1978 (2) TMI 39 - HC - Income Tax

Summary

Issues:
- Interpretation of provisions under Section 4(3)(i) and 4(3)(ii) of the Indian Income-tax Act, 1922 and Sections 11 and 12 of the Income-tax Act, 1961.
- Determination of whether income from Gurudwara and attached shops is entitled to exemption under the mentioned provisions.
- Assessment of whether the property is held under trust wholly for charitable or religious purposes.
- Examination of the legal obligations of the assessee as the manager of the Gurudwara.
- Analysis of the necessity of a formal deed or writing to establish a charitable or religious trust.

Detailed Analysis:

The judgment delivered by the High Court of ALLAHABAD pertains to a reference under Section 256(1) of the Income Tax Act, 1961, initiated by the CIT, U.P., Kanpur. The primary issue revolves around the entitlement of income from a Gurudwara and attached shops to exemption under Section 4(3)(i)/4(3)(ii) of the Indian Income-tax Act, 1922, and Sections 11 and 12 of the Income-tax Act, 1961, for specific assessment years. The assessee, a sanyasi managing the Gurudwara, contended that the income was not personal but utilized for religious and charitable purposes, thus qualifying for exemption. The ITO, however, assessed the income as personal, leading to appeals and subsequent findings by the AAC of Income-tax and the Tribunal in favor of the assessee.

The main question addressed in this reference is whether the income from the Gurudwara and attached shops qualifies for exemption under Section 4(3)(i) and 4(3)(ii) of the Indian I.T. Act. The AAC of Income-tax found that all income was utilized for religious, educational, and charitable purposes, indicating the property was held by the assessee under a legal obligation for these purposes. As such, the entire income was deemed exempt under the relevant provisions.

The court rejected the revenue's argument that a formal deed or writing was necessary to establish a charitable or religious trust. Citing legal precedent, the court emphasized that a clear intention to create such a trust and a formal vesting of property ownership are sufficient for dedication. The Privy Council's ruling in All India Spinners' Association v. CIT was cited to support the stance that no formal deed is required to constitute a religious and charitable trust under the Income Tax Act.

In conclusion, the court answered the reference question in favor of the assessee, affirming the entitlement to exemption under the relevant provisions. The assessee was awarded costs amounting to Rs. 200.