1972 (11) TMI 79 - SC - Income Tax

Charitable Trust - term individual in s. 3 of Wealth-tax Act includes individuals and therefore the trustees of a trust constitute an assessable unit - trust for the benefit of the members of the settlors family was not a trust for any public purpose

Summary

Issues:
1. Whether the trustees of the trust constitute an assessable unit under the Wealth-tax Act?
2. Whether the property held by the trustees under the trust is held for any public purpose of a charitable or religious nature in India?

Analysis:

Issue 1:
The appeals involved a reference under section 27(1) of the Wealth-tax Act, 1957, concerning the wealth-tax assessment of the appellant-assessee for the assessment years 1957-58 and 1958-59. The High Court had ruled against the assessee, leading to the appeals before the Supreme Court. The trust in question, known as "Gordhandas Govindram Family Trust," primarily aimed to benefit the family members of Gordhandas Govindram Seksaria. The trust deed outlined specific provisions for the maintenance and marriage expenses of poor family members, indicating a clear familial focus. The Supreme Court examined the relevant provisions of the Wealth-tax Act, including sections 3, 5(1)(i), and 21, to determine the assessability of trustees. It was argued that trustees could not be taxed under the Act due to a supposed lacuna in the charging section. However, the court rejected this contention, citing precedents and interpretations of similar provisions in tax laws.

The court referred to Commissioner of Wealth-tax v. Kripashankar Dayashankar Worah, emphasizing that trustees could be assessed for wealth-tax concerning trust properties. The argument that trustees did not fall within the scope of section 3 of the Act was dismissed, highlighting the broad interpretation of the term "individual" to include trustees. The court drew parallels with interpretations in income tax laws to support the inclusion of trustees as assessable units. Citing precedents like Commissioner of Income-tax v. Sodra Devi and V. Venugopala Ravi Varma Rajah v. Union of India, the court affirmed that trustees could be considered individuals for tax assessment purposes. The judgment aligned with previous decisions that joint trustees could be assessed as individuals under the Wealth-tax Act, ultimately concluding that the trustees of the trust constituted an assessable unit under the Act.

Issue 2:
Regarding whether the trust in question served a public charitable or religious purpose, the court examined the trust's provisions and intent. The trust primarily aimed to benefit the family members of Gordhandas Govindram Seksaria, with provisions for the maintenance and marriage expenses of poor family descendants. The court noted that the trust's title and provisions indicated a clear familial focus, rather than a broader public charitable intent. Reference was made to a Bombay High Court case where a similar trust was deemed not charitable under the Indian Income-tax Act, 1922, as its primary purpose was to benefit the settlor's family. The Supreme Court concurred with this assessment, emphasizing that the trust in question was private in nature, benefiting the family directly and the public indirectly. The court's decision aligned with previous rulings on trusts with primarily familial benefits, ultimately leading to the dismissal of the appeals.

In conclusion, the Supreme Court upheld the High Court's decision, ruling that the trustees of the trust constituted an assessable unit under the Wealth-tax Act and that the trust did not serve a public charitable or religious purpose, resulting in the dismissal of the appeals.