SEN.J. - (1.) THE Tribunal has referred the following question of law under s. 256(1) of the IT Act, 1961 ('the Act') to this Court: "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the trust constituted under the deed dt. 24th July, 1959 and executed by Shri Ghanshyamdas Binani was a valid charitable trust?"
(2.) IN this proceeding, the assessment year involved is 1960-61 for which the relevant year of account is the year ended on 31st March, 1961. The facts as found by the Tribunal narrated in the statement of case are as under: "Shri Ghanshyamdas Binani executed a deed of trust on 24th July, 1959 and transferred 30,000 shares of Metal Distributors (P) Ltd. bearing distinctive numbers 50,001 to 60,000 and 72,071 to 92,070. The trustees of the said trust were father of Shri Ghanshyamdas Binani and other two persons. The shares so transferred were registered in the books of the company in the names of the trustees. The object of the trust was that the income from those shares was to be applied for and upon such religious and or charitable purposes of a public nature as the trustees might think fir for paying donations to any public charitable trust. The trustees were entitled to hold the shares and all accretions thereto. However, they had no power to sell, pledge or otherwise transfer or deal with those shares. The trust was a revocable trust and the trust had not been revoked up to the time when the appeal was first heard by the Tribunal that is to say, up to 17th June, 1968, Clause (15) of the trust deed reads as under: 'The settlor hereby reserves the right to revoke this trust at any time after the expiry of seven years from the date of these presents....."
(3.) ON the income of the dividends from those shares income-tax was deducted at source. The trustees of the trust, therefore, claiming exemption under cl. (1) of s. 4(3) of the Indian IT Act. 1922, claimed refund of tax under s. 48 of the Act. The ITO held that the settlor being Hindu governed by Mitakshara School of Hindu Law was not entitled to revoke the trust meant for charity. He referred to the book: Tagore Law Lectures by Hon'ble Justice B.K. Mukherjee on Hindu Law Religious and Charitable Trust wherein it has been observed that of course, if a valid dedication is once complete, there would be no power left in the donor to revoke it and on assertion on his part, or the subsequent conduct of himself and his descendants contrary to such dedication would have the effect of nullifying it. He, therefore, reached the conclusion that because of cl. (15) in the deed of trust giving power of revocation to the settlor the trust was no more charitable and as such was not entitled to exemption from tax. The claim for refund of the tax was, therefore, rejected by him. The appeal was taken up by the assessee-trust against the said order of the ITO before the AAC who held that the condition of revocation did not change the character of the trust. According to him, it was a charitable trust and was as such entitled to exemption from tax. The Department then came up in appeal before the Tribunal. The Tribunal by order dt. 27th Aug., 1968 in IT Appeal No. 1573 of 1964-65 upheld the order of the AAC, thereafter, on the application of the Department under s. 66 of the Indian IT Act, 1922 the same question as is being referred now was referred to the Hon'ble High Court. The Hon'ble High Court by order dt. 2nd Sept., 1977 in IT Ref. No. 264 of 1964 without answering the question sent the reference back to the Tribunal with the following Page 2 of 3CTR 18/12/2010file://C:\PROGRAM FILES\html\matter3.htm observations: "In these circumstances, it will not be proper for us to answer this question at this stage. The Tribunal is to consider afresh whether the trust executed by Ghanshyamdas Binani is a valid trust after giving an opportunity to both the parties of being heard on all points and also giving them opportunities of adducing further evidence as to the application of the trust fund." Accordingly the appeal was reheard. Despite opportunities given to the parties no further evidence as to the application of the trust fund was put forth before us by any of the parties. The only point agitated before us was as to the validity of the charitable trust in view of the settlor having retained the power to revoke the trust. The Tribunal vide order dt. 1st Oct., 1985 held that it was valid charitable trust. The Tribunal, thus, upheld the order of the AAC.;