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Issues Involved:
1. Whether the assessee-trust as originally constituted could be regarded as a charitable trust entitled to exemption u/s 11 of the Act. 2. Whether the trustees had the power to revoke or modify any of the objects of the trust as originally constituted, and thus, whether the deed of rectification was valid or effective. Summary: Issue 1: Charitable Nature of the Trust The Tribunal held that the objects referred to in clauses 'k', 'l', and 'o' of the trust deed, which are for the promotion of welfare and well-being of the employees of Messrs. Sakthi Sugars Limited and for helping the destitute wives, husbands, and children of the deceased employees of the said company, financing persons for advanced studies in sugar technology and allied subjects, are not charitable in nature. The Tribunal's view was supported by the decision in J.K. Hosiery Factory v. CIT, which held that where the benefit of a trust goes to a particular group of people connected with the founder of the trust or its trustee and not a definite class of public, then its objects cannot be taken to be charitable. The court agreed with the Tribunal, stating that the benefits under these clauses are not available to the general public or even a section of the general public but are available only to persons employed or connected with M/s. Sakthi Sugars Limited. Thus, the original trust deed as drafted cannot come within the scope of s. 11. Issue 2: Validity of the Deed of Rectification The second contention was that the deed of rectification dated January 31, 1969, should be taken to be valid. However, the trust deed contains clause XXX, which enables the trustee to modify by addition, deletion, or alteration the provisions contained in paragraphs IV to XXIX. Clause III, which sets out the objects of the trust, is not included in clause XXX. This indicates that the founder did not provide for the alteration of the objects of the trust at any future time. The court held that once a trust has been founded with certain objects, those original objects cannot be deleted even by the founder of the trust. Therefore, the deed of rectification dated January 31, 1969, deleting the objects set out in 'k', 'l', and 'o' cannot be said to be valid. Additional Consideration: Decree of the District Court The third contention was based on the rectification ordered by a decree of the District Court, Coimbatore, on April 15, 1981, with effect from June 25, 1968. The Tribunal noted that the judgment of the District Court was a subsequent event and that the deletion of the offending clauses can take effect only from the date of the decree and not before. The court agreed with the Tribunal, stating that even assuming the District Court is empowered to delete the offending clauses, it cannot do so with retrospective effect from June 25, 1968. The court also noted that s. 92, C.P.C., does not enable the civil court to alter or rectify the terms of a trust. Conclusion: Questions Nos. 1 and 2 were answered in the negative and against the assessee. The assessee was ordered to pay the costs of the Revenue, with counsel's fees set at Rs. 500.
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