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Challenge to notices under section 17 of the Wealth-tax Act, 1957 for assessment years 1964-65, 1965-66, 1966-67, and 1967-68 based on the exemption under section 5(1)(i) of the Wealth-tax Act, 1957. Detailed Analysis: The petitioners, managing shebaits of a Debutter Estate, contested notices issued under section 17 of the Wealth-tax Act, 1957, for assessment years 1964-65 to 1967-68. The estate was founded in 1188 B.S. by Maharaja Joynarain Ghosal for religious purposes. Initially, income from the estate was exempt under the Indian Income-tax Act, 1922, as a public religious endowment. However, subsequent assessments under the Income-tax Act led to disputes regarding the charitable nature of the trust. The Income-tax Appellate Tribunal ultimately ruled the estate as a public religious endowment eligible for exemption under the Income-tax Act. The challenge under the Wealth-tax Act was based on section 5(1)(i), which exempts property held under trust for a public charitable or religious purpose. The respondents alleged misuse of trust funds by the petitioners, leading to the issuance of notices. The court analyzed the conditions for exemption under the Income-tax Act and the Wealth-tax Act. While the Income-tax Act requires application of income to charitable or religious purposes, the Wealth-tax Act focuses on the holding of property for such purposes without specifying the application of income. The court highlighted a legislative gap where trustees could misuse trust funds yet still enjoy exemption under the Wealth-tax Act. It emphasized the need for legislative review to align provisions with the Income-tax Act. However, based on current laws, the court ruled in favor of the petitioners, stating that the revenue lacked grounds to believe the wealth had escaped assessment. Consequently, the notices were quashed, and any completed assessments were set aside. In conclusion, the court granted relief to the petitioners, quashing the notices and restraining the respondents from further action. The judgment highlighted the discrepancy between the Income-tax Act and the Wealth-tax Act regarding the application of income for charitable purposes and called for legislative consideration to address this disparity.
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