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TMI Blog1962 (1) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the transfer directly or indirectly of the income of the settlers and as such bringing the income within the provisions of section 16(1)(c)? and 3. If the answer to question No. 2 is in the affirmative, whether the assessment of the aforesaid income will be raised in the hands of the settlors?" The matter relates to the constructions of what has been described as a deed of trust in the proceedings before the revenue authorities. Two persons by the name of Sagarmal Lohariwalla and Rameshwarlal Lohariwalla were carrying on business in partnership under the name and style of Messrs. Ganpatrai Sagarmal since the beginning of the Dewali year 2001-02. The terms and conditions of the partnership said to be recorded in a deed bearing d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on should be appropriated and applied or set apart partly for payment to the parties hereto and partly for religious and or charitable purposes according to certain terms and conditions and in manner also agreed to among the parties hereto and whereas it has been deemed expedient and proper that the terms and conditions and the manner already on among the parties hereto under and in which the business should be and is being carried on the income arising therefrom is to be appropriated, applied or set apart should, in order to avoid any doubt or ambiguity or differences thereabout be reduced in writing in the shape of these presents and now therefore these presents witnesseth the said terms and conditions." Clauses 1 to 18 specify t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst and the Second Parts. 7. That the parties hereto of the First and Second Parts reserve to themselves the right of augmenting the present working capital of the business aforesaid from time to time with interest at the rate of six per cent. per annum or such other rates as may be agreed on among the donees or trustees. The parties of the First and the Second Parts shall get interest at such rates also on the existing capital standing in their respective names in the books of account of the business. 15. That the purposes for which the charity fund is to be applied or set apart shall include the erection of a dharamsala, a charitable dispensary, on the premises at 8, Jadulal Mullick Road, Calcutta, which belongs to Sreemati Mahadei abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing done within the taxable territories, and in the case of property so held in part only for such purposes, the income applied or finally set apart for application thereto." We are not concerned with the proviso to this sub-section. The foremost question in this reference is whether the income which is said to be allocated to charitable or religious purposes is income derived from properties held under trust or other legal obligations wholly for religious or charitable purposes. In my opinion, no property was here held under trust or other similar obligations. Section 5 of the Indian Trusts Act provides as follows: "No trust in relation to immoveable property is valid, unless declared by a non-testamentary instrument in writing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be allocated or distributed to charity account in the ledger of the business. Mr. Meyer arguing for the revenue pointed out that it was not enough under section 4(3)(i) that the income from the property should be held for religious or charitable purposes but that the property itself should be held under a trust or other similar obligation for religious or charitable purposes. In my opinion, this contention must be upheld. This document so far as I can see merely shows that if and when there was any income or profit from business the same was not to go entirely to the erstwhile partners but was to be appropriated by them as regards 3/4th and the balance of 1/4th was to be allocated to charity. The answer to question No. 1 therefore is in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case comes within the mischief of this proviso. There does not seem to be any provision for re-transfer of the income directly or indirectly by the settlors. The trust deed provides that the trustees were to supervise the running of the business and ?th of the profit were to go the partners and 1/4th to charity. If the business had been transferred to the trustees with the condition that the trustees should pay 1/4th of the income to charity and 3/4th to others it could be said that there was a provision for re-transfer of the income of the assets to the settler. But this is not the position here. The parties had merely indicated their intention to set apart 1/4th of the income for charitable purposes. Nevertheless, the income was theirs. A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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