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TMI Blog1998 (2) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... monthly and other periodical aids to them." The trustees were empowered by clause (5) to decide the particular object or objects to which the income or corpus of the trust properties for the time being available were to be applied. Earlier clause 93 entitled the trustees to carry on such business as they might think fit from time to time provided all such businesses were carried on to utilise all such profits for the objects of the trust. When the matter relating to the assessment of the income of the trust came up for consideration before the Income-tax Officer for the assessment years 1954-55 to 1957-58, he did not treat its objects as being wholly for religious and charitable purposes. According to him, the income of the trust could also be utilised for any persons belonging to the Lath family. In his opinion, therefore, the trust did not qualify itself for exemption under the Act. This conclusion was arrived at notwithstanding a finding that as a fact the income had not been utilised for any non-charitable purposes, This decision of the Income-tax Officer was reversed by the Appellate Assistant Commissioner as he felt that the dominant intention of the trust was charitable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income-tax authorities allowed exemption to the assessee treating it as trust wholly for charitable and religious purposes within the meaning of section 4(3)(i) of the 1922 Act and section 11 of the 1961 Act. The settlor died in the year 1960. For the present assessment years 1967-68 to 1970-71, the Income-tax Officer took a different stand. According to the Income-tax Officer, the settlor having once decided the purpose and objects of the trust in the deed of settlement of the year 1948, he was precluded from making any additions or deletions in the same. The trust being irrevocable, he concluded that the deed of 1948 continued to operate. What appeared to have prompted him to adopt this new approach was a deed of declaration executed by the trustees on July 15, 1966. Thereby they had attempted to, inter alia, modify clause 2(iii) of the principal deed of settlement by the following substitution : "To promote, establish and run agricultural farms and agricultural research centres, seeds and grafts centres, nurseries, orchards, gardens and/or other plantations, to provide know-how, means and materials for advanced farming by improved and scientific methods and equipment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax under the Mysore Agricultural Income-tax Act, 1957. He, as such, finally allowed the exemption to the trust under section 11 of the Income-tax Act, 1961. The Tribunal found as follows : (1) That clause 2(vi) of the principal deed of settlement plainly and unequivocally permitted the trustees to utilise the income of the trust to render aid to any person belonging to the family of the Laths (2) that the aforesaid clause had been treated by the Rajasthan High Court, so as to refer to the family of the settlor ; (3) that it was not considered an insignificant or superfluous clause which had no bearing on the object of the trust ; (4) that its pervading effect was considered by the Rajasthan High Court to carry away the prospects of providing full discretion in the trustees to spend the entire trust funds for the aid of the settlor's family members ; (5) that this was not an innocent clause which had just crept in by inadvertence and without any intention or motive. The Tribunal held accordingly that the amending deed of 1959 was the result of second thoughts by the settlor when he was confronted with the income of the trust escaping the exemption of section 4(3)(i) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d May 21, 1958, the assessee-trust became a trust wholly for charitable or religious purposes as contemplated under section 11 of the Income-tax Act, 1961 ? (2) Whether, on the facts and in the circumstances of the case, the income of the assessee-trust was exempt in terms of section 11 of the Income-tax Act, 1961 ?" We heard Mr. N. M. Ranka, the learned senior advocate, for the assessee-trust, and Mr. Anant Kasliwal, the learned standing counsel for the Income-tax Department. Mr. Ranka urged, and Mr. Kasliwal could not oppose his submission, that both the questions, as reproduced above, had directly and substantially arisen for the consideration of this court in the assessee's own case for the assessment year 1972-73 and this court, after a thorough study of the original deed dated August 25, 1948, and the effect of the subsequent supplementary deed dated May 21, 1958, whereby the words "belonging to the family of Laths", occurring in clause 2(vi) of the original deed were deleted and in their place the words "in distress" was inserted and the original clause 2(vi) came to be read as "to render aid to any person in distress and to grant monthly and other periodical aid to them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nded, with reference to the provisions of the Indian Trusts Act, 1882. It was held that although the provisions of the Indian Trusts Act as such are not applicable to public trusts in view of section 1 of the said Act, the principles underlying them, being based on general principles or rules of English law are applied by the courts to public trusts also. The court further observed that in a private trust the beneficiaries are a determinate body and, therefore, any modification in the matter of terms of the author of the trust is required to be made with the consent of all the beneficiaries who are competent to contract and in cases where the beneficiary is incompetent to contract, his consent may be given by the civil court. The situation in the case of a public trust is, however, different because in a public trust, the beneficiaries are generally indeterminate and the provisions of section 11 requiring the consent of the beneficiaries cannot, therefore, be applied to a public trust. With reference to clause 2(vi) of the original trust deed, which made provision for giving aid to persons belonging to the family of Laths this court, on the basis of its earlier decision in Lakshm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rustees of the assessee to use the trust funds for giving aid to per sons belonging to the family of Laths. As a result, the flaw which was found by this court in its judgment in Lakshmi Narain Lath Trust v. CIT [1969] 73 ITR 402, that a discretion was vested in the trustees to apply the funds of the trust towards the object contained in clause 2(vi) of the object clause, i.e., to give aid to the persons belonging to the family of Laths and that, therefore, it was not a trust for charitable purposes, no longer exists. After the execution of the supplementary deed dated May 21, 1958, which is binding on the trustees, it is not open to the trustees to give aid only to persons belonging to the family of Laths, and, therefore, it is not permissible for the trustees to apply the funds of the assessee for non-charitable purposes. In these circumstances, we are of the opinion that after execution of the supplementary deed dated May 21, 1958, it cannot be said that the income o f the assessee could be used for non-charitable purposes and that the income of the trust was not used wholly for charitable purposes. We are, therefore, unable to agree with the Tribunal that the income of the trus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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