9911796707
TMI Blog1990 (8) TMI 210X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment years 1984-85 to 1987-88. 2. The few facts for appreciation of the real point involved in these appeals are as follows. The assessee is a trust. On 18-4-1985, 18-6-1985, 6-5-1986 and 22-6-1987 the assessee trust filed its returns of wealth claiming full exemption under section 5(1)(i) of the Wealth-tax Act and in the original assessments dated 11-8-1986 for the assessment years 1984-85 and 1985-86 and dated 3-2-1988 for the assessment year 1986-87 the claim of the assessee for exemption was granted by the Wealth-tax Officer while he framed the assessments against the assessee trust for those three assessment years. For the assessment year 1987-88 the assessee returned a wealth of Rs. 2,77,233 and claimed exemption under section 5(1)(i) of the Wealth-tax Act to the extent of Rs. 2,50,000. The Wealth-tax Officer while making the original assessment dated 3-2-1988 against the assessee trust determined the taxable wealth of the assessee at Rs. 27,230 and framed the original assessment for the assessment year 1987-88 accordingly. From the balance sheets of the assessee trust for these four assessment years it could be seen that the assessee owned silver articles weighing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the assessment year 1987-88 the fresh assessment dated 10-2-1989 was passed fixing the total wealth of the assessee at Rs. 3,27,759 and the net wealth at Rs. 3,21,332. In each of the fresh assessment orders the Wealth-tax Officer had taken the view that the assessee was holding the silver articles weighing 68.500 kgms. on each of the valuation dates relevant to these four assessment years in contravention of section 13(1)(d) of the Income-tax Act and, therefore, the assessee is not eligible for exemption under section 5(1)(i) of the Wealth-tax Act. It was contended on behalf of the assessee that the assessee itself had not voluntarily made any investments in silver articles but only received the silver articles from a donor along with a specific direction to treat them as forming part of the corpus of the trust. It was contended that no funds belonging to the assessee trust had been utilised to purchase the said silver articles or to make any investments in silver articles. Hence the assessee trust could not be said to have made any investment. It was the contention of the assessee that in order to deny exemption to the trust it should be established by the department that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e forms or modes specified in sub-section (5) of section 11; or (ii) any funds of the trust or institution invested or deposited before the 1st day of March, 1983 otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 continue to remain so invested or deposited after the 30th day of November, 1983 ; or (iii) Provided that nothing in this clause shall apply in relation to-- (i) any assets held by the trust or institution where such assets form part of the corpus of the trust or institution as on the 1st day of June, 1973 and such assets were not purchased by the trust or institution or acquired by it by conversion of, or in exchange for, any other asset." Section 13(1)(d) is substituted by the Finance Act, 1983 with effect from 1-4-1983 and therefore the provision extracted above applies to each of the four assessment years under consideration. The main question involved in these appeals is when a trust holds silver articles weighing 68.100 kgms. towards the corpus of the trust and the silver articles represent the corpus donation made by one of the donors of the trust can it be said that any funds of the trust are invested or depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 'invest' in section 13(2)(h) connotes a positive act on the part of the trust whereby the funds of the trust are laid out or committed in any particular property or business or transaction with the object of earning a profit or financial advantage or return. It has to be established that a trust having assets in the form of money or cash balance in a bank account or in any other form capable of being invested was by a positive act and pursuant to a decision of the trust laid out or committed in a concern of a nature specified, before it can be held that such an investment comes within the mischief of section 13(2)(h). Now, in that case the trust was found in 1920. Its income was spent for charitable purposes. Between 1956 and 1963 the assessee received ordinary shares of a company in which the settler had substantial interest. For the assessment year 1971-72 the assessee received dividends on the said shares amounting to Rs. 1,44,735. The Income-tax Officer denied the exemption in view of section 13(2)(h) but the Tribunal held that the assessee was entitled to exemption. The Calcutta High Court held that the assessee received shares of the company by way of donation. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) of section 13(2), laid down as to in what regard each transaction must relate. Clause (a) is in regard to income or property of the trust ; clause (b) is in regard to land, building or other property of the trust ; clauses (c) and (d) are in regard to services ; clauses (e) and (f) are in regard to shares, securities or other property; clause (g) is in regard to income or property ; and clause (h) is in regard to trust funds. Therefore, while construing the expression 'trust funds' employed in clause (h), what is provided in clauses (a) to (g) has to be kept in mind. Wherever the Legislature wanted the transaction to relate to income or property or land or building or shares or securities, it has specifically done so. Therefore, when in the same provision, namely, sub-section (2), while mentioning the trust funds in clause (h), income or properties are not mentioned, it would mean that income or property would not be included in the expression 'trust fund'. The expression 'trust funds' employed in clause (h) is employed in contradistinction to what is provided in clauses (a) to (g). One of the dictionary meanings of the expression 'fund' is 'money in hand or cash'. General meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the modes and forms other than those specified in section 11(5) after 28-2-1983 and if so whether the assessee charitable trust should be denied exemption under sections 11 and 12 because of the provisions of section 13(1)(d) read with section 11(5). The Madras High Court held that promissory notes are negotiable instruments and they are not funds. The Madras High Court held that normally 'funds' means cash on hand or in bank capable of being drawn upon and dealt with in a manner as desired by the person entitled or authorised to do so. A promissory note cannot be equated to funds but at best could only be an actionable claim. The Madras High Court further held as per the headnote of the decision at pages 250 and 251 as follows : " That the society received the promissory notes donated to it and kept them intact. There was no investment of the funds of the trust in the pronotes by a person authorised to do so on its behalf. The use of the words 'funds of the trust or institution are invested or deposited' clearly contemplated that monies belonging to the trust or institution should be invested or deposited by a positive act on behalf of the trust or institution, and if such inve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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