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TMI Blog1992 (8) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... rustees. Thus, the office of the trusteeship shall be hereditary. It is further mentioned that the seniormost heir of the family of the donor-founder's descendants irrespective of whether male or female shall always become one of the trustees according to the rule of primogeniture. Similarly, in the case of death of Smt. Shefali Sengupta, wife of the donor-founder, her second eldest heir shall become a trustee in her place and as such the said trusteeship shall also be hereditary according to the rule of primogeniture in the second line of heirs. The beneficiaries of the trust are as under : (i) 50 per cent. of the gross income derived from the trust properties, donations and other sources will be utilised towards establishment charges. (ii) 10 per cent. of the said gross income will be set apart as reserve fund for expansion and construction of the buildings. (iii) 10 per cent. will be utilised for repairs of the buildings, payment of Government revenue, municipal taxes, etc., and for meeting all recurring and non-recurring charges for maintenance of the buildings and properties of the trust. (iv) 12.5 per cent. shall go to the donor-founder and/or his descendants-trustees for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustee and, after their death, the trustees will be appointed only from amongst their legal heirs. The two trustees, viz., Sri Biswanath Chakraborty and Smt. Arati Ghosh are apparently strangers to the family of the vendor-trustee but none the less the extent of their representation is apparently ineffective. " From the facts and circumstances of this case, the following question of law has been referred to this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee is not entitled to the benefit of exemption under section 11 of the Income-tax Act, 1961 At the hearing before us, Mr. Khaitan has drawn our attention to the trust deed and has submitted that the Tribunal fell into an error in holding that the objects of the trust are not charitable inasmuch as 12.5 per cent. of the gross income of the trust had been applied for the benefit of social and customary needs of the donor-founder's family. Our attention has been drawn by Mr. Khaitan to the order passed by the Income-tax Officer under section 250 of the Act for the assessment year 1982-83 from which it appears that the trust applied its income to the exte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e extent to which such income is applied to such purposes in India ; and, where any such income is finally set apart for application to such purposes in India, to the extent to which the income so set apart is not in excess of twenty-five per cent. of the income from such property." (emphasis supplied). In this case, as we have already seen, 12.5 per cent. of the income from the trust is to be given over to the members of the founder's family to meet its social and customary needs. Thus, the founder's family has a right to receive 12.5 per cent. of the income and the family is given the further right to have dominion and control over that part of the income and to spend it in the manner they consider to be their social and customary obligation. The words "social and customary needs" are too vague to delimit the family's power to spend the income. The trustees shall have no say in the matter of the application of the said part of the income. Therefore, in the face of this particular term in the trust deed, it cannot be said that the property is held under trust wholly for charitable purposes. The trustees are only obligated to apply the income to the charitable purposes to the exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T v. S. Ramaswamy Iyer [1977] 110 ITR 364 (Mad), it has been held that a settlor cannot vary the purpose of a trust subsequently without a power being reserved therefor in the original deed. Even a supplemental deed executed afterwards would not alter the provision contained in the original trust deed. In case the trust is wholly for charitable purposes as per the original deed, it will qualify for exemption under section 11. Similarly in CED v. K. A. Kader [1974] 96 ITR 289 (Mad), it was decided that, in the absence of a reservation, the settlor cannot alter the terms of a wakfnama nor can he make a change in the personnel for the mutawallis. On top of all, a deed of trust that qualifies for exemption under section 11 cannot have any stipulation reserving any power to revoke or alter the terms of the trust deed because that would lend to the trust the character of a revocable trust attracting the provisions of section 61 read with section 63. Besides, the trustees have no power to alter the terms of the trust deed. In Shervani Charitable Trust v. CIT [1968] 69 ITR 750 (All), the terms of the trust document empowered the trustees to spend one-third income for the maintenance and su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t such submissions did not weigh with the Supreme Court. It was, further, argued on behalf of the assessee that whether a trust is for charity or not should be determined by reference not only to the objects but also to the activity actually conducted by the assessee. The court did not agree and held that whether a trust is for charitable purposes is determinable by reference to all the objects for which the trust is created and the actual activity conducted is of no relevance. In the present case, however, there is a clear-cut demarcation of the income to be applied for charitable purposes and to the non-charitable purposes. Therefore, the subject-matter of decision is altogether,different. Before the Supreme Court, it was never in question whether, even if the income in a definite or a fixed part alone is for charitable purpose, the exemption under section 11(1) shall avail, despite the fact that the trust was created on or after April 1, 1962, i.e., the commencement of the new Act of 1961. Much stress has been laid by learned counsel for the assessee on the following observations of the Supreme Court (headnote) : "It would be a different case where one or more of the objects in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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