D.N.SINHA, J. - (1.) THIS is a reference under s. 66(2) of the IT Act. The facts are shortly as follows : Sri Rai Satab Chand Nahar Bahadur executed a deed of trust dt. 19th Jan., 1918, by which he conveyed certain properties and funds for the purposes mentioned therein. An English translation of the deed is annexed to the statement of case dt. 13th July, 1959, and marked as annexure "A". In the deed it is stated that with the object that the pious acts relating to the management, etc., of the sadabrata, the family religious rites and the dharamsala set up by the ancestors of the settlor and himself might be properly performed after his death he, the settlor, had created a trust known as the "Nahar Family Trust". It recites that he was making provision for the appointment of trustees for giving effect to the same. Altough it is stated that the settlor had already created a trust, and that this document was an appointment of trustees, the statement of case accepts it as the trust itself and no prior trust is mentioned. As a deed of trust, the document leaves much to be desired. Although there is the above-mentioned recital of the objects, yet it has not been specifically stated anywhere that the trust was for the purpose of benefiting members of the public. Indeed, no mention of the public is made anywhere in the deed. There is a schedule entitled "Schedule of pious and religious acts", but it merely sets out a list of certain immovable properties and mentions certain expenditures and against each item a sum is mentioned as the sanctioned expenditure. In this case we are not concerned with the other properties or assets vested in the trustees, but only with one particular property known as the "Kumar Singh Hall" at No. 46, Indian Mirror Street, in the town of Calcutta. Under the deed of trust the settlor constituted himself the sole trustee for the term of his life and provided, inter alia, that after his death the eldest of his lineal descendants in the male line, who professed the faith of the Swetamber Jains, would be the trustees. The schedule shows that the "Kumar Singh Hall" is a two-storied house standing on about 14 cottahs of land at No. 46, Indian Mirror Street. It is stated that on the first floor of this premises there is the Derasar of a temple of Sree Adinath Thakur, a Jain Tirthankar, which was established in 19I7. To the south of the said building there is a two-storied outhouse. The amount of expenditure sanctioned against this premises for the "upkeep of the said hall, Derasar and provision for the necessary puja and worship" is Rs. 2,000.
(2.) I now come to the relevant clause in the trust deed which runs as follows: "5. As trustee I am performing all pious acts relating to the dharamsala at the holy place called Pawapuri in the District of Patna, and the Derasar (consecrated place) of Sree Adinath Thakur installed in the house known as Kumar Singh Hall at No. 46, Indian Mirror Street, in the town of Calcutta, and I shall continue to perform those acts as long as I am alive. Afterwards these acts shall be performed according to the rules laid down in this deed of trust. Be it declared that each of my sons, grandsons and other descendants shall have right to use the house known as the 'Kumar Singh Hall' and its outhouse and courtyard on the occasions of marriages, social engagements and festivities. My eldest son, Sreeman Rai Manilal Nahar Bahadur, and my second son, Sreeman Puran Chand Nahar, have established the 'Nahar Family Exhibition' and a library known as Golab Kumari Library in the said hall. They and their descendants shall be entitled to use the said hall for purposes of the said exhibition and library. The trustee for the time being shall allow such user and shall not be competent to put forward any manner of objection thereto." It is stated in the statement of case that the "Kumar Singh Hall" is used by the trustees for holding public meetings. The library and the museum contain collections on works of Jain art and culture and are open to the public. By notification dt. 27th March, 1953, issued by the Government of West Bengal, in exercise of the power conferred by the Explanation to sub- s. (I) of s. 157 of the Calcutta Municipal Act, 1951, the premises No. 46, Indian Mirror Street, Calcutta, has been declared to be used "solely for the purpose of education and advancement of an object of public utility, namely, the holding of public meetings". In the year 1953-54, Sri Keshari Singh Nahar, trustee of the said trust was assessed to income-tax and the ITO disallowed the claim for exemption made under s. 4 (3)(i) of the IT Act, in respect of the income of the properties conveyed under the deed of trust, on the ground that the settlement was not wholly for religious and charitable purposes. He assessed the income at the maximum rate under s. 41(1) of the said Act. The AAC observed that as the members of the settlor's family had been given a right to use the building at No. 46, Indian Mirror Street, for private purposes, the building could not be considered as reserved solely for public charitable purposes. He, therefore, held that the amount of Rs. 2,000 which was set apart for expenses in connection with the property at No. 46, Indian Mirror Street, was not exempt from taxation, but the balance of the income had been set apart wholly for public charitable purposes and was exempt from taxation. When the matter came up before the Tribunal, it held that cl. 5 of the deed dt. 19th Jan., 1918, did not make the settlement a mixed trust but that the trust was wholly for public charitable purposes and, therefore, the appeal was allowed. Upon this, an application was made for a reference to the High Court, which was rejected in the first instance, but in accordance with the direction of the High Court, the following question has been referred: "Whether, on the facts found, the Tribunal was justified in drawing the inference that the trust created by the trust deed dt. the 23rd Jan., 1918, was wholly for a public charitable purpose ?
(3.) I must say that the statement of case and the order of the Tribunal are far from satisfactory. As I have stated above, no investigation was made in connection with the statement in the deed of trust itself that the settlor had already created a trust known as the "Nahar Family Trust". The user of the "Kumar Singh Hall" as a place for holding public meetings is not mentioned in the deed itself. It is curious to state that Rs. 2,000 is the expenditure sanctioned by the schedule to the deed in respect of the premises No. 46, Indian Mirror Street, and then seek to exempt it from taxation. Obviously, it is not the expenditure which is taxable but the income, In fact, there is no indication in the trust deed itself as to what the trust property consists of, and no mention is made of the income. We have been informed that subsequent to the execution of the trust, the settlor purchased various Government securities and vested the same in the trustees, and there is some house-rent realised from investments made by the trustees in real property. Really, therefore, it is a part of the income which is sought to be exempted and not the expenditure. For the purposes of this case, however, we are not able to go into these various aspects of the matter ourselves. We must take it that the "Kumar Singh Hall" is a two-storied house with an outhouse and courtyard, where there is a temple of Sree Adinath Thakur. There is a hall in which the public are allowed to hold meetings. There is also a library and a museum open to the public. Rs. 2,000 out of the income of the trust estate is expended in respect of this property to carry out the trusts in respect thereof. The relevant section of the IT Act is s. 4 (3)(i). Sec. 4(1) lays down as to what is deemed to be the total income of an assessee. The relevant part of sub-s. (3) runs as follows: "4.(3) Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them: (i) Subject to the provisions of cl. (c) of sub-s. (1) of s. 16, any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, in so far as such income is applied or accumulated for application to such religious or charitable purposes as relate to anything done within the taxable territories, and in the case of property so held in part only for such purposes, the income applied or finally set apart for application thereto." ;