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TMI Blog1999 (5) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... ha, the beneficiaries of the trust are four brothers and four sisters of the settlor Shri Satha were prior beneficiaries and after them their descendants will be entitled to the benefits. The Assessing Officer accordingly held that the object of the trust are not of a nature of public charity Consequently, the Assessing Officer held that the trust is I private discretionary trust and accordingly disallowed the claim of exemption under section 5(1)(i) of the Wealth-tax Act. The extracts from clauses (5) and (6) of the trust deed dated 27-5-1968 executed by the settlor of the trust are reproduced below: "Clause (5) Beneficiaries - The following brothers and sisters of the settlor will be prior beneficiaries and after them, their descendants will be entitled to the benefits if need be, from the trust funds at the discretion of the trustees : (a) Shri Hormujshaw N. Satha; (b) Shri Jamshed N. Satha; (c) Shri Naosherwan N. Satha; (d) Shri Phiroz N. Shah; (e) Miss Gulmai N. Satha; (f) Smt. Shrinibai J. Damania; (g) Smt. Gaimai B. Jassawala; (h) Smt. Banubai N. Kerawala." "Clause (6) 6. Revocation of the trust - The trust will be irrevocable during the life-time of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olly' is not employed in section 5(1)(i) of the Wealth-tax Act. As such, it is not necessary, in considering the claim of an assessee to exemption under section 5(1)(i) to require that all the objects of the trust should fall within the expression 'public purpose of a charitable or religious nature' and it will be sufficient if the objects of the trust considered as a whole could be regarded to be within the expression, viz., for a public purpose of a charitable or religious nature. Therefore, for the purpose of earning exemption under section 5(1)(i), it is not necessary that the property must be held under trust wholly for a public purpose of a charitable or religious nature." 4. Shri C.M. Bhake, the learned Departmental Representative relying upon clauses (5) and (6) of the trust reproduced supra, submitted that the settlor settled the trust for the benefit of close relatives and that the predominant object of the assessee-trust was not charity. He submitted that the learned CWT(A) has held that the trust to be charitable on the basis of case law in CWT v. Trustees of the J.P. Pardiwala Charity Trust [1965] 58 ITR 46 (Bom.) and Trustees of the Charity Fund v. CIT [1959] 36 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he trust funds and, funds created as per clause 2(c) of the trust deed were utilised for the maintenance of the relations then the trust would be left with no funds for the fulfilment of charitable objects in the trust deed. The learned D.R. further submitted that in determining the dominant and primary purpose of the objects of the trust it was necessary to read the deed as a whole and come to the conclusion accordingly. It was only when the trust deed presented some difficulties in arriving at a definite conclusion on the basis of reading of a trust. deed then only reference can be made to other objects of the trust if they are numerically superior in number. The learned D.R. submitted that the issue stands squarely covered in favour of the department and against the assessee by the decision of the Supreme Court in the case of Trustees of Gordhandas Govindram Family Charity Trust v. CIT [1973] 88 ITR 47. The learned D.R. further relied upon the finding given in the income-tax assessment order for assessment year 1990-91 by the CIT(A) that the trust was not charitable in nature and was a private discretionary trust. 5. Dr. Sunil Pathak, the learned counsel for the assessee stron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that case were entirely different. The trust was for the benefit of Vaishya Hindoos and it was specifically provided in the objects of the trust deed that the members of the Sakseria family will be given priority over other beneficiaries; while in the present case, it is not so and the relatives of the settlor are not given any priority over the other general charitable objects. Regarding reliance placed by the learned D.R. on the observations of the CWT(A) in the income-tax appeal for assessment years 1991-92 and 199293 wherein he held that the dominant object of the assessee-trust is to benefit the relatives, the learned counsel submitted that the CIT(A) has completely erred in making these observations because as already stated above, the predominant object of the trust is charity and while making these observations, the CIT(A) has not given any reason as to why it can be considered to be that of the benefit to the relatives. Secondly, the observations of the CIT(A) about the priority of the relatives is misplaced because as already stated above, the relatives as per clause 5 have priority over other relatives but this clause in no manner indicates that they have a priority ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test laid down by the Hon'ble Bombay High Court and Supreme Court to determine the dominant purpose of the trust would become redundant and the courts would be rendered non-functional and therefore, the courts must come to a finding of fact on the reading of the trust deed as a whole. 7. We have considered the rival submissions and perused the facts on record. The whole case of the Assessing Officer is based on the literal interpretation of clauses (5), (6), 2(b), 2(c) and 2(a) of the trust deed. The clauses in a deed are not to be interpreted by keeping those clauses on one hand and dictionary on the other hand. For spelling out the meaning of the clauses in a deed, one must take into consideration the setting in which these terms are used and the purpose they are intended to serve. The Assessing Officer has totally ignored the ground realities i.e. in all these years, not a single paisa was enjoyed by the beneficiaries and the entire income after meeting the administrative expenses was spent/on charity. This fact is clear from the chart of Details of 'Income/Expenditure as Per Audited Accounts' placed at page 21 of the paper book. Further a careful reading of clause (5) shows t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for charitable objects. Thus, the ratio of the jurisdictional High Court clearly applies to the facts of the case of the assessee. The second yardstick to find out whether the trust is predominantly for charity or not is to consider the income applied for charity vis-a-vis the income applied for the benefit of the relatives. In the case before us, as already mentioned, in all these years, the entire income was spent on charity. The Hon'ble Supreme Court in the case of CIT v. Dharmodayam Co. [1977] 109 ITR 527 has held that if any particular object clause has not been acted upon during the year under consideration, the same should not be given any importance. Similarly, in the case of WTO v. P. Krishna Warrier [1990] 32 ITD 769 the Cochin Bench of the Tribunal has held that if a major portion of income is spent on charity, the trust is predominantly for charity and should be entitled to a deduction under section 5(1)(i). 9. Reliance placed by the learned D.R. on the decision of the CIT(A) in the Income-tax appeal for assessment years 1991-92 and 1992-93 in which it was held that the trust was not a charitable trust and hence does not qualify for exemption under section 11 of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X
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