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TMI Blog1980 (9) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be deemed to include his heirs, executors, administrators and assigns unless there is something repugnant to the subject or context thereof ". By this deed of trust, Narandas himself and four others were appointed as the trustees. The property in respect of which the first deed of trust was executed consisted of some lands at Poisar and 31% Govt. Promissory Loan Notes of the face value of Rs. 5,000. The object of the trust was the founding of a Sanatoriam for the benefit of the Pushakarana Brahmins and in their absence for the benefit of all the Brahmins from Gujarat, Kathiawar and Cutch and for the upkeep of the said Sanatorium. The said Sanatorium was to be called " the Narandas Lakhmidas Pushakarana Sanatorium ". The concluding portion of the first deed of trust is as follows : " AND IT IS HEREBY FURTHER AGREED AND DECLARED that the settlor may, at any time, revoke the trusts hereby declared." The second deed of trust was executed by Narandas on April 29, 1932, and was in respect of trust property consisting of. 31% Govt. Promissory Loan Notes of the face value of Rs. 50,000 and under the said deed of trust, which would be hereinafter for convenience referred to as " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fourth deed of trust, Narandas and some others were to be the trustees and the trust property and the dividends which might accrue thereon, were to be held for the said Narandas Lakhmidas Joshi Charities with a proviso that out of the dividends or income of the said trust funds, the trustees were to spend or keep apart a sum of Rs. 250 at least every year for the repairs of the dharamshala at Nalia in Cutch, which Narandas had built, and accumulate the same together with the sum of Rs. 100 provided for repairs of the said dharamshala at Narayan Sarovar also built by Narandas and to spend moneys out of the said repairs fund whenever necessary for the repairs of the said dharamshalas. In the fourth deed of trust also the word " settlor " was defined in exactly the same language as in the first, second and third deeds of trust and the concluding portion of the fourth deed, of trust was in identical language with the earlier three trust deeds. On March 31, 1942, three nephews of Narandas, namely, Bhagwandas Velji, Dwarkadas Velji and Delipsingh Velji, executed a deed of trust in favour of charities. These three settlors were described in the s aid deed of trust as " the settlors (w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed April 5, 1945, with a view to amalgamate the said Narandas Lakhmidas Pushakarana Brahmin Sanatorium Trust with the other trusts founded by Narandas and known as Narandas Lakshmidas joshi Charities Trusts, all the trusts under all the above deeds of trust were amalgamated and the trust funds blended together and all these trusts thereafter continued to exist and function as one single trust. After this amalgamation and blending of all the above trusts, Narandas executed yet another deed of trust, namely, a deed of trust dated July 6, 1941. We will refer to this trust as " the fifth deed of trust ". In this deed of trust Narandas was described as " the Settlor It simpliciter. The trust property consisted of certain immovable properties and the trustees under the said deed of trust were the trustees of all the above trusts. The trust property was to be held for the benefit of both the Joshi Trusts, namely, the said Narandas Lakhmidas Joshi Charities and the Narandas Lakshmidas Joshi Pushakarana Sanatorium. The concluding portion of the said deed of trust provided as follows: " AND IT TS HEREBY FURTHER AGREED AND DECLARED that in case Narandas Lakhmidas Joshi, the Settlor of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffect in the sixth deed of trust is. On October 31, 1956, Narandas died intestate. While assessing his estate to estate duty, the Asst. CED, by his order dated March 27, 1962, included in the estate, the value of all the trust properties under each and every trust mentioned hereinabove including under the two trust deeds executed by the said Veljis as also a sum of Rs. 75,000, being part of two donations of Rs. 25,000 and Rs. 50,000 given to the trusts by Narandas to enable them to purchase the said immovable property at Bombay in respect of which the petition earlier referred to was made to this High Court on the ground that all these trust deeds reserved to the settlor a power of revocation and, therefore, the trust properties passed on the death of Narandas by reason of the provisions of s. 12 of the E.D. Act. The accountable persons thereupon filed an appeal to the Appellate Controller of Estate Duty. By his order dated August 13, 1964, the Appellate Controller called for a report from the Assistant Controller on the question, whether the trust estate included any assets settled or donated by persons other than Narandas ". By his report dated December 7, 1964, the Asst. Cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, therefore, the trust was void under s. 126 of the Transfer of Property Act, 1882. The second ground urged by Mr. Kotwal for contending that all the trust deeds were void was because, according to him, the first of the three certainties necessary for the creation of a valid trust were absent in the present case. Mr. Kotwal, however, did not argue that the trusts were void by reason of the provision of s. 32 of the Transfer of Property Act. In our opinion, Mr. Kotwal rightly did not argue this point because s. 32 can possibly have no application to the present case. It merely deals with the imposition of an invalid condition subsequent and is merely a counterpart of s. 30 of the Transfer of Property Act and the effect of both these sections is that a condition which is void as a condition precedent would also be void if it were imposed as a condition subsequent. On behalf of the accountable persons, Mr. Rajgopal made a two-fold submission. His first submission was that the revocation clause was void and unenforceable and, therefore, the trust property did not form part of the estate of Narandas and s. 12 of the E.D. Act, was, therefore, not attracted. His other submission was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh counsel. Mr. S. A. Desai, learned counsel for the Charity Commissioner, supported the contention of Mr. Rajgopal that a charitable trust made by a Hindu can be governed only by Hindu law, and irrespective of the fact whether it contained a power of revocation or not, it was irrevocable. In the alternative, Mr. Desai submitted that once a charitable trust was registered under the Bombay Public Trusts Act, 1950, the trust became irrevocable, even though it might contain a revocation clause. It may be mentioned that all the trusts above referred to were duly registered under the Bombay Public Trusts Act. Before we consider the rival contentions as adumbrated above, it will be convenient to set out the provisions of s. 12 of the E.D. Act. Section 12, so far as is material for our purpose, provides as follows: " 12. Settlements with reservation.