1980 (1) TMI 127 - AT - Income Tax

Summary

Issues:
Validity of settlement deeds and dedication of lands to trust for charitable purposes.

Analysis:
The appeals filed questioned the assessments made against the Dharmam for the assessment years 1976-77 and 1977-78. The lands originally belonged to Fathima Nachiar and were settled on her son Abdul Khadar with a direction to spend one-fourth of the income for charitable purposes. After Fathima Nachiar's death, Abdul Khadar settled the properties on his children. The appellant-trust was assessed for the entire income on those lands until the assessment year 1975-76. However, during the finalization of assessment for 1976-77, it was claimed that the lands had been settled on Abdul Khadar's children, resulting in assessments being made against Fathima Nachiar Dharmam for the years 1976-77 and 1977-78. The main contention was whether there was a dedication of the lands to the trust as per the deeds of 1948 and the validity of the settlement deeds executed by Abdul Khadar in 1970.

The appellant argued that the settlement deeds of 1948 were only family settlements and not dedicated to the trust, emphasizing that the lands were burdened with charity to a limited extent. The appellant relied on various legal precedents to support their argument. The Tribunal analyzed the settlement deeds and concluded that there was no absolute dedication to the trust, as only one-fourth of the income was earmarked for charity, and the rest was to be enjoyed by Abdul Khadar and his descendants perpetually. The restriction on alienation in the settlement deeds was deemed void under the Transfer of Property Act. The Tribunal held that the settlement deeds did not create an absolute endowment but only a charge in favor of charity for specified expenses. Consequently, the settlement deeds executed by Abdul Khadar in 1970 were deemed valid in law. The Tribunal also noted that if each settlee had income exceeding the assessable limit, they could be assessed individually.

In conclusion, the appeals were allowed, and the institution fee was ordered to be refunded in full for both appeals.