1968 (2) TMI 12 - HC - Income Tax

Trust - assessment of the trustees - applicability of section 21 of Wealth Tax Act 1957 - held that Section 21 was applicable to the assessment of the trustees and they would also be capable of being treated as an individual and consueqently as an assessable entity u/s 3 of the WT Act

Issues Involved:
1. Whether the trustees of the trust constitute an assessable unit under the Wealth-tax Act.
2. Whether the property held by the trustees is for any public purpose of a charitable or religious nature within the meaning of section 5(1)(i) of the Wealth-tax Act.

Issue 1: Assessable Unit under the Wealth-tax Act

The court addressed whether the trustees of the "Gordhandas Govindram Family Charity Trust" could be considered an assessable unit under sections 3 and 21 of the Wealth-tax Act. The assessees contended that they did not form an assessable unit under section 3, and even if they did, they could not be taxed under section 21 as it stood at the material time.

The court reframed the first question to focus on the proper construction of sections 3 and 21. It concluded that joint trustees could be assessed as an "individual" for wealth-tax purposes. This conclusion was supported by the precedent set in Abhay L. Khatau v. Commissioner of Wealth-tax and Suhashini Karuri v. Wealth-tax Officer, Calcutta, which established that joint trustees are regarded as a unit for taxation and can be assessed in the status of an "individual."

Regarding section 21, the court noted that the section, as it stood at the material time, intended to cover trustees but failed due to the language used. The court referred to the Supreme Court's decision in Commissioner of Income-tax v. Managing Trustees, Nagore Durga, which interpreted similar provisions in the Income-tax Act. The court concluded that section 21 was applicable to the assessment of trustees and that trustees could be treated as an individual and, therefore, an assessable entity under section 3 of the Wealth-tax Act.

Issue 2: Public Purpose of a Charitable Nature

The court examined whether the property held by the trustees was for any public purpose of a charitable nature within the meaning of section 5(1)(i) of the Wealth-tax Act. The trust deed specified that the income was to be applied in giving help or relief to poor Vaishya Hindus or other Hindus, subject to conditions and directions that prioritized the poor members of the Seksaria family.

The court referred to the decision in Trustees of Gordhandas Govindram Family Charity Trust v. Commissioner of Income-tax, where it was held that the trust was not for any public purpose of a charitable nature. The primary object of the trust was to benefit the poor members of the settlor's family, making the benefit to the public too remote and illusory.

Mr. Kolah, representing the assessees, argued that the Supreme Court's decision in Trustees of the Charity Fund v. Commissioner of Income-tax and subsequent decisions should lead to a different conclusion. However, the court distinguished the present case from the Supreme Court decision, noting that the facts and terms of the trust deeds were different. The court held that the primary object of the trust was to benefit the poor members of the Seksaria family, and the relief to the public was too remote and illusory.

The court concluded that the trust did not qualify as a trust for any public purpose of a charitable nature within the meaning of section 5(1)(i) of the Wealth-tax Act. Therefore, the property held by the trustees was not exempt from wealth-tax.

Judgment Summary:

1. The trustees of the "Gordhandas Govindram Family Charity Trust" can be assessed as an "individual" under sections 3 and 21 of the Wealth-tax Act.
2. The property held by the trustees is not for any public purpose of a charitable nature within the meaning of section 5(1)(i) of the Wealth-tax Act and is therefore not exempt from wealth-tax.

The court answered the first question in the affirmative and the second question in the negative, with the assessee required to pay the costs of the Commissioner.

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