PETITIONER: AHMEDABAD RANA CASTE ASSOCIATION Vs. RESPONDENT: COMMISSIONER OF INCOME TAX, GUJARAT DATE OF JUDGMENT16/09/1971 BENCH: GROVER, A.N. BENCH: GROVER, A.N. HEGDE, K.S. CITATION: 1972 AIR 273 1972 SCR (1) 744 1971 SCC (3) 475 ACT: Income-tax Act, 1922, s. 4(3) (i) and Income-tax Act, 1961 s. 11 Income of assessee to be utilised for benefit of a community-Beneficiaries members of the community resident in a city and others admitted according to caste customs and usage-If united by common quality of impersonal nature. HEADNOTE: The assessee was an association of persons and held various properties for the purposes set out in its constitution. One of the purposes was the management of the movable and immovable properties of the Rana community of the City of Ahmedabad, doing acts to improve education in the community and to give medical help to the community, etc. The de- finition of Rana community comprised two classes-one class consisting of those who are natives of Ahmedabad while the other consists of such persons who are admitted by the Rana caste according to the old custom or the usage of the community. On the question whether the income of the assessee-trust was exempt under s. 4(3)(1) of the Income-tax Act, 1922, or s. 11 of the Incometax Act, 1961, the High Court held that since the second class of persons consisted-of those who had been accepted by the caste according its old custom or usage, all the beneficiaries were not united by a common characteristic or attribute of an impersonal nature and therefore, the beneficiaries did not constitute a community or a section of the Community Allowing the appeal to this Court, Allowing the appeal to this Court, HELD : An object beneficial to a section of the public is an object of general public utility. But the section of the community sought to be benefitted must be sufficiently defined and identifiable by some common quality of a public or impersonal nature. The common quality, in the present case, uniting the potential beneficiaries consists of being members of the Rana caste or community of Ahmedabad whether as natives or as being admitted to that caste or community under custom or usage. The mere fact that a person of the Rana community who is not an original native of Ahmedabad has to prove his credentials and according to the custom and usage of that community cannot introduce a personal element. Whenever a question arises whether a person belongs to a particular community or caste the custom or usage prevailing in that community must play a decisive and vital part. The personal element or personal relationship which takes a group out of a section of the community is their personal relationship to a single propositus or to several propo- sition or a relationship of a similar nature. Therefore, the members of the Rana caste who are not natives of Ahmedabad but who come to reside there and are accepted as members of that caste according to its usage and customs could be said to have a relationship of an impersonal nature. [748 B-D; 749 D-G; 750 BvD] Hazrat Pirmohamed Shah Saheb Roza Committee v. Commissioner of Income-tax, Gujarat, 58 I.T.R. 360, Commissioner of Income-tax, Madras v. Andhra Chamber of Commerce, 55 I.T.R. 722, Re Compton, Powell v. Compton & Ors., (1945) Ch. 123, Trustees of the Londonderry Presbyterian Church House v. Commissioners of Inland Revenue, 27 T.C. 431 and Oppenheim v. Tobacco Securities Trust Co. Ltd. & Ors., (1951) A.C. 745 297, referred to. JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeals Nos, 2146-2148
of 1968 and 1284 to 1286 of 1971.
Appeals by certificate/special leave from the judgment and
order dated July 25, 1967 of the Gujarat High Court in
Incometax Reference No. 4 of 1966.
S. T. Desai, R. P. Kapoor for I. N. Shroff for the
appellant
(in allthe appeals).
S. K. Aivar, R. N. Sachthey and B. D. Sharma, for the
respondent (in all the appeals).
The Judgment of the Court was delivered by
Grover, J. These appeals (C.As. 1284-1286/71) are by special
leave from a judgment of the Gujarat High Court in an Income
tax Reference. Originally the appeals had been filed by
certificate (C.As. 2146-2148/68) but that was found to be
defective as no reasons were stated therein.
The Reference relates to the assessment years 1960-61, 1961-
62 and 1962-63 the relevant accounting years being the
,financial years ending 31st March 1960, 31st March 1961 and
31st March 1962. During the relevant years the assessee
which is an association of persons held various properties
for the purposes set out in its constitution. It is
unnecessary to refer to all the clauses therein. It would
suffice to mention that among ,the objects and purposes of
the institution were the management of the movable and
immovable properties of the Rana community of the city of
Ahmedabad, doing acts to improve the education in the
community, to give medical help to the community etc. The
Income tax Officer took the view that the objects were not
charitable and therefore the assesses was not entitled to
the exemption under s. 4(3) (i) of the Income tax Act, 1922.
The Appellate Assistant Commissioner held that although the
assessee was registered under the Bombay Public Trust Act
the beneficiaries were not the public and the class of
community sought to be benefitted was very vague and ill-
defined and the number was also negligible. He held certain
clauses among the objects to, be charitable but others were
held by him not to be charitable. The matter was taken in
appeal to the Tribunal. The Tribunal held that the
beneficiaries as found in the Constitution were the Rana
community meaning thereby the “natives of Ahmedabad only and
other community members accepted by the community as per old
rules of the community and staying in Ahmedabad..
