JUDGEMENT
Per P.K.Ammini, Judicial Member - These appeals by the revenue and the cross - objections by the assessee are directed against the consolidated order of the Appellate Assistant Commissioner of Wealth-tax dated 10-3-1986. The assessment years involved are 1961-62, 1962-63, 1963-64 and 1964-65. Since common disputes are involved in these appeals, they were heard together and are being disposed of by this consolidated order, for the sake of convenience. -
(1.)
(2.)The original assessments on the assessee trust in this case was completed on 23-2-1979 but it was set aside by the Commissioner of Wealth-tax (Appeals) by his common order dated 21-3-1979 with a direction to re-do the assessment in the light of the decision of the Supreme Court in the case of CIT v. P. Krishna Warrier [1964] 53 ITR 176. In compliance with the directions fresh assessments were made and the appeals arise out the fresh assessments.
The assessee is a Managing Trustee of Arya Vaidya Sala, Kottakkal. The material facts leading to the present appeals and the cross-objections are as follows : 3.1 Shri P. S. Warrier, an eminent Ayurvedic Physician was carrying on business in Ayurvedic medicines under the name and style "Arya Vaidya Sala". He was also running a hospital named "Aryasikitsa Sala" and a school by name "Arya Vaidya Patasala". Shri Warrier executed a will whereby he created a trust in respect of his properties. As per the aforesaid trust-deed, 60% of the income was to be spent on the three institutions named above and 40% of the income to be given to two "thavazhies" for a period of 20 years and thereafter the entire income was to be utilised for the requirement of the above three institutions. The period of 20 years expired on 30-1-1964. Shri Warrier died on 30-1-1944. 3.2 The relevant portion of the trust deed is as follows :- "G. The primary and chief objects of the Trust are to carry on for even the two institutions, viz. The Arya Vaidya Sala and the Arya Vaidya Hospital on the lines followed now with the object of enlarging and increasing their scope and utility. The work of Arya Vaidya Sala now consists of : 1. Preparation of Ayurvedic Medicines, 2. Sale of the same, 3. Treatment of patients, receiving from them compensation according to their capacity and means,
(3.)TO conduct research into Arya Vaidyam with a view to make it more and more useful to the public.
** ** ** L. Out of the net profits of the Arya Vaidya Sala, 25% is to be devoted to the development of the Arya Vaidya Sala, 25% for meeting the expenses of the Arya Vaidya Hospital and 25% for division equally between the two thavazhies (this only for 20 years) : Out of remaining 25%, a sum not exceeding 10% may be, according to requirements, utilised for the purposes of the Arya Vaidya Patasala. The balance, if any, that may remain out of the 10% after disbursements of the Arya Vaidya Patasala, may be used for the Arya Vaidya Sala itself. The balance 15% are to be deposited by the Trustees each year in approved banks as a reserve fund for the two thavazhies for a period of 20 years and the fund thus accumulated inclusive of interest is to be divided equally among the two thavazhies equally, i.e. in moiety, and it will be the duty of the trustees to invest the same on the authority of immovable properties. M. The Trustees are not bound to pay any amount to the said two thavazhies after the expiry of 20 years. The 40% of the profit so earmarked for 20 years and so released after the expiry of 20 years are therefore to be utilised for the development of the Arya Vaidya Sala and Arya Vaidya Hospital according to the discretion of the Trustees." 3.3 During the relevant assessment years under consideration, the assessee claimed exemption under section 5(1) (i) of the W. T. Act. The Wealth-tax Officer allowed 60% and brought 40% of the assets of the trust to wealth-tax. But on appeal, the Appellate Assistant Commissioner of Wealth-tax allowed the entire claim of the assessee under section 5(1) (i) of the W. T. Act. 3.4 The Honble Supreme Court in its judgment in CIT v. P. Krishna Warrier [1964] 53 ITR 176, in the case of the assessee itself, has held that the entire business of Arya Vaidya Sala is held in trust for utilising 60% of its profits, i.e. part of the income for religious or charities purposes. The balance 40% of the income is not utilised for the religious or charitable purposes and hence to be taxed. But the Appellate Assistant Commissioner allowed the claim on the basis of the decision in P. Krishna Warrier v. CIT [1981] 127 ITR 192 (Ker.) (FB) and CIT v. P. Krishna Warrier [1972] 84 ITR 119 (Ker.). Hence these appeals by the revenue. 4. According to the revenue, the learned Appellate Assistant Commissioner erred in holding that the assessees properties are exempt under section 5(1) (i) of the W. T. Act. He ought to have found that since the utilisation of the 40% of the income was held to be not for charitable purposes, exemption under section 5(1) (i) will not be available to the assessee for these years for the proportionate value of the net wealth of the trust.
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