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TMI Blog1969 (12) TMI 33X X X X Extracts X X X X X X X X Extracts X X X X ..... ures for the benefit of the public ? (3) Whether a purpose of a charitable nature which does not enure for the benefit of the public can be a 'charitable purpose' for the purpose of section 4(b) of the Agricultural Income-tax Act ? (4) Whether the provision for charitable purposes in clause 8 of the trust deed makes the separate and independent provision in clause 9 of the deed for the utilisation of a specific part of the income on the descendants also a provision for charitable purposes or on the other hand the trust is a mixed trust ? (5) Whether augmentation of the properties of a mixed trust can be a 'charitable purpose' for the purpose of section 4(b) of the Agricultural Income-tax Act ? (6) Whether the dominant purpose of the trust deed is charitable? (7) Whether the income for the augmentation of the trust properties in question is exempt from tax? (8) Whether the properties in question are held under trust wholly for religious or charitable purposes? The provision of the Agricultural Income-tax Act of 1950 with which we are concerned is section 4(b), which gives exemption from tax to: " Any agricultural income derived from property held under trust or other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hould be provided according to their status ; and that the amounts should be spent for their educational expenses too, in keeping with their status. The further provision in this paragraph is that, if the trustees are of opinion that if a lump sum of Rs. 5,000 is paid to any one branch that branch will thereafter live without need, that can also be done, but such lump sum payment should be only one in a year. The next paragraph to be noted is paragraph 12, which provides that, in the matter of paying maintenance as stated in paragraph 9 the trustees must evince special care on the founder's grandson (Moosa) and his male descendants, and the amounts given to them must bear proportion to their status. The food, clothing, etc., given to these persons must be such as they will not have to depend upon anybody else and must be such as to enable them to live without any difficulty. It is also provided that the amounts given must be sufficient to meet the educational expenses, marriage expenses, etc., and the amounts must be paid as and when such expenses arise. Lastly it is provided in this paragraph, that, in case the descendants mentioned above become extinct, the said two quarters-- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a section of the public as distinguished from specified individuals. The Supreme Court was considering whether a building purchased by the Andhra Chamber of Commerce was property held under trust or other legal obligation wholly or in part for religious or charitable purposes and the income therefrom was exempt from tax under section 4(3)(i) of the Indian Income-tax Act : and the court held that the advancement or promotion of trade, commerce and industry leading to economic prosperity ensuring for the benefit of the entire community was an object of general public utility, and the fact that the prosperity would be shared by those who engaged themselves in trade, commerce and industry would not make the object any the less an object of general public utility. The next decision of the Supreme Court is Trustees of the Charity Fund v. Commissioner of Income-tax. In this decision, the trust the Supreme Court was considering was one founded by Sir Sassoon David, Bart. There were five or six purposes mentioned in the relevant clause of the document with two provisos added thereto. All the purposes mentioned in the body of this clause were charitable purposes ; but the first proviso s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. In addition to these decisions, two decisions of the Madras High Court, three of the Bombay High Court, one of the Calcutta High Court and one of the Gujarat High Court have also been brought to our notice. The decisions of the Madras High Court are Commissioner of Income-tax v. M. Jamal Mohamad Sahib and Commissioner of Income-tax v. Aga Abbas Ali Shirazi. In the first of these cases, Leach C.J., who delivered the judgment of the Full Bench, held that the expression " charitable purposes " must be construed strictly and be applied only to a public charity. The learned Chief Justice observed that there was no such thing as a private charitable trust--there might be a private trust for religious purposes, but no private charitable trust. Leach C.J. held further that, where a wakf deed directed that half of the annual net income of the trust should be utilised for the expenses of maintenance, education, marriage and funeral and other necessities of such members of the donor's family in the male line as in the opinion of the mutawalli were in poor and needy circumstances and the other half of the annual net income was to be utilised for charitable purposes, then that part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l the members of the family were exhausted that a section of the public would come in for benefit, then the property under the trust was not held wholly for charitable purposes and the income was therefore not exempt from tax under section 4(3)(i) of the Indian Income-tax Act. In the next decision the Bombay High Court was considering a provision of the Wealth-tax Act. The trust which the High Court had to consider in that case was Jehangir Pestonji Pardiwala Charity Trust ; and though one of the clauses of the document of trust empowered the trustees to expend money on certain religious ceremonies for the repose of the soul of the members of the settlor's family, another clause of the document authorised the trustees to pay money towards the maintenance and support of the settlor's relatives and/or other indigent persons. It was argued that, for that reason, the trust was not a public trust. The High Court held that ceremonies performed for the repose of the soul of a deceased individual enured for the benefit of mankind at large, and as such, the purpose was a public purpose of a religious nature. The High Court also held that the word " other " in the other clause showed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... public " ; and an " object of public utility " need not be one benefiting the whole mankind or even all persons living in a particular country or province. If the direct beneficiaries under a trust are " the public ", the trust does not lose its public character merely for the reason that reservations or preferences are made in favour of the founder's poor relations or the poor members of his family. The question whether a trust is one wholly for religious or charitable purposes has to be decided on the dominant intention of the settlor or founder and unless the charitable object involved is an object of general public utility, the trust will not be a public charitable trust, so that a trust where the dominant intention of the founder is to provide for his poor relations will not be a public charitable trust. Similarly, a trust providing for the poor relations of the founder, and when they are all exhausted or when they become extinct, providing for public charities, will not be a public charitable trust. Again, if there are public charitable purposes and also provisions for the benefit of the relations of the founder and the trustees are given the discretion to spend the entire in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trust deed, and contends that there was no possibility of the descendants of the founder-Moosa, his sister, the founder's daughters and other descendants claiming any help from the trust funds, because they were all well provided, at the time of the settlement. The counsel also points out that under paragraph 34 substantial properties were given to Moosa, so that there was no possibility of his or his descendants being indigent either. The counsel proceeds to contend that the dominant intention of the founder was only to provide for public charities and not for providing food, clothing, etc., for his own descendants. In other words, the argument of the counsel is that the ultimate purpose of the settlement was to provide for public charities. (This is how the Tribunal has understood the provision : the Tribunal has held that this half is also a public trust, since the ultimate purpose was public charity). We find it difficult to agree with this contention of Mr. Viswanatha Iyer. From paragraphs 9 and 12 it is quite clear that the intention of the founder was to provide for his descendants both in the male line and in the female line. The several provisions in these two paragraph ..... X X X X Extracts X X X X X X X X Extracts X X X X
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