9911796707
TMI Blog1997 (7) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... 27(1) of the Wealth-tax Act, 1957 (for short "the W.T. Act"), for the assessment years 1973-74 and 1974-75 ; and the second judgment is in reference under section 256(1) of the Income-tax Act for the assessment year 1975-76. The questions which arise from the references under the Income-tax Act are : " 1. Whether, in view of clause 41 of the trust deed, clause 39 of the trust deed can be legally amended ? If so, whether such amendment would give rise to a legally enforceable mandate, as contemplated by the first proviso to sub-section (1) of section 13 of the Income-tax Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the interest income of the assessee-trust is exempt from tax under section 11 read with first proviso to sub-section (1) of section 13 of the Income-tax Act, 1961 ? " The question on which reference was sought under the Wealth-tax Act is as under : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the assessee-trust is exempt from wealth-tax under section 21A of the Wealth-tax Act, 1957 ? " As to how these questions aros ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 11 of the Act. The Income-tax Officer was of the view that the assessee had violated the provisions of section 13 of the Act inasmuch as the trust funds had been invested in the concerns of the trustees in which they were having interest. According to him, the assessee violated clauses (a) and (h) of sub-section (2) of section 13 of the Act. He was also of the view that the deposit made in Gokal Chand Rattan Chand Woollen Mills Private Limited carried interest at a much lower rate. Against the order of the Income-tax Officer the assessee filed an appeal before the Appellate Assistant Commissioner of Income-tax who agreed with the Income-tax Officer and dismissed the appeal. The matter was taken by the assessee to the Income-tax Appellate Tribunal, who, however, held that the amendment made to clause 39 of the trust deed was valid and that as this clause mandated that funds of the trust which were not required for immediate needs of the trust shall be kept with Gokal Chand Rattan Chand Woollen Mills Private Ltd., there was no violation of the provisions of section 13 of the Income-tax Act. The Tribunal, therefore, allowed the appeal of the assessee. On references both u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the person in receipt thereof . . . (c) in the case of a trust for charitable or religious purposes or a charitable or religious institution, any income thereof . . . (ii) if any part of such income or any property of the trust or institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in sub-section (3) : Provided that in the case of a trust or institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3), if such use or application is by way of compliance with a mandatory term of the trust or mandatory rule governing the institution . . . (2) Without prejudice to the generality of the provisions of clause (c) of sub-section (1), the income or the property of the trust or institution or any part of such income or property shall, for the purposes of that clause, be deemed to have been used or applied for the benefit of a perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere held by an individual who is a citizen of India and resident in India for the purposes of this Act, but without excluding the value of any asset under sub-section (1) of section 5, and at the maximum marginal rate : Provided that in the case of a trust created before the 1st day of April, 1962, the provisions of clause (i) shall not apply to any use or application, whether directly or indirectly, of any part of such property or any income of such trust for the benefit of any person referred to in sub-section (3) of section 13 of the Income-tax Act, if such use or application is by way of compliance with a mandatory term of the trust." The answer to the questions referred to the High Court would depend on the interpretation of the first proviso to section 13(1)(c)(ii) of the I.T. Act and of the first proviso to section 21A of the W.T. Act, both of which have been quoted above. It is to be seen if the provisions of the trust deed, particularly clause 39 as amended fall within the ambit of the proviso. The trust was created before, the commencement of the I.T. Act, 1961, which came into force on April 1, 1962, and clause 39 of the trust deed as it stood at that time did not ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
