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TMI Blog1945 (9) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ns he declared a trust in respect of his residuary estate in clause 15 of the will which is as follows:- "Clause 15.-My trustee shall utilize my residuary property for such acts of 'charity' as he deems proper. But if my trustee thinks fit, he can give a one-fourth part of my residuary property to all or one or more than one of my daughters or to the sons of my daughters." The residuary estate consists of immovable properties in Bombay and its suburbs, as well as securities. The assessee is the executor and trustee appointed by the will. In his legal character as trustee he has been assessed in respect of income from the trust properties just mentioned. The Income-tax Officer computed the total income at ₹ 53,367 and levied the tax at the maximum rate, rejecting the assessee's contention that the whole of the income was exempt from taxation under Section 4 (3) (i) of the Act by reason of its being income from property held in trust wholly for religious or charitable purposes. In appeal, the Appellate Assistant Commissioner reduced the assessable income to ₹ 47,566 holding that ₹ 5,801 out of the total income was exempted from taxation bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 (3) (i) of the Act?" Sir J. B. Kanga and R. J. Kolah, for the assessee M. C. Setalvad, for the Commissioner JUDGMENT KANIA, AG. C.J.- This is a reference under Section 66(1) of the Income-tax Act by the Tribunal of Income-tax, inviting the Court's opinion on the following question:- "Whether in the circumstances of the case and on a true construction of clause 15 of the will of late Gordhandas Khetsey the income from the deceased's residuary estate in income from property held in trust or other legal obligation wholly for religious or charitable purposes so as to be exempt from assessment under Section 4(3)(i) of the act?" The material facts are few. Gordhandas Khetsey made his will date 30th April 1934 and died on 27th February 1935. He left a large estate. Clause 15 of the will runs as follows:- "My trustee shall utilize my residuary property for such acts of charity as he deems proper. But if my trustee thinks fit, he can give a one-fourth part of my residuary property to all or one or more than one of my daughters or to the sons of my daughters." In the statement of case it is stated the residuary estate consists of immovable proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harity. The expression "private charity," strictly speaking, is a misnomer. The words "charity" or "charitable purpose" or "charitable object" are defined in various sections of different Acts of the Indian legislature. In all of them the idea of public benefit is clearly involved. It was sought to be argued on behalf of the Commissioner that in the present case by the use of the word "charity" without the word "public" the use for public was not necessarily indicated. In this connection Mr. Setalvad relied on the judgment of the Privy Council in All India Spinner's Association v. Commissioner of Income-tax [1944] 12 I.T.R. 482. In that case the court was considering whether the objects of the Association were charitable or not. It must be noted that the word "charity" was not used as one of the objects of the Association. Their Lordships emphasized that in the definition given in the Income-tax Act the word "public" was used and it was of importance. From that observation it was sought to be argued on behalf of the Commissioner that unless the word "public" was used in connection with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... definition of charitable purposes given in the Indian Income-tax Act and the argument of the Commissioner on this point must be rejected. It was next argued that in the present case by clause 15 no specific property is set apart for charity and therefore the case is covered by the second part of Section 4(3)(i) which runs in these terms:- "4. (3) This Act shall not apply to the following classes of income:- (i) Any income derived from property held under trust or other legal obligation wholly for religious or charitable purpose, and in the case of property so held in part only for such purposes, the income applied, or finally set apart for application, thereto." It was argued that in the present case the residuary estate was not property held in trust or for other legal obligation "wholly" for religious or charitable purpose. At most therefore only such portion of the income is proved to be applied for such purposes should be exempted from tax. Mr. Setalvad relied on the judgment of the Privy Council in Maulana Mohammed Ibrahim Riza Malak v. Commissioner of Income-tax [1930] 4 I.T.C. 486; 57 I.A. 260. In that case a property was settled on trust under a deed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y" within the meaning of law. In the present case by clause 15 the testator had directed his trustee to utilise three-fourths of the income of the residuary estate for charity. That clearly falls within the first part of clause (i) of sub-section (3) of Section 4 of the Act. As regards the remaining one fourth part the trustee is given the option to spend it either for charity or to give the same over to one or more of the testator's daughters or the sons of his daughter. To that part the second portion of clause (i) may be applied. We are not concerned with that point as it is agreed between the parties that the question before the Court should be limited only to three-fourths of the income of the residue. In my opinion that income is clearly covered by Section 4(3)(i), first part. That portion of the residue is held wholly for charitable purposes within the meaning of the Income-tax Act, and is completely exempt from tax. Our answer to the question submitted for the Court's opinion (limited to the three-fourths of the income of the residuary estate) is in the affirmative. The Commissioner to pay the costs of the reference. CHAGLA, J.--I agree. in my opinion when an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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