A.D.V.REDDY, J. -
(1.) : His Exalted Highness Nawab Mir Sir Osman Ali Khan Bahadur, the ex-Nizam of Hyderabad and Berar, had created a number of trusts, public and private, during his lifetime. We are now, in these references made under the IT Act and WT Act, concerned with two such trusts with regard to the income from the trust properties being assessable to tax under either of those statutes.
(2.) THE first of these two trusts is known as the Azakhana Zohra Trust created by the Nizam under a trust deed dt. 29th March, 1951. In or about 1941, after the death of his mother, Zohra Begum, popularly known as Madar-e-Deccan, the Nizam in her sacred memory had constructed the Azakhana Zohra (mourning house) with Niazkhana (poor-feeding house) and Shafakhana (inpatient hospital) attached to it on the banks of the river Moosi in the vicinity of Dar-us-Shaffa. THE Nizam, for purpose of the completion of that work, had set apart a sum of two lakhs of rupees from his private fund, Sharf-e-Khas funds. It is with regard to this that the trust deed dt. 29th March, 1951, came into existence. In addition to the sum of Rs. two lakhs, another sum of Rs. 1,50,000 invested in the Government bonds was also endowed as a fund to provide for the management, upkeep and maintenance of the said buildings. It was also further provided that a sum of Rs. 4,500 should be given for such management from the Sharf-e-Khas funds, besides a sum of Rs. 500 to be paid from the same source as an annual offering to cover the expenses of the annual ceremonies to be performed at the said Azakhana during the mourning period of Moharram. THE further direction given was that the income from the Government securities are to be accumulated and could be used at the absolute discretion of the trustees which they think fit.
The second trust we are concerned with is what is known as "The H.E.H. the Nizam's Supplemental Religious Endowment Trust" created by him under a trust deed dt. 27th Jan., 1952, whereunder a sum of Rs. 50,000 was set apart for completing the construction of the Azakhana Zohra, Niazkhana and Shafakhana attached thereto and for the management, maintenance and upkeep of the same. This is in addition to the provisions made under the earlier trust deed. In the same deed he had set apart a sum of Rs. 8 lakhs made up of 8,000 cumulative preference shares of the face value of Rs. 100 each in Greaves Cotton and Co. Ltd., as a further fund for the upkeep and maintenance of the scared buildings mentioned in the Second Schedule as additional provision, as he had under an earlier deed dt. 12th Sept., 1950, settled a sum of Rs. 40 lakhs for their upkeep and maintenance.
The dispute now relates to the exigibility to tax of the corpus as wealth under the WT Act and the income from the endowed amounts under the IT Act, the investments made under the above deeds. The claim of the Department is that these are not religious and charitable trusts and the corpus and the income from the endowed amounts are not, therefore, exempt from the levy of either wealth-tax or income-tax whereas the contention of trustees is to the contra.
(3.) THE provisions that are attracted in these references are s. 4(3)(i) of the Indian IT Act 1922, s.11 of the IT Act of 1961 and s. 5(1)(i) of the WT Act, 1957, as they are the provisions which relate to the exemptions to be granted, if the property held is for any public purpose of a charitable and religious nature. THE only difference between the provisions of the WT Act and the provisions of the IT Act, both old and new, is that under the IT Act, the provision referred to is that the trust must be "wholly" for religious or charitable purpose.
With regard to the first of the trusts, i.e., the Azakhana Zohra Trust, the question of taxability of the income from the trust arose before the income-tax authorities for the asst. yr. 1952- 53. The ITO accepted the contention of the assessee that it was a place of public worship for all Muhammadans and was a public religious institution and exempted it from tax under s. 4(3)(i) of the Indian IT Act of 1922. Since the income was exempt from payment of tax, the assessee did not file returns for the following years. But in the asst. yr. 1959-60 the income was shown and the exemption was claimed. The contention was rejected and the assessment for the prior years was also reopened and for all the years the income was subjected to tax. On appeal, the IAC held that it was a public trust and directed the deletion of the tax, while on further appeal, the Tribunal held that it was not created for public charitable purposes and upheld the levy. Along with this tax, the trust property was also subjected to wealth-tax for the years, i.e., 1959-60 to 1965-66.;