-(1) Property passing under any settlement made by the deceased by deed or any other instrument not taking effect as a will whereby an interest in such property for life or any other period determinable by reference to death is reserved either expressly or by implication to the settlor or whereby the settlor may have reserved to himself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in part, as the case may be ". The argument on behalf of the Department was based upon the supposition that a trust is a gift, a supposition which is not borne out in law. A gift is a transfer of property. It is defined in s. 122 of the Transfer of Property Act as " the transfer of certain existing movable or immovable property made voluntarily and without consideration, by one person, called the donor, to another, called the donee, and accepted by or on behalf of the donee ". The Transfer of Property Act deals, as its long title and preamble show, with the transfer of property by act of parties or transfers inter vivos. The general rules governing such transfers are set out in Chap. If of the Act, while Chapters III to VIII deal with certain specific types of transfer such as sale of immovable property, mortgages of immovable property and charges, leases of immovable property, exchanges, gifts and transfers of actionable claims. Turning to Chapter II of the Act, s. 5 defines the expression " transfer of property ". It provides: "5. `Transfer of property' defined.-In the following sections 'transfer of property' means an act by which a living person conveys property, in present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l charity or religious object is a very well-recognised legal device known to law. So far as English law is concerned, it originated in the Court of Chancery in England. Jurists have found it difficult to give a complete definition of trust. As pointed out in Snell's Principles of Equity, Twenty-seventh edition, 1973, at page 87, " No one has yet succeeded in giving an entirely satisfactory definition of a trust ". According to Snell, perhaps the most satisfactory definition is that given by Prof. Keeton, in his book " The Law of Trusts " (9th Edn., 1968), p. 5, where he defines a trust as " the relationship which arises wherever a person called the trustee is compelled in equity to hold property, whether real or personal, and whether by legal or equitable title, for the benefit of some persons (of whom he may be one and who are termed cestuis qui trust) or for some object permitted by law, in such a way that the real benefit of the property accrues, not to the trustee, but to the beneficiaries or other objects of the trust ". The mention of " Equity " in Prof. Keeton's definition has reference to the historical origin of the doctrine of trusts and the mention of " some object perm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the trust property was exempt from income-tax under s. 4(3)(i) of the Indian I. T. Act, 1922. One of the contentions raised on behalf of the Department, as can be seen from the statement of case reproduced in the report of that case as given in [1948] 16 ITR at page 112, was that revocable trusts were not valid trusts and, therefore, could not be covered by the said s. 4(3). The Division Bench repelled that contention in the following words (p. 114): " The other contention raised by the Advocate-General is whether this particular trust is a charitable trust at all. The argument advanced by the Advocate-General is that it is not open to a Parsi in India to make a revocable trust of personality for a charitable purpose. Now, it is well established that a Parsi has no personal law which governs him in British India and he is either governed by the statutory law of this country or in the absence of statutory law he is governed by the Common Law of England and under the Common Law as stated both in Tudor on Charities (p. 551) and in Halsbury's Laws of England (Vol. 4, p. 200), it is open to person to make a trust of personality in favour of a charity which is revocable trust. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e creation of a trust was not present in any of these trusts. In support of this submission, Mr. Kotwal relied upon another decision of this High Court in Hanmantram Ramnath v. CIT [1946] 14 ITR 716 and, particularly, the following observations (p. 718): " Although the Indian Trusts Act does not apply to charitable trusts, it is clear that the three certainties there described are required to create a charitable trust. They are : (1) a declaration of trust which is binding on the settlor, (2) setting apart definite property and the settlor depriving himself of the ownership thereof ; and (3) a statement of the objects for which the property is thereafter to be held, i.e., the beneficiaries." The dispute in that case was whether the second certainty, namely, setting apart of definite property and the settlor depriving himself of the ownership thereof had been fulfilled and on the facts of that case it was found that moneys had not been set apart for charities. Relying upon the above passage, Mr. Kotwal contended that in the present case, in none of the trust deeds was the first certainty present because there was no declaration of trust which was binding upon the settlor inasmuc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deed