Act. Key Points: - Section 41(1) of the Indian Income-tax Act, 1922, concerns the taxation of income in the hands of trustees. - The total income of the trust fund is Rs. 1,263, which is below the minimum limit for taxation. - The argument that trustees should be assessed as individuals in their own right is rejected. - Section 14 of the Transfer of Property Act does not invalidate the settlement for the life of the beneficiaries in existence at the date of the transfer. - The trustees have discretion in selecting scholars and determining scholarship amounts, making the beneficiaries and their shares indeterminate. Conclusion: The trustees are liable to be assessed at the highest rate under Section 41(1) since the trust deed does not specify beneficiaries and their shares. The answer to the second question is in the affirmative. Final Judgment: The reference is answered accordingly: - The income of the trust fund is not derived from property held under trust wholly for charitable purposes. - The income of the trust is taxable at the maximum rate under Section 41(1) of the Indian Income-tax Act, 1922.
|
