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TMI Blog1983 (3) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 that the trust was not constituted for charitable or religious purposes within the meaning of section II read with section 2(15) of the 1961 Act because there was no specification of objects for which the trust was brought into effect and the trust income was, therefore, not exempt from income-tax. In the light of this judgment, the view taken by the Commissioner (Appeals) cannot be said to be correct. The trust income is, therefore, not exempt from the levy of income-tax and that view has to be reversed. We direct accordingly. 3. However, the learned advocate for the assessee, Shri Padmanabhan, argued that the matter is entirely different with reference to wealth-tax assessments. He pointed out that the Wealth-tax Act did not contain a definition of ' charitable purpose ' similar to the one found in section 2(15) of the 1961 Act and consequently, the decision given by the High Court which turned upon the definition of ' charitable purpose ' cannot apply to wealth-tax purposes. He also submitted that section 5(1)(i) of the Act stated that if any property was held under trust or other legal obligations for any public or charitable purpose, the net wealth of such a trust would ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes and an irrevocable trust was created therefor. It was further mentioned in the trust deed that the trust property shall be used for religious, charitable, social, cultural and other allied purposes. By the judgment, dated 17-12-1980, the High Court observed that the effect of the statutory definition of ' charitable purpose ' in the 1961 Act was that there must always be an enquiry whether any given object of general public utility does or does not involve carrying on of any activity for profit and since the expression ' charitable purpose ' employed in the trust deed included within its fold not only the three named heads of charity, namely, relief of the poor, education and medical relief, but also the residuary objects of general public utility, there will have to be an enquiry outside the trust deed relating to the activities of the trust and the earning and application of income in any given year because the crux of the statutory exemption was not only earning but also actual application of the funds. On that reasoning, the High Court came to the conclusion that since the trust deed failed to particularise the object with respect to which it could be examined whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for more than one reason. Firstly, the High Court held that the trust was not entitled to exemption under section 11 only because it did not satisfy the definition in section 2(15) and since such a definition is not present in the Wealth-tax Act the claim for exemption has to be considered de hors that definition. Secondly, there was a significant observation in the judgment of the High Court that it was absolutely essential to scrutinise the objects of the trust particularly after the statute has eschewed any kind of activity for private profit as a charitable object. Since such criterion is absent for the purpose of Wealth-tax Act, the particularisation of the object to see whether there is an activity for profit is not essential and it would be sufficient if the general object of the trust is charitable or religious. Thirdly, the High Court held that the charitable object expressed in the trust deed may in fact refer to the purpose or the users of the property and not the trust itself and, may not, therefore, indicate the particular nature of the trust, though the religious object was capable of being correctly and clearly understood. Under the Wealth-tax Act, property held in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of the trust, only four fell within section 5(1)(i) and yet the High Court held that the trust was entitled to exemption from the levy of wealth-tax under section 5(1)(i). Applying this principle to the facts before us, we have to find out whether there are any objects which fell within the definition of section 5(1)(i). It may be remembered that when a property is held in trust for several objects, for the benefit of the public, any member of the public would be entitled to compel the trustees to utilise the properties for those objects and the discretion granted to the trustees by the trust deed would not be so absolute as to enable the trustees to abandon any one of the objects stated in the trust deed. The Madras High Court in the present case made the following observations : " On the terms of the original trust deed, we are satisfied that the reference to religious purposes is not bad for uncertainty nor can its scope be restricted when there is no condition in that deed derogating from the generality of the religious purpose. However notwithstanding this finding of ours on the validity of the religious object, since the founder, under the terms of the deed, had endowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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