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TMI Blog1984 (4) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... der a trust deed dated June 25, 1968, declared by the founder and donor, Shri N. Mahalingam, by an initial donation of Rs. 5,000. According to the terms of the said trust deed, the trust fund and its properties are to consist of such initial donation and all funds and assets, movable and immovable, thereafter to be donated by the trustees, Messrs. Sakthi Sugars Limited and its directors and shareholders and others for the purpose of the trust. The following are the objects set out in the trust deed: "(a) to promote, aid and advance art, architecture, literature and science, classical, ancient and modern; (b) to establish centres of learning and research and construct, equip and maintain buildings, equipments, models and machineries for such promotion, advancement and research; (c) to publish books and periodicals for the propagation of Indian art, architecture and literature, classical and modern; (d) to translate and publish in English and/or other language books, classical and ancient works of Indian culture, art, architecture and literature and propagate the same in and outside India (e) to print and publish books, journals and periodicals for the propagation of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment appealed to the Tribunal. Pending the appeal before the Tribunal, the assessee filed a suit under s. 92 of the Code of Civil Procedure before the District Judge, Coimbatore, for rectification of the original trust deed dated June 25, 1968, and the District Judge decreed the said suit on April 15, 1981, declaring the offending clauses to be void with effect from June 25. 1968, the date of the original deed of trust. The Tribunal held that the objects referred to in clauses 'k', 'l' and 'o', which are for the promotion of welfare and well-being of the, employees of Messrs. Sakthi Sugars Limited and for helping the destitute wives, husbands and children of the deceased employees of the said company, financing persons for advanced studies in sugar technology and allied subjects, for better and more efficient carrying on of the industries under the management of the said company are clearly objects aimed at providing benefit to the company and its employees and cannot at all be regarded as objects of charitable nature. The Tribunal also held that the deed of rectification dated January 31, 1969, is not valid in view of the fact that the trustees have no power to revoke or modify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der these clauses are not available to the members of the public in general or even a section of the general public, but are available only to persons employed or connected with M/s. Sakthi Sugars Limited, the Tribunal appears to be right in holding that the objects set out in clauses 'k', 'l' and 'o' are not charitable in nature. The decision in J.K. Hosiery Factory v. CIT [1971] 81 ITR 557 (All), supports the said view of ours that where the benefit of a trust goes to particular group of people connected with the founder of the trust or its trustee and not a definite class of public, then its objects cannot be taken to be charitable. In that case, a company executed a trust under which some directors of the company were appointed as trustees. The trust deed empowered the trustees to construct residential quarters for workmen in general and in particular for the workmen of the company and its allied concerns. A question arose as to whether the objects of the trust were exclusively charitable for the purpose of s. 4(3)(i) of the Indian I.T. Act, 1922. The Allahabad High Court held that the expression "workmen in general " did not fix a definite class of public which was intended to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt expressed the view that the status of some of the " poor relations " trusts as valid charitable trusts was recognised more than two hundred years ago and a few of those trusts then recognised are still being administered as charitable today and it is " quite impossible " for the Court of Appeal to overrule such old decisions, that it is unwise to cast doubts on " decisions of respectable antiquity in order to introduce a greater harmony into the law of charity as a whole " : that the " poor relations " and the " poor employees " decision were to be treated on the same footing and to draw a distinction between different sorts of " poverty " trusts would be quite illogical and could certainly not be said to be introducing " greater harmony " into the law of charity. The court also observed as follows (p. 534): " The phrase a 'section of the public' is in truth a vague phrase which may mean different things to different people. In the law of charity, Judges have sought to elucidate its meaning by contrasting it with another phrase; 'a fluctuating body of private individuals'. But I get little help from the supposed contrast for as I see it one and the same aggregate of persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... non-charitable objects, such a trust is not entitled to the benefits of s. 11. In East India Industries (Madras) Private Limited v. CIT [1967] 65 ITR 611, the Supreme Court held that where a trust was established for various objects most of which are charitable but some of which are non-charitable, then such a trust cannot be taken to be held wholly for charitable purposes within the meaning of s. 4(3)(i) of the Indian I.T. Act, I 922. In that case, the objects of a trust known as "The Agastyar Trust " included both charitable and non-charitable objects, and discretion had been given to the trustees to spend the income to all or any of the objects. Taking note of the discretion given to the trustees, the court held that the trust cannot be said to have been established wholly for charitable purposes within the meaning of s. 4(3Xi). The following is the relevant observation of the Supreme Court (p. 615): " In our opinion, this particular object of the trust is neither charitable nor religious in character. If the trustees can, under a trust held validly, spend the entire income ofthe trust on this non-charitable object, it is difficult to hold that the trust property is held unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said to be valid. This leads us to the third contention which is based on the rectification ordered by a decree of the District Court, Coimbatore, on April 15, 1981, with effect from June 25, 1968. This question appears to be outside the scope of this reference. However, having regard to the submission made on that question by both sides, we proceed to express our prima facie opinion. Subsequent to the Revenue filing an appeal before the Tribunal, O. S. No. 18 of 1981, on the file of the District Court, Coimbatore, was filed under s. 92 of the Civil Procedure Code, seeking a declaration that the inclusion of the words " and outside " in clauses `d' and `e', and the continuance of clauses `k', ₹ 1' and 'o' in paragraph III of the trust deed dated June 25, 1968, are void ab initio and non est and, consequently, directing the deletion of the words "and outside " in clauses `d' and 'e' and the deletion of the clauses `k'. ₹ 1' and `o' in paragraph III of the trust deed. In the said suit, one S. Venugopalan for himself and as representative of the general body of employees of M/s. Sakthi Sugars Ltd., Coimbatore, was shown as the defendant. The suit was not resisted. On th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase was considered by the Delhi High Court in Jagdamba Charity Trust v. CIT [1981] 128 ITR 377. In that case also, trust deed contained certain non-charitable objects along with other objects which were substantially charitable. Having regard to the existence of the non-charitable purposes, the High Court originally and later the Supreme Court negatived the claim for exemption from income-tax on the ground that they were not trusts exclusively for charitable purposes. Thereafter, the founder of the trust filed a suit under s. 26 of the Specific Relief Act, 1963, for rectification of the trust deed by deleting the offending clauses. The civil court granted a decree and directed that the trust deed will stand rectified with effect from its very inception. The question was, whether the trust was exempted under s. 11 in view of the retrospective rectification of the, trust deed. The court held that since there was an order of the civil court binding on the author and the trustees, they could administer the trust only in terms of the amendment directed by the court, that the trustees were and must be deemed, from the beginning, to have been under a legal obligation to hold the propertie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d form, and that it is, therefore, settled law that after the deed is rectified by a decree of the court, the deed as rectified will be deemed to be operative ever since its original execution. In that case, however, the court proceeded on the basis that the Court had the requisite power to rectify the trust deed on the ground of mutual mistake under the provisions of the Specific Relief Act. But here, the suit has been filed under s. 92 of the Code of Civil Procedure. Therefore, the question is, whether the civil court had the power to rectify the trust deed under s. 92. Section 92, C.P.C., nowhere enables the civil court to alter or rectify the terms of a trust. It only enables the civil court in suitable cases to remove any trustee, appoint a new trustee, vesting any property in a trustee, directing any ex-trustee to deliver possession of the trust property to the person entitled to the possession of such property, directing accounts and enquiries, declaring that portion of the trust property or interest therein shall be allotted to any particular objects of the trust or to settle scheme. Thus, the court has got power to allocate the trust properties to any particular field of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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