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TMI Blog1987 (3) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... 5(1)(i) of the Wealth-tax Act, 1957, in respect of the corpus of the trust fund ? " R. C. No. 139 of 1980 is a reference under section 25.6(1) of the Income-tax Act, 1961, and the question referred herein is: "Whether, on the facts and in the circumstances of the case, the assessee's income for the assessment year 1974-75 is not liable to be taxed in view of the provisions of section 11 of the Income-tax Act, 1961 ? " Late H.E.H. the Nizam had created a number of trusts, one of which is " H.E.H. the Nizam's Pilgrimage Money Trust ", constituted under deed of trust dated November 2, 1950, settling securities of the value of Rs. 22,20,000 as the corpus of the trust. The object of the trust was to provide for the expenses of Haj pilgrimage for himself and members of his family accompanying him and for other charitable or religious purposes after his lifetime. It is necessary to notice the relevant recitals in the trust deed. The settlor recited in the first instance that he had, during the last 35 years, set apart 30,000 gold sovereigns " to form fund for providing thereout the expenses of the settlor for visit and pilgrimage to various Mahomedan shrines and other holy places ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eof made during the settlor's lifetime and the investments thereof, for all or any one or more of the following religious or charitable objects and purposes at Hedjaz and/or Iraq in such manner as the trustees may, in their absolute discretion, think proper: (i) for making silver Zari at Surra-mun-Zaa; (ii) for supplying or donating carpets for the Holy Mosque at Madina called 'Masjid-e-Nabavi'; (iii) for installing electric fittings in the prophet's Mosque at Madina; (iv) for constructing and maintaining Inns or Sarais and for keeping in good repair and condition the Inns or Sarais already constructed by the ancestors of the settlor; (v) for constructing, establishing and maintaining dispensaries or hospitals or wards in hospitals and otherwise for medical aid and relief; (vi) for constructing, establishing, maintaining and running schools, madrasahs and other educational institutions and otherwise for advancement of education; (vii) for making religious offerings and expending monies for charitable purposes at any of the said holy places; and (viii) for such other religious or charitable purposes as the trustees may, in their absolute discretion, think fit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under the Wealth-tax Act. Under the Income-tax Act too, the very same question was reiterated by the assessee for the assessment year 1974-75. In both these matters, the assessee's contention was that the order of the Chief judge dated September 29, 1973, is valid and enforceable and by virtue of it the property held in trust is exempt under section 5(1)(i) of the Wealth-tax Act and its income exempt under section 11 of the Income-tax Act. Their contention was that the decision of the High Court in R.C. No. 127 of 1976 does not govern the case inasmuch as the assessment years now concerned are subsequent to the order of the learned Chief Judge. The income-tax authorities, as well as the Tribunal, disagreed with the said contention under both the enactments. The Tribunal held that under the Wealth-tax Act the corpus of the trust fund cannot be said to have been held in trust for charitable or religious purposes in India, as contemplated by section 5(1)(i) of the Wealth-tax Act and, therefore, not entitled to exemption. Under the Income-tax Act, the Tribunal merely chose to follow its earlier decision relating to the assessment years 1969-70 to 1973-74 and negatived the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... doubt. It says that after the death of the settlor we are concerned herein with the position obtaining after the death of the settlor the trustees shall hold the trust fund and the unspent accumulations, if any, for spending or utilising " for all or any one or more of the following religious or charitable objects and purposes at Hedjaz and/or Iraq in such manner as the trustees in their absolute discretion think proper ", and then follow the eight sub-clauses elaborating the purposes. Thus, the entire income and the accumulations are to be spent by the trustees only for religious or charitable purposes at Hedjaz (which, as the trust deed makes it clear, means and refers to Mecca and Madina) and in Iraq. The various objects elaborated in sub-clauses (i) to (viii) are, therefore, objects to be performed only at Hedjaz and/or Iraq. The proviso to paragraph 3 also goes to show that, the construction of " sarais ", etc., was to be done entirely outside India. We are, therefore, of the opinion, on a fair and reasonable reading of the trust deed, that all the objects and purposes of the said trust are located outside India, and that none of the objects and purposes are to be performed wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion, advice or direction on any present questions respecting the management or administration of the trust property other than questions of detail, difficulty or importance, not proper in the opinion of the court for summary disposal . . . " It would be evident that even the present questions relating to management or administration of the trust property will not be gone into under this section if they are questions of detail, difficulty or importance. It cannot be denied that the amendment of the objects of the trust is a matter of importance and hence cannot be gone into under section 34, even assuming that section 34 applies to a public trusts. Mr. Ratnakar, learned counsel for the assessee, while not disputing the proposition that on the death of the settlor the trust became a public trust, sought to argue that it became a private trust by virtue of section 5(1)(i) of the Act. His argument which we must frankly say does not appeal to us at all-runs like this : Inasmuch as the property of the trust is not held for a public purpose of a charitable or religious nature within India, it is not a " public purpose " within the meaning of section 5(1)(i) of the Wealth-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... court and obtained the order, they have to act in accordance therewith. We are, however, unable to read the said judgment as laying down the proposition that even where the order of the court is without jurisdiction, it still binds the petitioner. Under section 44 of the Evidence Act, an order or judgment of the court without jurisdiction is irrelevant and void. Once we hold that the Trusts Act does not apply to the trust concerned herein and further that, in any event, section 34 does not authorise or contemplate the amendment of the objects of the trust, the order of the Chief judge cannot be read as changing the objects of the trust. The next decision relied upon by learned counsel is in Dharmaposhanam Company v. CIT [1978] 114 ITR 463 (SC). That was a case where certain objects of a trust were charitable while others were not charitable, all of them enjoying equal status : it was open to the trustees to apply the trust income on those objects in such proportion or measure as they thought appropriate. In such circumstances, it was held that the entire trust is liable to be treated as not for charitable purposes and will not be entitled to claim exemption under section 11 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of section 11(1)(a) whether the charitable or religious purposes are confined to taxable territories or not. It is sufficient if the income is spent within India and, to that extent, that income will be exempt under the said provision. This is also the view expressed by the Bench in CWT v. Trustees of H. E. H. the Nizam's Religious Endowment Trust [1977] 108 ITR 229, referred to above. It was observed by the Bench that under the Income-tax Act, it is immaterial whether the charitable or religious purposes for which the trust is created are confined to the taxable territories, what is required is that the income must be applied or accumulated for application or set apart for application within the taxable territories. It was further observed that what is relevant under the Income-tax Act is the area of 'application of income and not the objects. Indeed, the Bench pointed out the distinction between the language employed in section 5(1)(i) of the Wealth tax Act and section 11(1)(a) of the Income-tax Act on this score. We respectfully agree with the said view. We, therefore, hold that even though the objects of the trust do not empower the trustees to spend any part of the income of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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