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Issues Involved:
1. Whether the trust is wholly for charitable purposes and eligible for exemption under section 4(b) of the Tamil Nadu Agricultural Income-tax Act, 1955. 2. Whether the income of the trust should be assessed in the hands of the trustees in a representative capacity under section 8(1)(a) of the Tamil Nadu Agricultural Income-tax Act, 1955. Detailed Analysis: 1. Charitable Purpose and Exemption under Section 4(b): The primary issue was whether the trust was wholly for charitable purposes, thus qualifying for exemption under section 4(b) of the Tamil Nadu Agricultural Income-tax Act, 1955. The trust deed, created by two Hanifa Mahomedans in 1893, outlined that the income from the trust property was to be used for specific charitable activities, with any surplus divided among the heirs. The Privy Council had previously determined that the trust's primary purpose was charitable, but also noted that part of the income was designated for the maintenance of the grantor's family. The court concluded that the trust could not be considered wholly for charitable purposes because: - The trust deed specified that one-third of the income was to be invested in immovable property to augment the trust, not directly for charitable purposes. - The Supreme Court's decision in Abdul Sathar Haji Moosa Sait Dharmastapanam v. Commissioner of Agricultural Income-tax [1973] 91 ITR 5 (SC) supported this view, as it held that a trust could not be wholly charitable if part of the income was earmarked for augmenting the corpus. Thus, the claim for exemption as if the trust was wholly for charitable purposes failed. However, the court acknowledged that the trust was eligible for partial exemption for the income applied for charitable purposes. 2. Assessment in Representative Capacity under Section 8(1)(a): The second issue was whether the income should be assessed in the hands of the trustees in a representative capacity under section 8(1)(a) of the Tamil Nadu Agricultural Income-tax Act, 1955. This section applies when income is received on behalf of beneficiaries. The court noted that: - The District Munsif had identified 26 legal heirs entitled to specific shares in the trust income, which later increased to 36 sharers. - The Supreme Court's decision in Commissioner of Income-tax v. Managing Trustees, Nagore Durgha [1965] 57 ITR 321 (SC) was relevant. In that case, the Supreme Court held that trustees receiving income on behalf of beneficiaries in definite shares should be assessed in a representative capacity. The court determined that the income was received on behalf of the beneficiaries, and the shares of the beneficiaries were ascertained and clearly defined. Consequently, the assessment should be made in the hands of the trustees in a representative capacity, not as a single unit of assessment. The court remanded the matter to the Agricultural Income-tax Officer to work out the shares and make separate assessments accordingly. Conclusion: The tax revision petition was allowed in part. The court held that the trust could not be considered wholly for charitable purposes and was eligible for partial exemption for the income applied for charitable purposes. Additionally, the income should be assessed in the hands of the trustees in a representative capacity, with separate assessments for each beneficiary. There was no order as to costs.
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