SATISH CHANDRA, J. - (1.) THESE two references are inter -connected. I.T.R. No. 18 of 1973 has been made at the instance of M/s. Kamla Town Trust, the assessee. It is a consolidated reference relating to the assessment years 1949 -50 to 1955 -56. I.T.R. No. 715 of 1972 is at the instance of the Commissioner of Income -tax. It is also a consolidated reference and relates to the assessment years 1956 -57 to 1965 -66.
(2.) THE two principal questions that require consideration are - ' (i) Whether the Kamla Town Trust, the assessee, was a public charitable trust ? and (ii) Whether the rectification made in its indenture by an order of the court made in 1955 was retrospective in effect, with the result that the trust was a public charitable trust right from its inception ? ' The J. K. Cotton Spinning and Weaving Mills Co. Ltd., Kanpur, by a deed of indenture dated October 27, 1941, created a charitable trust called Kamla Town Trust so that a colony or settlement be erected and established primarily for the residence of workmen employed by the company and its allied concerns. In Re Mercantile Bank of India Agency Ltd. : [1942]10ITR512(Cal) , the Calcutta High Court held that a trust created for the benefit of one's employees was not a charitable trust within the meaning of Section 4(3)(i) of the Indian I.T. Act, 1922. The company filed Suit No. 40 of 1945 in the Civil Courts at Kanpur for a rectification of the trust deed so as to bring it in conformity with its real intention to create a public charitable trust. The trustees were, inter alia, the defendants to the suit. The Civil Judge, Kanpur, by a decree dated 18th August, 1945, ordered the rectification of the deed of trust in, terms prayed for. After rectification the objects of the trust was to establish residential quarters for the workmen, staff and other employees of the company and its allied concerns.
(3.) ON 15th January, 1946, the three Singhania brothers retired from a partnership firm called J. K. Hosiery Factory. On 5th February, 1946, the firm, J. K. Hosiery Factory, was reconstifuted. In the reconstituted firm the Kamla Town Trust became a partner. In the assessment proceedings for the year 1948 -49 relating to the linn, J. K, Hosiery Factory, a question arose whether Kamla Town Trust was a public charitable trust so as to be exempt from tax under Section 4(3)(i) of the Indian I.T. Act, 1922. The Tribunal held that after rectification some of the objects were charitablebut some were not of a charitable nature. The trust being for mixed objects was not a public charitable trust and was not exempt under Section 4(3)(i) of the Indian I.T. Act, 1922. The Tribunal gave its decision on 11th May, 1953.;