746
This is a well defined cross-section of the public of
Ahmedabad, certain and ascertainable. This number, we are
told, is about 2,400(?) but no minimum number is prescribed
to constitute a clear, ascertainable cross-section of the
general public. It cannot be said, therefore, that there is
any vagueness about the beneficiaries or of their public
character.” After considering vanous other matters the
Tribunal came to the conclusion that the trust was a
charitable trust and therefore entitled to the exemption
claimed. The Commissioner of Income tax moved the Tribunal
for stating the case and referring the question of law
arising from its order. The Tribunal referred the following
question to the .High Court :-
“Whether on the facts and in the circumstances of the case
the income of the assessee trust is exempt under s. 4 (3)
(i) of the Income tax Act 1922 and s. 11 of the Income tax
Act 1961.”
The High Court decided the whole matter only on one point.
It considered the question whether the purpose for which the
properties were held by the assessee had the public
character which the income tax law required of the charities
it recognised for The purpose of exemption. The question
that was posed was ” are the purposes directed to the
benefit of the community or a section of the community as
distinguished from private individuals or a fluctuating body
of private individuals”? There can be no doubt, according
to the High Court, that the beneficiaries did not constitute
a community since they were confined only to the members of
the Rana Caste residing in Ahmedabad and ful-filling one or
the other conditions set out in the definition clause. It
had, therefore, to be decided whether the beneficiaries
could be said to constitute a section of the community.
After referring to certain English cases and the decision of
this Court in Hazrat Pirmohamed Shah Saheb Roza Committee v.
Commissioner of Income tax, Gujarat (1), the High Court
rightly held that the enquiry must be directed to what the
common quality was which united the parties within the class
and whether that quality was essentially impersonal or
personal. If the former, the class would rank as a section
of the community if the latter, the answer would be in the
negative. According to the High Court having, regard to the
common opinion amongst the people and the conditions of
‘Indian life if the beneficiaries were the members of the
Rana caste residing in Ahmedabad and were natives of
Ahmedabad they would be section of the community because the
common quality uniting them within the class would be
essentially an impersonal quality. But the High Court
proceeded to say:
747
“the class of beneficiaries before us consists
of two sections; one comprising members of the
Rana Sect who are natives of Ahmedabad and the
other comprising members of the Rana Sect who
are residing in Ahmedabad and who have been
accepted by the community according to the old
usage of the caste. It is difficult to see
how this class of beneficiaries can be- said
to constitute a well section of the public
connected together by a common quality or
characteristic”.
Although it was recognised that even the second class of
beneficiaries were members of the Rana caste and were
residing in Ahmedabad but the distinguishing feature, in the
view of the High Court, was that. the second section or
class consisted of persons who had been accepted by the
caste according to its old custom or usage. This led the
High Court to conclude that all the beneficiaries comprised
in this class were not united by a common characteristic or
attribute. The question referred was answered in the
negative.
Section 4(3) (i) to the extent it is material is in the
following terms :-
“4(3) Any income, profits or gains falling
within the following classes shall not be
included in total income of the person
receiving them
(i)Subject to the provisions of clause (c)
of subsection (1) of section 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 in-
come applied or finally set apart for
application thereto:
Provided that…………………”
The operative part of S. 11 (1) (a) of the Income tax Act
1961 is in similar terms. There are certain points of
difference between the provisions of the two Acts. Some of
them may be noticed. In the 1922 Act a charitable purpose
included relief of the poor, education, medical relief and
advancement of any other object of general public utility.
Section 2(15) of the Act of 1961 introduces the following
qualifying words to general public utility, ” not involving
the carrying on of any activity for profit”. Under the Act
of 1922 a trust for the benefit’of any particular religious
community or caste was entitled to exemption but under the
Act of 1961 a charitable trust which is created for such
benefit on or
748
afterthe first day of April 1962 would be disentitled
to the exemption. In the present case the trust was
created prior to first April 1962 and therefore no question
arises of its not being entitled to the exemption if other
conditions were satisfied even though it was created for the
benefit of the Rana caste of Ahmedabad.