of trust power to revoke the said trust he was not bound to render accounts to the Charity Commissioner of his management of the trust properties. He had, however, not exercised that power of revocation and the court held that as the trust was not revoked he was bound to render accounts. This was the only authority cited in support of the argument that the trust were void and, for the reasons set out above, there is no substance whatever in this contention. It was next contended on behalf of the Department that the Tribunal was in error in coming to the conclusion that the revocation clause was void and unenforceable because the deceased was a Hindu and, therefore, governed by the Hindu law. In arriving at this conclusion, the Tribunal has merely relied upon a statement which appears in Gupte's Hindu Law, Second edition, at page 844. That statement is as follows: " It is well settled law that in the case of a dedication or endowment of public nature, the dedication is irrevocable; but it cannot be considered settled whether an endowment of a private nature is likewise irrevocable." The authority cited by Mr. Gupte, in support of the proposition, that in the case of a de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India; they are: (i) a dedication of the property under Hindu law; and (ii) a trust in accordance with the law of British India, such as by a transfer to the trustees for the benefit of the object in accordance with the provisions of the Transfer of Property Act or the Indian Succession Act, or the law relating to trusts in India. But we are here concerned with the manner in which an endowment may be validly and effectually created under Hindu law." By not taking into account this passage, the Tribunal thought that the passages which followed it dealt with all modes by which a Hindu may appropriate property for a specific religious or charitable purpose. In this section of his book, Mr. Gupte was concerned only with the first mode of transfer, namely, the dedication of property under Hindu law and not with the creation of a trust under the ordinary law of the land. There are a number of authorities which have laid down that a dedication for a religious purpose to a family idol or deity or to a temple once made is irrevocable. In none of these cases, however, was there any, question of a power of revocation because all these dedications were made under Hindu law by religious cerem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st in accordance with the law of trusts as is known to the ordinary law of the land, which deed of trust reserved to the settlor a power of revocation, such a Dower of revocation is valid or not never arose in that case. Mr. Rajgopal next submitted that according to Hinduism, all acts of charity are religious acts and, therefore, whenever a Hindu did charity or created a charitable trust, irrespective of the mode of creation which he availed of, he was dedicating property to God and in such dedication if he had reserved the power of revocation, that power was void. In support of his argument, Mr. Rajgopal relied upon a decision of the Supreme Court in CIT v. Sri Jagannath Jew [1977] 107 ITR 9. In that case, a Hindu executed a will which was drafted by an English solicitor and which will opened with the words that it dedicated and made debutter certain immovable property of the testator in the name and for the worship of his Thakoor Sree Sree Jagannath Jew. The will also provided for giving and dedicating and making debutter all the jewelleries for the worship of the Thakoor. Apart from this, the will contained directions for spending amounts to be spent on charitable objects like ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese three; but the greatest of these is charity ". St. Paul thus placed charity higher than faith. In Chapter IV of the Koran, which is headed " Al-Nisa ", the Moslems are enjoined to do charity. Every testator was expected to leave something to the poor and if a man died intestate, his heirs were bound to give a part of their inheritance to charity. Charity is the central theme of the religion preached by Prophet Zarathustra. Whether a Hindu, by a charitable act, wishes to dedicate property to God or not depends not upon whether he is a Hindu. It depends upon the mode which he selects for appropriating the property. If he selects a Hindu ceremonial mode, then he is dedicating property to God. If he selects a mode known to ordinary law, he is not dedicating property to God but he is executing a deed of trust and thereby creating a public charitable trust governed by the ordinary law of the land which would apply in this case both to Hindus and non-Hindus alike. Narandas, having created all the above trusts by regular deeds of trust and not according to the ceremonies required under the Hindu law, the validity so far as the form of these deeds of trust is concerned cannot be judge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was to be exercised by him only in the eventuality of Narandas revoking the earlier deeds of trust executed by him. Since the power of revocation under the earlier deeds of trust had become inoperative, the question of Narandas revoking any of those deeds of trust did not arise and the power of revocation under the fifth, sixth and seventh deeds of trust was, therefore, an inoperative and ineffectual one. It was next argued on behalf of the respondents that the power of revocation reserved to Narandas under the first, second, third and fourth deeds of trust was void as infringing the rule against perpetuity inasmuch as the revocation was to be either by Narandas or his heirs, executors, administrators and assigns. It was submitted that if Narandas died intestate, as he in fact did, no one may take out letters of administration to his estate for a number of years, and if ultimately somebody did take out letters of administration, the person to do so may do it beyond the period of perpetuity and that such a possibility rendered the power of revocation void. In support of this submission, reliance was placed upon In re Watson's Settlement Trusts: Dawson v. Reid (1959] 1 WLR 732, in, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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