9911796707
TMI Blog1959 (5) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... eld by them on trusts more specifically therein mentioned. Clause 13 of the said deed, on the true construction of which depends the answer to the referred questions, runs as follows : "13. The trust fund shall be held by the trustees upon the trusts to apply the net income thereof after providing for all necessary expenses in relation to the management of the trust funds for all or any of the following purposes that is to say, (a) the relief and benefit of the poor and indigent members of Jewish or any other community of Bombay or other parts of India or of the world either by making payments to them in cash or providing them with food and clothes and/or lodging or residential quarters or in giving education including scholarships to or setting them up in life or in such other manner as to the said trustees may seem proper or... (b) the institution, maintenance and support of hospitals and schools, colleges or other educational institutions or... (c) the relief of any distress caused by the elements of nature such as famine, pestilence, fire, tempest, flood, earthquake or any other such calamity or... (d) the care and protection of animals useful to mankind or... (e) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the said certificate that it was to enure till its cancellation. In 1946 the 3 1/2% Government securities were redeemed by the Government of India and were converted into 3% Conversion Loan, 1946. Accordingly in February 1948, the said certificate of exemption was cancelled, as the securities covered thereby had been redeemed by the Government. The trustees thereupon asked for a fresh certificate of exemption from the Income-tax Officer, Bombay Refund Circle, in respect of the 3% Conversion Loan, 1946. But the said Income-tax Officer refused to issue such certificate on the ground that the income from the trust fund in question was not exempt from taxation under section 4(3)(i) of the said Act which, at the material time, was as follows : "4. (3) Any income, profits or gains falling within the following classes shall not be included in total income of the person receiving them : (i) Any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, and in the case of property so held in part only for such purposes, the income applied, or finally set apart for application, thereto...." Upon the fact of the withholding of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal has been filed on the strength of such certificate. A perusal of clause 13 of the deed shows that the trust fund is declared to be held by the trustees upon trusts to apply the net income thereof for all or any of the six purposes enumerated therein. It was conceded before the High Court and it has not been disputed before us--that if there was nothing else in this clause, then each of these six purposes would have to be upheld as a charitable purpose involving an element of public utility and consequently. within the protection of section 4(3)(i). The fact that the trustees could expend the net income on any of the six purposes to the exclusion of the other five purposes would not, it is also conceded, have made the slightest difference in the matter of such exemption from income-tax. For instance, if the trustees spent the net income solely and wholly for the purposes mentioned under sub-clause (a) to the exclusion of those mentioned in sub-clauses (b) to (f) such income would still be exempt from taxation under section 4(3)(i). The High Court, however, took the view that clause 13 should be read as a whole along with the provisos and that so read the trust is primarily ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the trust fund was not exempt from taxation under section 4(3)(i) and answered both the questions in the negative. The problem before us is whether the High Court was right in so answering the questions. In coming to the decision that it did, the High Court relied on its own earlier decision in the case of Trustees of Gordhandas Govindram Family Charitable Trust v. Commissioner of Income-tax. The facts in that case, however, were somewhat different from the facts now before us. In that case the trust was significantly enough described as "Gordhandas Govindram Family Charitable Trust". Clause 2 of that trust deed provided for the application of the net income in giving help or relief to such poor Vaishyas and other Hindoos as the trustees might consider deserving of help in the manner and to the extent specified in the said trust deed and subject to the conditions and directions stated in the next following clauses. Sub-clause (a) of clause 3 provided that Vaishya Hindoos who were members of Seksaria family should be preferred to poor Vaishyas not belonging to the said family. Maintenance had to be provided under sub-clause (b) for the poor male descendants of the settlor an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the provisos. The first proviso opens with the words "in applying the income as aforesaid". This takes us back to sub-clause (a). The meaning of the proviso obviously is that in applying the income for the purpose of sub-clause (a), the trustees shall give preference to the poor and indigent relations or members of the family of Sir Sassoon David, Bart. The proviso does not operate independently but comes into play only "in applying the income as aforesaid". The provision for giving preference involves the idea of selection of some persons out of a bigger class envisaged in sub-clause (a). The poor and indigent relations or members of the family can claim to participate in the benefits under the trust only if they come within one of the several classes enumerated in sub-clause (a). To take an extreme example. If a poor and indigent relation of Sir Sassoon David, Bart., abjures the faith held by the Jewish community and does not adopt any other faith and thus ceases to be a member of the Jewish community but does not become a member of any other community, he will certainly not be entitled to the benefits of sub-clause (a) although be is a poor and indigent relation or member of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... next task was. to make a selection from that primary class of eligible persons, the learned judge continued : "It is only when one comes to make a selection from that primary class that the employees of John Batt & Co. and the members of their families come into consideration, and the question is, does that direction as to selection invalidate the primary trust ? In my judgment it does not do so." Further down be said : "In my judgment it is at the stage when the primary class of eligible persons is ascertained that the question of the public nature of the trust arises and falls to be decided, and it seems to me that the will satisfies that requirement and that the trust is of a sufficiently public nature." The learned judge then concluded : "If, when selecting from that primary class the trustees are directed to give a preference to the employees of the company and members of their families, that cannot affect the validity of the primary trust, it being quite uncertain whether such persons will exhaust in any year 75 per cent. of the trust fund. On the true construction of this will, that is not (as to 75 per cent.) primarily a trust for persons connected with John Batt ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