It is well settled by now and the High Court also has
rightly taken that view that an object beneficial to a
section of the public is an object of general public
utility. To serve a charitable purpose it is not necessary
that the object should be to benefit the whole of mankind or
all persons in a particular country or State. It is
sufficient if the intention to benefit a section of the
public as distinguished from a specified individual is
present. This Court in Commissioner of Income tax, Madras
v. Andhra Chamber of Commerce(1) overruled the view of
Beaumont C.J. in Commissioner of Income tax v. Grain
Merchants’ Association of Bombay(2) on the point. It was,
however, observed that the section of the community sought
to be benefitted must be sufficiently defined and
identifiable by some common quality of a public or
impersonal nature. Where there was no common quality
uniting the potential beneficiaries into a class the trust
might not be regarded as valid. In the various orders the
clause relating to the beneficiaries has not been clearly
and accurately set out. In the petition of appeal dated
October 7, 1968 the provisions of the constitution of the
assessee are set out and with reference to The community it
is stated, “Rana community means natives of Ahmedabad only
and the other community brothers accepted by the community
as per old rules of the community staying in Ahmedabad”. It
is common ground that the word ” old rules” do not represent
the correct translation of the original word in Gujarati
which is Riwaj meaning custom. The learned judges of the
High Court also, who are conversant with that language, have
proceeded on the basis that the correct rendering of the
aforesaid word is custom or usage. That is why according to
the High Court the definition comprises two classes of
members of Rana caste residing in Ahmedabad, one class
consisting of those who are natives of Ahmedabad while the
other class consists of such persons who are admitted by the
Rana caste according to the old custom or usage of the
community. The reason which prevailed with the High Court
for treating the second class as not being united with the
first class by a common characteristic or attribute was that
its members have to be accepted by the community according
to the old custom or usage and that the entry of the members
of this class into the Rana caste residing in Ahmedabad was
dependent on the decision of the caste to
(1) 55 I.T.R. 722. (2) 6 I.T.R. 427.
749
admit them. We are altogether unable to concur in the
approach or the conclusion of the High Court on the above
point.
We may usefully refer to the judgment of Lord Greene M.R. in
re Compton, Powell v. Compton & Others(1). The Master of
Rolls declared that no definition of what was meant by “a
section of the public” had, so far as he was aware, been
laid down. But he indicated that the trust of a public
character is one in which the beneficiaries do not enjoy the
benefit when they receive it by virtue of their character as
individuals but by virtue of their membership of a specified
class the common quality, uniting potential beneficiaries
into the class being essentially an impersonal one. This
common quality he said was “definable by reference to what
each has in common with the others and that is something
into which their status as individuals does not enter”.
Andrew, L.C.J. accepted this statement of law without
hesitation in Trustees of the Londonderry Presbyterian
Church House v. Commissioners of Inland Revenue(2). What
has to be seen in the present case is whether the members of
the Rana caste who are not natives of Ahmedabad but who come
to reside there and are accepted as members of that caste
according to its usage and customs can be said to have a
relationship which is an impersonal one dependent on their
condition as members of the Rana community. We are unable
to comprehend how such members of the Rana caste can be
regarded as having been introduced into that caste by
consideration of their personal status as individuals. As a
matter of fact the predominant content and requirement of
the clause defining “beneficiaries” in the constitution of
the assessee is the factum of their belonging to the Rana
community of Ahmedabad. The common quality, therefore,
uniting the potential beneficiaries into the class consists
of being members of the Rana caste or community of Ahmedabad
whether as natives or as being admitted to that caste or
community under custom or usage. The mere fact that a
person of the Rana community who is not an original native
of Ahmedabad has to prove his credentials according to the
custom and usage of that community to get admitted into that
community cannot introduce a personal element. In Oppenheim
v. Tobacco Securities Trust Co. Ltd. & Others(1) the
trustees were directed to apply certain income in providing
for the education of children of employees or “former
employees” of a British limited company or any of its
subsidiary or allied companies. It was held by the House of
Lords by a majority that though the group of persons
indicated was numerous, the nexus between them was
employment by particular employers and accordingly the trust
did not satisfy the test of public
(1) [1945] Ch. 123.
(3) [1951] A.C. 297.
(2) 27 T.C. 431.
75O
benefit requisite to establish it as charitable. This is
what Lord Simonds observed –
“A group of persons relationship which takes a
group nexus between them is their personal
relationship to a single propositus or to
several propositi, they are neither the
community nor a section of the community for
charitable purposes”.
The personal element of personal relationship which takes a
group out of sestion of the community for charitable
purposes is of the nature which is to be found in cases of
the aforesaid type. We cannot possibly discover a similar
element of personal nature in the members of the Rana
community who settle in Ahmedabad and have been accepted by
the Rana community of that place as members of that
community. As regards the acceptance of such persons as
members of the community or caste, according to custom and
usage, it is well known that whenever a question arises
whether a person belongs to a particular community or caste
the custom or usage prevailing in that community must play a
decisive and vital part. That cannot be regarded as an
element which would detract from the impersonal nature of
the common quality.
For the reasons given above the appeals are allowed and the
answer returned by the High Court is discharged. The
matters are remitted to the High Court for returning the
answer to the question referred after determining the,-
other points which were left undecided. The parties shall
bear their own costs in these appeals. Appeals by
certificate (i.e. C.As. 2146-2148 of 1968) are dismissed,
the certificate being defective for want of reasons.
V.P.S. Appeals allowed.
751