COMMISSIONER OF INCOME TAX Vs. MANAGING TRUSTEE JALAKHABAI TRUST
HIGH COURT OF KERALA
COMMISSIONER OF INCOME-TAX
MANAGING TRUSTEE, JALAKHABAI TRUST
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Isaac, J. -
(1.) THIS is a reference under Section 66(2) of the Indian Income-tax Act, 1922, as directed by this court on the application of the Commissioner of Income-tax, Kerala. The question referred is :
"Whether the Income-tax Appellate Tribunal erred in holding that 1/8 of the income from properties described in schedules B and C was exempt from liability to pay income-tax under Section 4(3)(i) of the Indian Income-tax Act, 1922 ?"
(2.) THE assessee is the managing trustee of a charitable trust, which has got properties described in schedules A, B and C of the deed of trust. Clauses 12 and 13 of the deed read as follows :
"(12) From the incomes realised from 'B' and 'C' scheduled properties, the amount should be spent in the first instance for the maintenance and improvements of such property, for payment of land revenue pattern, municipal tax, etc., for purchase of account books, stationery, salary, printing charges, etc., and the remainder shall be divided into 4 equal parts and expended in the manner hereinafter described.
(13-a) One share of the four parts referred to above should be utilised for effecting improvements to any of the existing buildings and for putting up new buildings for being let out on rent.
(13-b) THEre are now 3 equal parts remaining to be dealt with, half of one of these 3 parts should be utilised on the indigent members of the Kutchi Memon Community and the widows of such indigent members for giving them food, clothing, etc., imparting religious instruction to poor children and also other general education, contributing for the marriage of poor girls, etc. THE remaining half of the said one part should be added on and utilised for acquisition of new properties as described in para. (13-a). But if there are poor members among our descendants suffering on account of financial distress, the said half of the one part should be utilised for giving food, clothing, education, marriage, funeral expenses of the said members, and if any residue is left, after incurring such expenses, such residue amount should be added and disposed of as described in para. (13-a), above."
The question whether one-fourth of the income derived from B and C schedule properties is exempt from liability to pay income-tax under Section 4(3)(i) of the Act was raised before this court in I.T.R. Case No. 23 of 1963; and this court decided that question in favour of the assessee. This reference relates to one-half of one-fourth of the income from B and C schedule properties dealt with in Clause (13-b) and directed to be added on and utilised for acquisition of new properties as described in paragraph (13-a). With reference to this one-eighth part of income, it is also provided in paragraph (13-b) that if there are poor members among the descendants of the executor suffering on account of financial distress, the said one-eighth part of the income should be utilised for giving food, clothing, education, marriage and funeral expenses to the said members, and that, if any residue is left after incurring such expenses, such residue amount should be added and disposed of as described in paragraph (13-a) above. It has been already held in I.T.R. Case No. 23 of 1963 that the income set apart for purchasing properties for the trust would fall within the exemption. There can also be no doubt that giving food, clothing, education, marriage and funeral expenses of members of the executor's family who are poor and suffering on account of financial distress would also be a charitable object, therefore, the whole of this one-eighth share of the income would be entitled to exemption under Section 4(3)(i) of the Act.
In the result, we answer the question referred to this court in the negative and that is against the Commissioner of Income-tax. The parties will bear their own costs. A copy of the judgment will be forwarded to the Income-tax Appellate Tribunal as required by Section 66(5) of the Act.;
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