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TMI Blog1969 (2) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... r. For the relevant years under appeal, the Income-tax Officer assessed the surplus funds of the association amounting respectively to Rs. 13,716, Rs. 12,309 and Rs. 11,800 under section 143(3) of the Act. In the proceedings before the Income-tax Officer, the assessee claimed exemption from tax under section 11(1) of the Act, on the ground that the trust created under the deed of March 4, 1959, provided for the disposal of the surplus funds for charitable purposes. Such claim was negatived both by the Income-tax Officer and the Appellate Assistant Commissioner. The Tribunal construed the deed of trust and held that the " surplus funds" which formed the subject-matter of the trust came within the definition of the term " property ". It is stated in the statement of the case that as regards the purpose and object of the trust, clause (3) of the deed of trust lays down that the surplus funds are to be disposed of, " (i) by making improvement to the racing facilities available at Jorhat, etc., and/or (ii) by making donations at the discretion of the trustees to any recognised institution for social, cultural and physical benefits of the people. According to the Tribunal, the first of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion envisages two important aspects, namely, making improvements to the racing facilities, etc., and/or making donations to charitable institution for social, cultural and physical benefits of the people. It will be pertinent to note that the object of the trust in respect of the surplus funds was to dispose them of in any of the manners as stated in the said clause. Mr. S.K. Sen, appearing for the assessee, has argued that the surplus funds as stated in the deed should come within the definition of trust, and this should be treated as a " property " in terms of section 11(1) of the Act, for which a trust may be created and, therefore, under each provision, the surplus funds should be exempted from assessment of tax. His second argument is that promotion of racing facilities available to the members of the public at Jorhat is an object of general public utility and, therefore, charitable in nature. Mr. J. P. Bhattacharjee on behalf of the department has referred us to several provisions of the Act and has argued that the " surplus funds " as stated before can never come within the ambit of section 11(1) of the Act. Section 2 clause 15, defines charitable purposes as follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al obligation on the assessee to apply the surplus fund wholly or in part for some religious or charitable purposes, and, therefore, when he is fastened with a " legal obligation " which is inseparably connected with the said fund, he should be exempted from tax liability. This argument has undoubtedly some force, but, in our opinion, the word " property " used in section 11 is the criterion on which the entire decision should be based. The expression " legal obligation " cannot be separated from the " property " itself which in the instant case is a horse-racing concern, inasmuch as law enjoins that such property must be held under a trust or other legal obligation and not the fund derived therefrom. We have already shown that Jorhat Races were not the subject-matter of a trust and only a trust has been created in respect of the surplus fund. The surplus fund really emanates from a property which is not a subject-matter of the trust and as such in the absence of any legal obligation fastened thereto, no exemption can be allowed under section 11 of the Act. In this connection, reference may be made to the well-known Privy Council case Mohammad Ibrahim Riza v. Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d stake money, by increasing the facilities available to the members of the public or in such other manner connected with the races as the trustees shall consider desirable. By quoting the provisions of section 10(23) of the Act, we have already shown that such object does not come within the said exemption clause. When such fund does not come within its ambit, it goes without saying that the trustees had the indefeasible alternative right to apply the funds to such purposes, without making any donation to charitable purposes. In such circumstances, the matter is hit by the decision of the Privy Council as stated before and the contention of Mr. Sen in this respect is negatived. We shall now turn to decide the application which was filed before this court under section 258 of the Act. It provides that if the High Court or the Supreme Court is not satisfied that the statements in a case referred to it are sufficient to enable it to determine the questions raised thereby, the court may refer the case back to the Appellate Tribunal for the purpose of making such additions thereto or alterations therein as it may direct in that behalf. In the petition before us, the assessee has aske ..... X X X X Extracts X X X X X X X X Extracts X X X X
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