ORDER
Shri B. L. Chhibber, Accountant Member
1. A common but vital issue raised in these five appeals by the Revenue is whether the assessee-trust is exempt from wealth-tax under section 5(1)(i) of the Wealth-tax Act, 1957.
2. The assessee-trust holds properties viz. Akbar Press Property which forms the corpus of the trust property. It is situated opposite the State Transport Bus Stand at the city of Ahmednagar and near the land of Ahmednagar Panjarapol Sanstha and certain structures specified in the schedule attached to the said trust-deed. Before the Assessing Officer the assessee claimed that it was a public charitable trust and hence its assets were exempt from wealth-tax under section 5(1)(i) of the Wealth-tax Act. The Assessing Officer however, adopted the status of the assessee as private discretionary trust in view of the fact that in clause 6 of the trust deed executed on 27-3-1968 settled by Shri Meherjibhoy Nawrozji Satha, the beneficiaries of the trust are four brothers and four sisters of the settlor Shri Satha were prior beneficiaries and after them their descendants will be entitled to the benefits. The Assessing Officer accordingly held that the object of the trust are not of a nature of public charity. Consequently, the Assessing Officer held that the trust is a private discretionary trust and accordingly disallowed the claim of exemption under section 5(1)(i) of the Wealth-tax Act. The extracts from clauses (5) and (6) of the trust deed dated 27-5-1968 executed by the settlor of the trust are reproduced below :
“Clause (5)
Beneficiaries – The following brothers and sisters of the settlor will be prior beneficiaries and after them, their descendants will be entitled to the benefits if need be, from the trust funds at the discretion of the trustees :
(a) Shri Hormujshaw N. Satha;
(b) Shri Jamshed N. Satha;
(c) Shri Naosherwan N. Satha;
(a) Shri Phiroz N. Shah;
(e) Miss Gulmai N. Satha;
(f) Smt. Shrinibai J. Damania;
(g) Smt. Gaimai B. Jassawala;
(h) Smt. Banubai N. Kerawala.”
“Clause (6)
6. Revocation of the trust – The trust will be irrevocable during the life-time of the settlor Shri M. N. Satha, however, after the death of the settlor, if the trustees find that due to some unforeseen circumstances the management of the trust becomes impracticable and/or difficult and if they unanimously agree, then the trust may be revoked and the proceeds therefrom may be utilised in the manner laid down in the Bombay Public Trust Act, 1950, or as decided unanimously by the trustees.”
According to the Assessing Officer clause (6) of the trust deed provides that the trust is revocable at the discretion of the trustees and the proceeds of the trust can be utilised as decided by the trustees which indicates that the trust is at the mercy of the trustees and revocable at their discretion itself indicates that the assessee is a private discretionary trust. The Assessing Officer further held that on identical issue in Income-tax appeal for the assessment year 1990-91, the predecessor CIT(A), Nasik, as per his order No. AHN/AC.Cir.1(2)/4/94-95 dated 6-4-1995 had confirmed the view taken by the Assessing Officer adopting the status of the assessee as private discretionary trust. The Assessing Officer accordingly denied the exemption under section 5(1)(i) of the Act.
3. On appeal, the CWT(A) reversed the finding of the Assessing Officer observing as under :
“The contention of the learned ACIT is not tenable that the appellant trust should be held to be not public charitable trust on the basis of his assessment orders for income-tax which was upheld in appeal by the CIT(A), Nasik. The facts of the case are similar to the facts in the case of CWT v. Trustees of the JP. Pardiwala Charity Trust [1965] 58 ITR 46 where the jurisdictional High Court had held that the properties of the trust to be entitled to exemption under section 5(1)(i). The facts of the case are also similar to the facts in the case of Trustees of Charity Fund v. CIT [1959] 36 ITR 513 wherein the settlor had provided for preferential treatment to his indigent relations or family members. The Supreme Court held in this case that the, trust was a public charitable trust. It is to be noted that there is a difference in the language employed in section 11(1)(a) of the Income-tax Act and section 5(1)(i) of the Wealth-tax Act. Under section 11(1)(a) of the Income-tax Act, the property is required to be held under trust wholly for religious or charitable purposes, but the word ‘wholly’ is not employed in section 5(1)(i) of the Wealth-tax Act. As such, it is not necessary, in considering the claim of an assessee to exemption under section 5(1)(i) to require that all the objects of the trust should fall within the expression ‘public purpose of a charitable or religious nature’ and it will be sufficient if the objects of the trust considered as a whole could be regarded to be within the expression, viz., for a public purpose of a charitable or religious nature. Therefore, for the purpose of earning exemption under section 5(1)(i), it is not necessary that the property must be held under trust wholly for a public purpose of a charitable or religious nature.’
