1999 (5) TMI 86 - AT - Wealth-tax

Summary

Issues Involved:
1. Whether the assessee-trust is exempt from wealth-tax under section 5(1)(i) of the Wealth-tax Act, 1957.

Detailed Analysis:

1. Assessing Officer's Determination:
The Assessing Officer (AO) determined that the assessee-trust is a private discretionary trust rather than a public charitable trust, and thus not exempt from wealth-tax under section 5(1)(i) of the Wealth-tax Act, 1957. This determination was based on clause 6 of the trust deed, which allows the trust to be revoked at the discretion of the trustees, indicating it is at the mercy of the trustees. Additionally, the AO noted that the trust's beneficiaries were close relatives of the settlor, which suggested the trust's primary purpose was not public charity.

2. CWT(A)'s Reversal:
On appeal, the Commissioner of Wealth Tax (Appeals) [CWT(A)] reversed the AO's finding, citing precedents such as CWT v. Trustees of the J.P. Pardiwala Charity Trust and Trustees of Charity Fund v. CIT. The CWT(A) emphasized that section 5(1)(i) of the Wealth-tax Act does not require the property to be held wholly for charitable purposes, unlike section 11(1)(a) of the Income-tax Act. Therefore, it is sufficient if the trust's objects, considered as a whole, are for a public purpose of a charitable or religious nature.

3. Departmental Representative's Argument:
The Departmental Representative (DR) argued that the trust's predominant object was not charitable, pointing to clauses in the trust deed that prioritized the settlor's relatives. The DR cited the Supreme Court decision in Trustees of Gordhandas Govindram Family Charity Trust v. CIT, arguing that the trust's dominant purpose was the maintenance of the settlor's relatives, not charity.

4. Assessee's Defense:
The assessee's counsel contended that the trust is partly charitable, with the majority of its clauses dedicated to charitable purposes. The counsel highlighted that during the relevant years, the trust's income was entirely spent on charitable activities, not on the settlor's relatives. The counsel also referenced the Bombay High Court's decision in Trustees of K.B.H.M. Bhiwandiwalla Trust v. CWT, which held that a trust is entitled to exemption if its predominant object is for public charitable purposes.

5. Tribunal's Analysis:
The Tribunal considered the rival submissions and the facts on record, emphasizing the need to interpret the trust deed in its entirety rather than focusing on isolated clauses. The Tribunal noted that the trust's income had consistently been spent on charitable activities, with no benefits enjoyed by the beneficiaries. The Tribunal also highlighted that the trust deed's clauses provided for charitable objects, such as medical help, educational donations, and support for the needy.

6. Conclusion:
The Tribunal upheld the CWT(A)'s finding that the assessee-trust is predominantly for charity and thus entitled to exemption under section 5(1)(i) of the Wealth-tax Act. The appeals by the Revenue were dismissed, affirming the trust's status as a public charitable trust eligible for wealth-tax exemption.

Judgment:
The appeals are dismissed, and the assessee-trust is entitled to exemption under section 5(1)(i) of the Wealth-tax Act.