1987 (5) TMI 12 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessee-trust acquired the status of a trust wholly for charitable or religious purposes by the amended trust deed of 1958.
2. Whether the assessee-trust is entitled to exemption u/s 11 of the Income-tax Act, 1961.

Summary:

Issue 1: Status of the Trust Post-Amendment
The Tribunal questioned if the amended trust deed of 1958 granted the assessee-trust the status of a trust wholly for charitable or religious purposes. The original settlement deed dated August 25, 1948, included objects like aiding family members of the settlor, which was not considered a charitable purpose. The supplementary deed dated May 21, 1958, amended this clause to aid "persons in distress" instead of family members. The Tribunal previously held these amendments invalid, citing the need for beneficiaries' consent u/s 11 of the Indian Trusts Act, 1882. However, the court noted that the Indian Trusts Act does not apply to public charitable trusts and emphasized that the amendments were genuine and acted upon by the trustees. The court concluded that the supplementary deed effectively clarified the settlor's intention, making the trust wholly charitable.

Issue 2: Entitlement to Exemption u/s 11
The Tribunal also held that the assessee-trust was not entitled to exemption u/s 11 of the Income-tax Act, 1961. The court reviewed the dominant intention of the trust and the amendments made by the supplementary deed. It was noted that the trust's income had not been used for non-charitable purposes even before the amendment. The court referenced the Supreme Court's decision in Apoorva Shantilal Shah v. CIT, which stated that unless a competent court invalidates a partial partition or amendment, it should be considered valid. The court found no evidence that the supplementary deed was fictitious or sham and held that the amendments were binding on the trustees. Consequently, the trust's income was deemed to be used wholly for charitable purposes, qualifying it for exemption u/s 11.

Conclusion:
1. The Tribunal was not justified in holding that the assessee-trust did not acquire the status of a trust wholly for charitable and religious purposes by the amended trust deed of 1958.
2. The Tribunal was not justified in holding that the assessee-trust is not entitled to exemption u/s 11 of the Income-tax Act, 1961.

There will be no order as to costs.