4. Shri C. M. Bhake, the learned Departmental Representative relying upon clauses (5) and (6) of the trust reproduced supra, submitted that the settlor settled the trust for the benefit of close relatives and that the predominant object of the assessee-trust was not charity. He submitted that the learned CWT(A) has held that the trust to be charitable on the basis of case law in CWT v. Trustees of the J. P. Pardiwala Charity Trust [1965] 58 ITR 47 (Bom.) and Trustees of the Charity Fund v. CIT [1959] 36 ITR 513 (SC), but the ratio of the said case was not applicable to the facts of the assessee-trust since in both the cases, it was held that all the objects were charitable in nature. He drew our attention to the objects of the trust on page 48 of the assessee’s paper book and pointed out that clause 2(a) was not charitable in nature. Clause 2(b) of the object was totally not charitable since it was for the maintenance of the brothers and sisters-of the settlor. He further pointed out that this clause viz, clause 2(b) specifically laid down that the brothers and sisters of the settlor would be accommodated in the Akbar Press Property which is also the corpus of the trust whenever they wanted or whenever any one of them so desired. The learned D.R. further pointed out that this could be possible only by keeping the trust property available to the brothers and sisters of the settlor all the time since the objects ordained the trustees to make that property available whenever they wanted. This showed that the corpus of the trust, namely the Akbar Press Property was reserved for the exclusive use by the brothers and sisters of the settlor – a pointer to the fact that the dominant purpose of the creation of the trust was maintenance of relatives of the settlor. The learned D.R. Further submitted that clause (2) provided for the creation of funds for meeting the objects as prescribed in clause 2(b). This shows anxiety and the dominant purpose of the settlor i.e the care he shows towards his relations. The learned D.R. further submitted that it is to be noted that there is no such object in respect of the other objects of the trust which are charitable in nature, again a pointer to the fact that the dominant purpose was not to cater to the charitable objects but to welfare of his relations. The learned D.R. further pointed out that creation of funds as laid down in the object 2(c) showed that the settlor was apprehensive that the trust funds as created by him would not, perhaps, be sufficient enough for the needs of his relations and therefore, it was laid down in the object 2(c) of the trust that a separate fund should be created. According to the learned D.R. the intention was that these relations were well looked after, and this showed the dominant purpose of the trust deed towards the maintenance of his relatives. The learned D.R. further pointed out that if the trust funds and, funds created as per clause 2(c) of the trust deed were utilised for the maintenance of the relations then the trust would be left with no funds for the fulfilment of charitable objects in the trust deed. The learned D.R. further submitted that in determining the dominant and primary purpose of the objects of the trust it was necessary to read the deed as a whole and come to the conclusion accordingly. It was only when the trust deed presented some difficulties in arriving at a definite conclusion on the basis of reading of a trust deed then only reference can be made to other objects of the trust if they are numerically superior in number. The learned D.R. submitted that the issue stands squarely covered in favour of the department and against the assessee by the decision of the Supreme Court in the case of Trustees of Gordhandas Govindram Family Charity Trust v. CIT [1973] 88 ITR 47. The learned D.R. further relied upon the finding given in the income-tax assessment order for assessment year 1990-91 by the CIT(A) that the trust was not charitable in nature and was a private discretionary trust.
5. Dr. Sunil Pathak, the learned counsel for the assessee strongly supported the order of the learned CWT(A). He submitted that the assessee is a partly charitable trust wherein the object clauses provide that the income of the trust can be spent on the relatives of the settlor as well as the general charitable objects provided therein. In this connection, he referred to pages 48 and 49 of the paper book. He further submitted that from this, it was clear that numberwise the clauses on charity are more than the clauses for benefit of the relatives. Clause (5) of the deed (page 50) speaks only of the priority amongst the various relatives who are the beneficiaries of the trust. This clause no way, conveys that these relatives will get priority over the general charitable objects contained in clause 2. It is specifically mentioned only the relatives who will get priority over other relatives.
