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TMI Blog1976 (7) TMI 18X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee-A.O.P. ? " These questions in this reference relate to the assessment year 1956-57 and they arise out of an indenture of trust created by Dr. Divekar and his wife, Dr. Mrs. Divekar. By an indenture of trust dated August 23, 1954, Dr. Divekar and his wife settled upon trust two maternity hospitals one at Shivaji Park, Dadar, and the other at King's Circle, Matunga, which were run by them and an immovable property known as "Abhay" situate at Versova Road for the purposes and objects which are contained in the said indenture of trust. The assessees are the trustees under the said trust which is known as Dr. Divekar Charity Trust. The primary object of the trust was to carry on and promote the educational, health, cultural, literary, social and economic interests of the people, particularly of the backward and poorer classes, within the areas of Greater Bombay, Poona City and Kanara District in Bombay State. For the assessment year 1956-57 the assessees contended before the Income-tax Officer that the income from the maternity homes was income from business which was settled upon trust and was exempt from payment of income-tax under section 4(3)(i) of the Indian Income-tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid to Dr. Mrs. Divekar according to him it was an allowable deduction in computation of the assessees' income and accordingly he directed exclusion of the said amount from the total income computed. Aggrieved by the order of the Appellate Assistant Commissioner, the Income-tax Officer filed an appeal which was heard by the Tribunal. At the time when the appeal was heard before the Tribunal, neither the assessees nor anybody else on their behalf appeared before it. Before the Tribunal it was urged on behalf of the representative of the revenue that the trust itself was not registered and was, therefore, not a valid trust. Such a contention was urged having regard to the fact that the copy which was filed in the record did not bear any endorsement of registration. According to the Tribunal the trust was not a valid trust. The Tribunal further took the view that there was no actual transfer of immovable properties to the trustees if regard be had to the language employed in the document. The Tribunal set aside the finding of the Appellate Assistant Commissioner that the maternity homes and the immovable properties were held in trust by the trustees. On the assumption that the prop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to therein to the trustees. His submission was that the use of the past tense itself indicated that the transfer was not effected by the trust deed but it was merely a record of a past transaction and it was invalid in law in the absence of an instrument in writing duly registered. Secondly he submitted that even if upon construction of the provisions contained in the indenture of trust it is treated as a valid trust as understood in law, still the trust is not, inter alia, in respect of the business of the maternity hospitals but the trustees were expected to carry on the business by conducting hospitals and if that is so, the conditions laid down in proviso (b) to section 4(3)(i) of the Act ought to be fulfilled and as the said conditions are not fulfilled the income cannot be exempted from tax. So far as the payment of the salary of Rs. 7,500 was concerned, he submitted that the said salary was paid to one of the assessees and, therefore, cannot be permitted to be deducted in computing the income assessable for the relevant year. Mr. Munim, on the other hand, on behalf of the assessee, contended that in respect of document drafted by an advocate regard should be had to the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrying out the objects herein mentioned; And whereas it is further decided by Dr. M. R. Divekar and Dr. Nalini M. Divekar that the net annual income from the above mentioned hospitals, after deducting all the expenses for maintaining and running the hospitals and after deducting a sum of Rs. 750 per month which should be paid regularly to Dr. Nalini Mahabal Divekar for managing the said hospitals for and on behalf of the trust during her lifetime, should accrue to the trust from year to year. And Whereas Dr. M. R. Divekar and Dr. Nalini M. Divekar did transfer the above mentioned Versova property and both the hospitals to the Trustees : ...... Now This Indenture Witnesseth and it is hereby agreed and declared as follows: . ...... The Trustees and the survivors of them and all persons hereafter becoming Trustees in succession to them (all of whom are hereinafter included in the expression 'the Trustees') shall hold all sums and properties that accrue to the Trust from time to time for the purpose of the Trust herein contained upon the terms, conditions and trust herein contained...... To apply the monies and properties of the trust firstly in payment of the expenses of ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay, Poona City and Kanara Districts in Bombay State. The only question that remains to be considered is, are the trust properties duly transferred to the trustees ? It is undoubtedly true that in the above recitals there are no express words to the effect that Dr. Divekar and Dr. Mrs. Divekar "hereby transfer the properties mentioned" therein, but one of the recitals makes it clear that both the settlors did transfer the properties mentioned therein to the trustees. What was really intended thereby was that by reason of the deed itself they transferred the said properties to the trustees and as the trust is duly registered it is effective in law to create a valid transfer both having regard to the provisions of the Indian Trusts Act as well as the Indian Registration Act. Further, the operative part of the indenture that the trustees shall hold all sums and properties, clearly indicates that they hold the same on the date, of the indenture of trust and that clearly indicates that a valid transfer by the deed itself is created in their favour. As the deed is duly registered it is sufficient in law to effect such a transfer. In our opinion, the Tribunal took a very rigid approach in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, in so far as such income is applied or accumulated for application to such religious or charitable purposes as relate to anything done within the taxable territories, and in the case of property so held in part only for such purposes, the income applied or finally set apart for application thereto : Provided that such income shall be included in the total income-....... (b) in the case of income derived from business carried on on behalf of a religious or charitable institution, unless the income is applied wholly for the purposes of the institution and either- (i) the business is carried on in the course of the actual carrying out of a primary purpose of the institution, or (ii) the work in connection with the business is mainly carried on by beneficiaries of the institution." If the business of conducting a maternity hospital is settled upon trust, then it is well settled in view of the decision of the Supreme Court that the case is covered by the provisions of clause (i) of section 4(3) and in such a case the conditions laid down in the proviso (b) are not attracted. Such was the view taken by the Supreme Court in the case of Commissioner of Income-tax v. P. Krishna ..... X X X X Extracts X X X X X X X X Extracts X X X X
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