Grover, J. - (1.) These appeals (C. As. 1284.1286/71) are by special leave from a judgment of the Gujarat High Court in an Income Tax Reference. Originally the appeals had been filed by certificate (C. As. 2146-2148/68) but that was found to be defective as no reasons were stated therein.
(2.) The Reference relates to the assessment years 1960-61, 1961-62 and 1962-63 the relevant accounting years being the financial years ending 31st March 1960, 31st March 1961 and 31st March 1962. During the relevant years the assessee which is an association of persons held various properties for the purposes set out in its constitution. It is unnecessary to refer to all the clauses therein. It would suffice to mention that among the objects and purposes of the institution were the management of the movable and immovable properties of the Rana community of the city of Ahmedabad, doing acts to improve the education in the community, to give medical help to the community etc. The Income-tax Officer took the view that the objects were not charitable and therefore the assessee was not entitled to the exemption under Section 4 (3) (i) of the Income Tax Act, 1922. The Appellate Assistant Commissioner held that although the assessee was registered under the Bombay Public Trust Act the beneficiaries were not the public and the class of community sought to be benefited was very vague and ill-defined and the number was also negligible. He held certain clauses among the objects to be charitable but others were held by him not to be charitable. The matter was taken in appeal to the Tribunal. The Tribunal held that the beneficiaries as found in the constitution were the Rana Community meaning thereby the "native of Ahmedabad only and other community members accepted by the community as per old rules of the community and staying in Ahmedabad. This is a well defined cross-section of the public of Ahmedabad, certain and ascertainable. This number, we are told, is about 2,400( ) but no minimum number is prescribed to constitute a clear, ascertainable cross-section of the general public. It cannot be said, therefore that there is any vagueness about the beneficiaries or of their public character." After considering various other matters the Tribunal came to the conclusion that the trust was a charitable trust and therefore entitled to the exemption claimed. The Commissioner of Income-tax moved the Tribunal for stating the case and referring the question of law arising from its order. The Tribunal referred the following question to the High Court:- "Whether on the facts and in the circumstances of the case the income of the assessee trust is exempt under Section 4 (3) (i) of the Income-tax Act 1922 and Section 11 of the Income-tax Act 1961."
(3.) The High Court decided the whole matter only on one point. It considered the question whether the purpose for which the properties were held by the assessee had the public character which the Income-tax law required of the charities it recognised for the purpose of exemption. The question that was posed was "are the purposes directed to the benefit of the community or a section of the community as distinguished from private individuals or a fluctuating body of the private individuals" There can be no doubt, according to the High Court, that the beneficiaries did not constitute a community since they were confined only to the members of the Rana Caste residing in Ahmedabad and fulfilling one or the other conditions set out in the definition clause. It had, therefore, to be decided whether the beneficiaries could be said to constitute a section of the community. After referring to certain English cases and the decision of this Court in Hazrat Pirmohamed Shah Saheb Roza Committee v. Commissioner of Income-tax, Gujarat, 58 ITR 360 the High Court rightly held that the enquiry must be directed to what the common quality was which united the parties within the class and whether that quality was essentially impersonal or personal. If the former, the class would rank as a section of the community; if the latter, the answer would be in the negative. According to the High Court having regard to the common opinion amongst the people and the conditions of Indian life if the beneficiaries were the members of the Rana Caste residing in Ahmedabad and were natives of Ahmedabad they would be section of the community because the common quality uniting them within the class would be essentially an impersonal quality. But the High Court proceeded to say: "the class of beneficiaries before us consists of two sections:one comprising members of the Rana Sect who are natives of Ahmedabad and the other comprising members of the Rana Sect who are residing in Ahmedabad and who have been accepted by the community according to the old usage of the caste. It is difficult to see how this class of beneficiaries can be said to constitute a well (defined ) section of the public connected together by a common quality of characteristic." Although it was recognised that even the second class of beneficiaries were members of the Rana Caste and were residing in Ahmedabad but the distinguishing feature in the view of the High Court, was that the second section or class consisted of persons who had been accepted by the Caste according to its old custom or usage. This led the High Court to conclude that all the beneficiaries comprised in this class were not united by a common characteristic or attribute. The question referred was answered in the negative.;