The learned counsel drew our attention to the chart on page 21 and submitted that during all these years, the trustees did not spend any money for the benefit of the relatives but whatever was spent, it was totally on charity. Further, he drew our attention to the profit and loss account and balance sheet for all these years (page 22 of the paper book) which clearly indicate the details of other expenses on establishment, property maintenance etc. He therefore, argued that during the years, as the entire amount was spent on charity the trust should be entitled to exemption under section 5(1)(i) of the Act. The learned counsel relied upon the judgment of the Bombay High Court in the case of Trustees of K.B.H.M Bhiwandiwalla Trust v. CWT [1977] 106 ITR 709, wherein the court held that if the predominant object of the trust is for public purpose of a charitable or religious nature, it is entitled to a deduction under section 5(1)(i). The learned counsel further relied upon the judgment of the Bombay High Court in the case of CWT v. State Bank of India [1995] 213 ITR 1/81 Taxman 72, wherein it was held that the exemption under section 11 is applicable to a trust wholly for charitable purpose while the exemption under section 5(1)(i) of the Wealth-tax Act is allowable even if the trust is not wholly for charitable purpose. The learned counsel further submitted that the reliance placed by the learned D.R. on the judgment of the Supreme Court in the case of Trustees of Gordhandas Govindram Family Charity Trust (supra) is misplaced. The facts in that case were entirely different. The trust was for the benefit of Vaishya Hindoos and it was specifically provided in the objects of the trust deed that the members of the Sakseria family will be given priority over other beneficiaries; while in the present case, it is not so and the relatives of the settlor are not given any priority over the other general charitable objects. Regarding reliance placed by the learned D.R. on the observations of the CWT(A) in the income-tax appeal for assessment years 1991-92 and 1992-93 wherein he held that the dominant object of the assessee-trust is to benefit the relatives, the learned counsel submitted that the CIT(A) has completely erred in making these observations because as already stated above, the predominant object of the trust is charity and while making these observations, the CIT(A) has not given any reason as to why it can be considered to be that of the benefit to the relatives. Secondly, the observations of the CIT(A) about the priority of the relatives is misplaced because as already stated above, the relatives as per clause 5 have priority over other relatives but this clause in no manner indicates that they have a priority over charity. The learned counsel further submitted that the learned D.R.’s point that clause 2(c) of the trust deed is for creating funds for meeting the purposes in clause (b), which speaks of the benefit to the relatives, indicates that the assessee is earning income for accumulating for the benefit of the relatives. It was further submitted that this clause also does not mean that the trustee cannot spend on charity and they have to compulsorily accumulate the income for fund for the relatives Secondly, it was clear that in the years in the appeal this question does not arise because the income was spent on charity and not on the relatives indicating that this contention of the D.R. is not correct. He therefore, submitted that the assessee is a charitable trust and accordingly is exempt from wealth-tax under section 5(1)(i) of the Act.
6. As a rejoinder, Shri C. M. Bhake, the learned D.R. submitted that in the Bombay High Court decision in Trustees of K.B.H.M. Bhiwandiwalla Trust’s case (supra) 716, absence of the word ‘wholly’ in the provisions of the Wealth-tax Act as contrasted with the presence of that word under section 11 of the Income-tax Act, 1961, did not give any sort of licence to the assessee so that even private trusts would be exempted from wealth-tax under section 5(1)(i) of the Wealth-tax Act, 1957. The learned D.R. further submitted that it would be immaterial as to what treatment the assessee trust ultimately gave to the funds in its day-to-day working, since what is supreme and permanent are the clauses and recitals in the deed. The name of the trust namely ‘Meherjibhoy Nawrozji Satha Charitable Trust’ was a pointer towards the fact that this was a private discretionary trust as held by the Hon’ble Supreme Court in the case of Trustees of Gordhandas Govindram Family Charity Trust (supra). The learned D.R. submitted that the registration of the trust under the Bombay Public Trust Act is not very material for proceedings under the Income-tax/Wealth-tax Acts since the definition under that Act is of wider import and there is no need to import it in the Wealth-tax Act as was held by the Bombay High Court in the case of Trustees of Gordhandas Govindram Family Charity Trust v. CIT [1968] 70 ITR 600. The learned D.R. further submitted that if a trust is to be held charitable or otherwise on the basis of numerical superiority of the objects, then perhaps the test laid down by the Hon’ble Bombay High Court and Supreme Court to determine the dominant purpose of the trust would become redundant and the courts would be rendered non-functional and therefore, the courts must come to a finding of fact on the reading of the trust deed as a whole.
