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TMI Blog1983 (8) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961 ('the 1961 Act'), which order was also upheld by the learned AAC for the assessment year 1973-74. The WTO, accordingly, completed the wealth-tax assessment for the assessment year in question on a net wealth of Rs. 3,56,135.25. 3. In appeal, the learned AAC was influenced by the fact that section 13(b)(ii) of the 1961 Act, had been substituted by the Finance Act, 1966, with effect from 1-4-1966. The learned AAC also thought that the trust under consideration was created after 1-4-1962 and that it was disentitled to exemption under section 11. For this purpose reliance was placed on the observations contained at page 295 of Kanga and Palkhivala's Law and Practice of Income-tax, 7th edition, Volume I. Reliance was also placed on the decision of the Hon'ble Bombay High Court in the case of Trustees of Gordhandas Govindram Family Charity Trust v. CIT [1952] 21 ITR 231. Accordingly, the appeal was dismissed. 4. The assessee, being aggrieved, has come up in appeal before us. Shri A.C. Sinha, the learned counsel for the assessee, firstly submitted that the wealth-tax authorities had erred in examining the controversy with reference to the provisions of the 1961 Act and not w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct for the proposition that in the case of a trust created before 1-4-1962 the provisions of clause (i) shall not apply to any use or application, whether directly or indirectly, of any part of such property or any income of such trust for the benefit of any person referred to in sub-section (3) of section 13, if such use or application is by way of compliance with a mandatory term of the trust. He argued that since the trust in question was treated before 1-4-1962, this proviso was fully applicable and the wealth of the assessee-trust was entitled to exemption. Shri Sinha, however, pointed out that though the question of status in which the assessee had been assessed had been agitated before the learned AAC and was also mentioned in the grounds of the assessee's appeal, that ground was not being pressed. 5. On the other hand, Shri K.K. Rai, the learned departmental representative placed reliance on the orders of the wealth-tax authorities. At the same time he fairly conceded that the case was governed by section 5(1)(i) and not under the provisions of the 1961 Act. However, he referred to sub-clauses (a) to (g) of clause 4 of the trust deed as well as clauses (6) to (10) thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the trust under consideration was created after 1-4-1962. Section 13(3) enumerates the following persons for whose benefit directly or indirectly any part of the income or property of the trust is used or applied : (a) the author of the trust ; (b) any person who has made a substantial contribution to the trust ; (c) where such author, founder or person is a Hindu undivided family, a member of the family ; (cc) any trustee of the trust or manager of the institution ; (d) any relative of any such author, founder, person, member, trustee or manager as aforesaid ; (e) any concern in which any of the persons referred to above has a substantial interest. A perusal of the trust deed in question shows that references are made therein to money being spent on the upbringing, education and maintenance of deserving descendants of the executant and on the marriage expenses of deserving female descendants of the executant. Therefore, the proviso to section 21A applied to the case of the assessee on facts since the use or application of the income of such trust for the benefit of the aforesaid persons is a mandatory term of the trust and the trust has been created before 1-4-1962. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be expended on the upbringing, education and maintenance of deserving descendants of the executant and if God forbid no such descendants of the executant exist the amount should be utilised for grant of marriage expenses and scholarship to deserving students who might be connected with the executant, at the discretion of the trustees. (d) 10 per cent to be expended on performance of religious duties, celebration of Dasehra, pilgrimage, yatra, pooja, feeding of poor and similar dharmic objects. Any savings in any one year to be carried over to the next year and expended at the discretion of the trustees for similar objects whenever suitable occasions arise. (e) 10 per cent to be expended on the maintenance, improvements, additions, accretions and alterations of the trust property. If no occasion arises for such expenditure in any year the amount shall be saved to be utilised when suitable occasion arises. (f) 15 per cent to be expended on providing marriage expenses to deserving female descendants of the executant or other persons preferably of caste fellows. If no suitable persons are available in any year the money shall be saved for expenditure when a suitable occasion aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sub-clauses (b) and (c). Lastly, sub-clause (g) provides for spending 10 per cent by the trustees at their discretion for the maintenance and support of the deserving persons. This is a public purpose of a charitable nature unconnected with the executant or his family. No doubt clause (6) (which has been quoted above) says that the trustees are not authorised to treat the trust as a public trust or to incur expenditure on strangers so long as the descendants or the caste fellow of the executant are available. However, this is not an overriding provision but only in the nature of a residuary provision since the objects of the trust have been fully described in the various sub-clauses of clause (4) referred to above and utilisation of the entire income is provided for therein. In fact, in terms of the decision of the Hon'ble Bombay High Court in the case of Trustees of K.B.H.M. Bhiwandiwalla Trust the trustees have no discretion to use the whole income of the trust on any one of the specified objects. Therefore, notwithstanding the existence of clause (6) referred to above, the trust remains a trust for a public purpose of a charitable or religious nature. We have to be guided by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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