H.N. Seth, J. - (1.) AT the instance of Messrs. Surjidevi Kunji Lal Jaipuria Charitable Trust, hereinafter referred to as the assessee, the Income-tax Appellate Tribunal, Allahabad Bench, has referred the following question of law arising in respect of the assessment year 1961-62, for the opinion of this court: "Whether, on the facts and in the circumstances of the case and on a proper interpretation of the declaration and the terms and conditions of the deed of trust dated April 24, 1958, it could be held that the trust was not entitled to exemption under Section 4(3)(i) of the Indian Income-tax Act, 1922?"
(2.) THE assessee-trust was created under a deed dated 24th April, 1958. Objects for the creation of the trust as given in Sub-clause (2) of Clause 3 of the deed ran thus : "To apply or spend out of the balance of such interest, dividend and income if the trustees unanimously agree even out of the corpus of the trust fund any amount for the following objects and purposes and so that the decision of the trustees as to the object of the trust or the beneficiaries shall be final and binding on all persons claiming under this trust and shall not be questioned in any court of law or otherwise howsoever :-- (i) For giving monetary help to poor deserving members of the Vaishya community. (ii) For giving financial help by way of gift, or loan without interest, to enable the poor and deserving members of the Vaishya community to set up any business, profession or vocation. (iii) For giving financial help in the shape of money, books or otherwise for education (primary school, college and higher education and technical or non-technical education) to the poor and deserving members of Vaishya community. (iv) For giving help, financial or otherwise, on the occasion of marriage of members of the Vaishya community. (v) For giving medical aid in money or in kind to the members of the Vaishya community. (vi) For social welfare, uplift and generally for improving the condition of poor members of the Vaishya community. (vii) For giving help without reference to caste or creed in times of calamity, melas, famine, earthquake, fire, cyclone, flood and the like. (viii) For any other object of general public utility preference being given in the discretion of the trustees to the members of the Vaishya community." For the assessment year 1961-62, the assessee's total income was computed at Rs. 586. The Income-tax Officer held that the assessee had derived the aforesaid income from property held under trust wholly for religious or charitable purposes. Accordingly, as provided in Section 4(3) of the Indian Income-tax Act, 1922, such income was not liable to be included in the total taxable income of the assessee. The Commissioner of Income-tax, U. P., Lucknow, however, did not agree with the view expressed by the Income-tax Officer and as he considered that the order passed by the Income-tax Officer was prejudicial to the interest of the revenue, he required the assessee to show cause as to why appropriate action under Section 263(1) of the Income-tax Act, 1961, be not taken with regard to its assessment for the year 1961-62. Relying upon the cases of Trustees of Gordhandas Govindram Family Charily Trust v. Commissioner of Income-tax [1952] 21 ITR 231 (Bom) and Kedia Jatiya Sahayak Sabha and Fund v. Commissioner of Income-tax [1963] 49 ITR 74 (Cal), the Commissioner of Income-tax found that the following objects mentioned in the trust deed were not charitable objects ;-- (i) For giving monetary help to poor and deserving members of the Vaishya community ; (ii) For giving financial help by way of gift or loan without interest to enable the poor and deserving members of the Vaishya community to set up in any business, profession or vocation ; (iii) For giving financial help or otherwise on the occasion of marriage of members of the Vaishya community ; (iv) For social welfare, uplift and generally for improving the condition of poor members of the Vaishya community. He then referred to the cases of Mohammad Ibrahim Riza Malak v. Commissioner of Income-tax, AIR 1930 PC 226, and East India Industries (Madras) P. Ltd. v. Commissioner of Income-tax [1967] 65 ITR 611 (SC) and held that if there were several objects of the trust some of which were charitable and some non-charitable, and it was open to the trustees to apply the income to any of the objects, the whole trust failed and no part of the income is exempt from tax. He accordingly set aside the order passed by the Income-tax Officer and directed him to make a fresh assessment.
(3.) THE assessee then filed an appeal before the Income-tax Appellate Tribunal, Allahabad Bench, Allahabad. Before the Appellate Tribunal the assessee conceded that two of the objects mentioned in the trust deed, viz., (1) for giving financial help or otherwise on the occasion of marriage of members of the Vaishya community; and (2) for social welfare, uplift and generally for improving the condition of poor members of the Vaishya community, may be treated as being not of public charitable nature but claimed that even then the income of the trust would be exempt from being included in the assessee's total income. THE Appellate Tribunal accepted the assessee's contention that the trust having come into existence prior to the Income-tax Act, 1961, according to which such exemption cannot be claimed in respect of the income of the trust or institution created or established for the benefit of any particular religious community or caste, its provisions will not apply to the income under consideration and merely because the charity was intended to benefit generally the members of the Vaishya community the trust will not cease to be a charitable trust entitled to the benefit of Section 4(3)(i) of the Indian Income-tax Act, 1922. Accordingly, two of the clauses, viz, that for giving monetary help to poor and deserving members of the Vaishya community and that for giving financial help by way of gift or loan without interest to enable the poor and deserving members of the Vaishya family to set up in any business, profession or vocation may not be held to be non-charitable objects. However, in view of the decision of the Bombay High Court in the case of Trustees of Gordhandas Govindram Family Charity Trust [1952] 21 ITR 231 and of the Calcutta High Court in Kedia Jatiya Sahayak Sabha and Fund [1963] 49 ITR 74, the assessee conceded that the remaining two objects, viz., (1) for giving financial help or otherwise on the occasion of marriage of members of the Vaishya community ; and (2) for social welfare, uplift and generally for improving the condition of poor members of the Vaishya community, are not such objects which could be described as charitable objects. In view of this concession, the Tribunal proceeded on the basis that although some of the objects of the trust were of public charitable nature yet some others were not such objects. It held that, apart from objects nos. (vii) and (viii) of the trust deed, the remaining objects were independent objects and none of them could be described as subsidiary in nature. Since the trustees have full discretion to spend the income of the trust both for charitable and non-charitable purposes it could not be said that the assessee was holding property under a trust wholly for religious or charitable purpose. Following the decision of the Supreme Court in the case of East India Industries (Madras) P. Ltd. v. Commissioner of Income-tax [1967] 65 ITR 611, it held that the assessee was not entitled to the benefit under Section 4(3)(i) of the Indian Income-tax Act, 1922. Before the Tribunal, the main argument raised on behalf of the assessee was that the preamble to paragraph 3 of the trust deed indicated that the settlor was desirous of making a charitable trust. Accordingly, such objects which did not fall within the category of charitable purposes had to give way to the predominant charitable objects. Accordingly, such of the objects mentioned in the trust deed which were not of a charitable nature, became innocuous and could not be enforced. Since all the enforceable objects were charitable in nature the assessee could not be denied the benefit of Section 4(3)(i) of the Indian Income-tax Act, 1922. The Tribunal repelled this objection and dismissed the appeal filed by the assessee. Subsequently, at the instance of the assessee the Tribunal referred the aforesaid question of law for the opinion of this court.;