1985 (12) TMI 72 - AT - Income Tax

Issues Involved:
1. Validity of the charitable trust and its objects.
2. Dedication of property to the trust and its legal implications.
3. Taxability of the income from the property post-dedication.
4. Applicability of the Transfer of Property Act and Indian Registration Act to the dedication.

Issue-Wise Detailed Analysis:

1. Validity of the Charitable Trust and Its Objects
The assessee, a lady doctor, founded the 'Chandrakanta Jawaharlal Public Charitable Trust' and settled Rs. 1,100 on the trust. The trust was established through a deed of declaration executed on 18-4-1976, and its objects were charitable in nature. The trust was registered under section 12A of the Income-tax Act, 1961, and granted a certificate under section 80G. The Commissioner (Appeals) confirmed the charitable nature of the trust's objects, overruling the ITO's objections.

2. Dedication of Property to the Trust and Its Legal Implications
On 1-4-1977, the assessee dedicated her property at 16/72 Civil Lines, Kanpur, including a hospital and nursing home, to the trust for public charitable purposes. This dedication was confirmed through a declaration on 7-4-1977. The ITO contended that the transfer was incomplete without registration under the Transfer of Property Act and the Indian Registration Act. The assessee argued that under Hindu law, such a dedication did not require a registered instrument.

3. Taxability of the Income from the Property Post-Dedication
The ITO assessed the income from the property in the hands of the assessee, arguing that the property was not legally transferred to the trust due to the lack of registration. The Commissioner (Appeals) upheld this view, stating that the legal ownership continued to vest in the assessee, making her liable for the property's income under section 22 of the Act. The income was computed at Rs. 51,812.

4. Applicability of the Transfer of Property Act and Indian Registration Act to the Dedication
The assessee appealed, arguing that the dedication was valid under Hindu law without the need for a registered instrument. The legal counsel cited various cases supporting the view that a charitable trust could be created without a formal deed or registration if the intention to dedicate was clear. The departmental representative countered that any transfer of immovable property required a registered document.

Tribunal's Findings:
The Tribunal noted that the trust was genuinely constituted with charitable objects, evidenced by its registration and certificates under sections 12A and 80G. The property was ultimately vested in the trust, as shown by the mutation in municipal records and a court decree. The Tribunal emphasized that under Hindu law, a dedication for charitable purposes did not require a registered instrument. The dedication made on 1-4-1977 was valid, and the subsequent declaration on 7-4-1977 merely confirmed this.

The Tribunal concluded that the assessee had effectively divested herself of the property on 1-4-1977, making the trust the owner from that date. Therefore, the provisions of the Transfer of Property Act and the Indian Registration Act did not apply. The assessee was not the owner of the property as of 31-3-1978, and thus, the income from the property should not be taxed in her hands for the assessment year 1978-79.

Conclusion:
The appeal was allowed, and the income from the property was directed to be excluded from the assessee's assessment.

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