1967 (9) TMI 26 - HC - Income Tax

Trust created having clause of meeting and feast - cannot be considered as for religious purpose

Summary

Issues Involved:
1. Interpretation of Clause 9(2)(c) of the Trust Document
2. Determination of whether the Trust is "wholly for religious or charitable purposes"
3. Eligibility for Income Tax Exemption under Section 4(3)(i) of the Indian Income-tax Act

Detailed Analysis:

1. Interpretation of Clause 9(2)(c) of the Trust Document
The primary issue was whether Clause 9(2)(c) of the trust document, which provided for an annual majlis or meeting of Kesarbai's relations and acquaintances in remembrance of Imam Hussein Saheb, and included a feast in the name of Kesarbai's husband, constituted a religious or charitable purpose. The Tribunal and tax authorities contended that this clause was for the maintenance of Kesarbai's own friends and relations, thus rendering the trust not wholly for religious or charitable purposes. However, the court analyzed that the dominant intention of Clause 9(2)(c) was to hold an annual majlis in remembrance of Imam Hussein Saheb, which is a religious meeting in the context of the Khoja community. The court emphasized that the remembrance of Imam Hussein Saheb, a figure of highest veneration among Shias, inherently involved religious ceremonies, including prayers and the recital of the Fateha.

2. Determination of whether the Trust is "wholly for religious or charitable purposes"
The court examined the overall scheme of the trust, which included various provisions for religious and charitable activities such as the celebration of religious events, distribution of bread and clothes to the poor, medical aid, and educational support for the Khoja community. The court concluded that the dominant intention of the trust was to establish a religious and charitable endowment. The court rejected the Tribunal's view that the provision for a feast in remembrance of Imam Hussein Saheb in the name of Kesarbai's husband detracted from the trust's religious nature. The court held that the provision for an annual majlis in remembrance of Imam Hussein Saheb was a valid religious purpose and not a private purpose.

3. Eligibility for Income Tax Exemption under Section 4(3)(i) of the Indian Income-tax Act
The court considered whether the trust was eligible for income tax exemption under Section 4(3)(i) of the Indian Income-tax Act, which exempts income derived from property held under trust wholly for religious or charitable purposes. The court noted that the trust had been assessed as such until 1953 and had obtained the necessary certificate of exemption. The court found that the trust's provisions, including Clause 9(2)(c), were in line with the definition of religious purposes under the law applicable to the assessee. The court rejected the Tribunal's distinction between religious purposes under personal law and those under the Income-tax Act, affirming that the trust was wholly for religious purposes within the meaning of Section 4(3)(i).

Conclusion:
The court concluded that the income of the trust was exempt under Section 4(3)(i) of the Indian Income-tax Act for the assessment years 1953-54 to 1958-59. The Commissioner was directed to pay the costs of the assessee.