7. We have considered the rival submissions and perused the facts on record. The whole case of the Assessing Officer is based on the literal interpretation of clauses (5), (6), 2(b), 2(c) and 2(d) of the trust deed. The clauses in a deed are not to be interpreted by keeping those clauses on one hand and dictionary on the other hand. For spelling out the meaning of the clauses in a deed, one must take into consideration the setting in which these terms are used and the purpose they are intended to serve. The Assessing Officer has totally ignored the ground realities i.e. in all these years, not a single paisa was enjoyed by the beneficiaries and the entire income after meeting the administrative expenses was spent/on charity. This fact is clear from the chart of Details of “Income/Expenditure as Per Audited Accounts” placed at page 21 of the paper book. Further a careful reading of clause (5) shows that beneficiaries will be entitled to benefits “if need be”. From the facts of the case, it is evident that such need never arose and hence the beneficiaries did not enjoy any benefit and the entire income of the assessee trust was spent on charity. Further, clause (5) of the deed speaks only of the priority among the various relatives who are the beneficiaries of the trust. This clause in no way, conveys that these relatives will get priority over the general charitable objects contained in clause 2, viz. –
“(g) to provide for medical help to needy and poor and deserving persons through Evangiline Booth Hospital, Ahmednagar;
(h) to provide for donations for educational activities of the friends of depressed league Ahmednagar and National Education Board, Ahmednagar;
(i) to help the needy and poor Parsec widows of Ahmednagar District and give scholarships to poor and deserving Parsec students of Ahmednagar District for education and give them prizes for furtherance of education at all levels;
(j) to provide for medical relief in deserving cases in Parsec community of Ahmednagar;
(k) to incur expenses for advancement of such objects of public utility with the consent of majority of the trustee; to undertake such other activities and projects for the fulfilment of the above mentioned objects.’
8. From the chart on page 21 of the paper book, it is crystal clear that during all these years, the trustees did not spend any money for the benefit of the relatives but whatever was spent, it was totally on charity. The profit and loss account and the balance-sheets for all these years have been placed on page 22 onwards of the paper book which clearly indicate the details of other expenses on establishment, property maintenance etc. In the case of Trustees of K.B.H.M Bhiwandiwalla Trust (supra), the julisdictional High Court has held that if the predominant object of the trust is for public purpose of a charitable or religious nature, it is entitled to a deduction under section 5 (1)(i) of the Wealth-tax Act, 1957. In this case, the Court has also observed that the number of clauses on charity was more than the number of clauses for the benefit of the relatives. This was one indication of providing that the trust was predominantly for charity. In the case before us also, only three clauses are for the benefit of the relatives while the other seven clauses are for charitable objects. Thus, the ratio of the jurisdictional High Court clearly applies to the facts of the case of the assessee. The second yardstick to find out whether the trust is predominantly for charity or not is to consider the income applied for charity vis-a-vis the income applied for the benefit of the relatives in the case before us, as already mentioned, in all these years, the entire income was spent on charity. The Hon’ble Supreme Court in the case of CIT v. Dharmodayam Co. [1977] 109 ITR 527 has held that if any particular object clause has not been acted upon during the year under consideration, the same should not be given any importance. Similarly, in the case of WTO v. P. Krishna Warrier [1990] 32 ITD 769 the Cochin Bench of the Tribunal has held that if a major portion of income is spent on charity, the trust is predominantly for charity and should be entitled to a deduction under section 5(1)(i).
9. Reliance placed by the learned D.R. on the decision of the CIT(A) in the Income-tax appeal for assessment years 1991-92 and 1992-93 in which it was held that the trust was not a charitable trust and hence does not qualify for exemption under section 11 of the Income-tax Act, is of no assistance to the revenue. The Hon’ble jurisdictional High Court in the case of State Bank of India (supra) has held that provisions in one statute cannot be interpreted with reference to a similar provision in another statute and that the exemption under section 11 of the Income-tax Act is applicable to a trust wholly for charitable purpose while the exemption under section 5(1)(i) of the Wealth-tax Act is allowable even if the trust is not wholly for charitable purpose. It should be predominantly for charitable purposes.
10. Reliance placed by the learned D.R. on the judgment of the Supreme Court in the case of Trustees of Gordhandas Govindram Family Charity Trust (supra) is also of no assistance to the Revenue, because in the above referred case, the facts were entirely different. In that case, the trust was for the benefit of ‘Vaishya Hindoos’ and it was specifically provided in the objects of the trust deed that the members of the Sakseria family will be given priority over other beneficiaries while in the case of the assessee, it is not so. All the relatives of the settlor are not given any priority over the other general charitable objects. It is pertinent to note that the above decision was considered and distinguished by the jurisdictional High Court in the case of Trustees of K.B.H.M. Bhiwandiwalla Trust (supra).
11. In the light of the above discussion, we hold that the assessee-trust is predominantly for charity and hence the trust is entitled to exemption under section 5(1)(i) of the Wealth-tax Act. We accordingly uphold the finding of the CIT(A).
12. In the result, the appeals are dismissed.