JUDGMENT
THANIKKACHALAM, J. :
In pursuance of the order passed by this Court in TCP Nos. 53, 54 and 55 of 1979, the Tribunal referred the following questions for our opinion under s. 256(2) of the IT Act, 1961, for the asst. yrs. 1971-72 to 1974-75 :
1. “Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the income from property No. 1, Memorial Hall Road, and Nos. 511 and 512, Mint Street, Madras, should not be assessed in the hands of the assessee ?
2. Whether, on the facts and in the circumstances of the case, the Tribunals finding that the assessee was not the owner of the properties is based on valid and relevant materials and is a reasonable view to take on the facts of the case ?”
2. The assessee is a trust constituted under a deed dt. 14th Aug., 1951, under which five trustees were appointed to manage and administer certain properties. The properties were to be held for the benefit of the Chemists and Druggists Association and any surplus income available was directed to be utilised for the purpose of the association. The assessee filed returns before the ITO claiming exemption under s. 11 of the IT Act. The ITO held that the trust was not intended for the benefit of any cross-section of the public and hence the benefit of s. 11 was not available. The assessee had income from properties and also interest. The ITO completed the assessment on the trust for the assessment years in appeal. The assessee filed an appeal before the AAC and the AAC held that this was not an independent body having control over the management and affairs relating to a building. The income really belonged to the Chemists and Druggists Association in whose hands it should be assessed. The AAC therefore, did not accept the assessments in the hands of the assessee trust, but directed the ITO to assess the income from the house property in the hands of the Chemists and Druggists Association. Aggrieved, the Department filed appeals before the Tribunal. The Tribunal accepted the view taken by the AAC and accordingly, confirmed the order passed by the AAC in all the assessments under his consideration.
3. Learned standing counsel for the Department submitted that the trust was created by a trust deed dt. 14th Aug., 1951, and according to the said trust deed five persons created the trust by dedicating two properties, one in Memorial Hall Road and another in Mint Street in favour of the trust. According to the trust deed, the legal title in the properties was vested in the trust and the Chemists and Druggists Association were the beneficiaries of the trust. The income arising out of the trust was applied for the benefit of the association. Therefore, according to learned standing counsel, when the legal title over the properties was vested in the hands of the trust, it is not possible to make an assessment with regard to the income from the property in the hands of the beneficiaries which is the Chemists and Druggists Association. Hence, learned standing counsel submitted that the Tribunal was not correct in directing the Assessing Officer (AO) to assess the income from the trust properties in the hands of the Chemists and Druggists Association. Learned standing counsel further pointed out that the properties in question were purchased under a sale deed dt. 5th June, 1950. The properties in question were purchased by the board of trustees of the Madras Chemists and Druggist Association represented by the governing body consisting of five persons. After the said properties were purchased by the said board of trustees, the abovesaid trust was created. In the trust, the Madras Chemists and Druggists Association is the beneficiary according to the trust deed. There is also a clause which shows that the excess income can be applied to the benefit of the trustees and also for other purpose. Therefore, learned standing counsel submitted that the direction given by the Tribunal to assess the income from the properties in the hands of the Chemists and Druggists Association is not correct.
4. On the other hand, learned counsel appearing for the assessee, while supporting the order passed by the Tribunal, submitted that the Madras Chemists and Druggists Association are the sole beneficiaries of the trust and the board of trustees are only entrusted with the management of the properties. Therefore, according to learned counsel, the Tribunal was correct in holding that the income arising from these properties should be assessed in the hands of the Chemists and Druggists Association. Alternatively, learned counsel also submitted that, in case the assessment is made on the trust, then a direction can be given to the AO to assess the income from the trust as assessable in the hands of the beneficiaries.
5. It remains to be seen that the two properties in question were purchased by a deed of sale dt. 5th June, 1950, by the board of trustees of the Madras Chemists and Druggists Association represented by the governing body consisting of (1) Lalchand Dhadha, (2) Venkatapathi Naidu, (3) Mohanlal Pandia, (4) Wilfred Periera, and (5) R. S. K. Swamy. This board of trustees, after purchasing these properties, dedicated these properties to the benefit of the Madras Chemists and Druggists Association under a trust deed dt 14th Aug., 1951. Clause 1 of the trust deed states as under :
“The legal title in the property bearing at present Municipal Door No. 1, Memorial Hall Street, and Door Nos. 511 and 512, Mint Street, Park Town, Madras 600 003, more particularly, described in Schedule A hereto and purchased under registered deed of conveyance dt. 8th June, 1950, in these names of the aforesaid five persons, constituting board of trustees, shall vest and continue to the vested in the said five persons as a board of trustees and in the successors in office of each of them as and when such successors are duly co-opted in the manner provided for herein.”
Clause 2 of the said trust deed states that :
“…… to avoid all ambiguity, the said association shall not have a separate board of trustees in whom the other movable and immovable properties may remain vested and they shall, for vesting such properties, constitute the governing body. viz., the executive committee as the body in whom the said movable and other immovable properties the legal titles of which vest in the association shall be deemed to be vested for all purposes referred to in s. 5 of the Societies Registration Act, 1860.”
Clause 10 of the said trust deed says that :
“It shall be competent for the board of trustees to apply any part of the net surplus income from the said trust properties for their own individual purpose or for the purposes of any association or body other than the Chemists and Druggists Association, Madras, who shall be the sole beneficiaries, beneficial owner of the net surplus income from the property, as provided for therein for the purpose of the said association.”
Therefore, a plain reading of the abovesaid trust deed would go to show that the legal title in the abovesaid two properties vests in the trust and not in the association. Therefore, the income arising from these two properties should be assessed in the hands of the trust and not in the hands of the association. In the present case, the Chemists and Druggists Association Building Trust, Madras, is the assessee. The assessee filed the returns for the assessment year under consideration and on the basis of these returns, the ITO assessed the property income in the hands of the assessee which is the trust. In such circumstances, there is no basis for the Tribunal to come to the conclusion that the association is the legal owner of the trust properties. Therefore, the direction given by the Tribunal to the AO to assess the income from these properties in the hands of the Chemists and Druggists Association is not in accordance with the facts arising in this case. Therefore, we are not in agreement with that finding of the Tribunal and accordingly restore this matter to the Tribunal with a direction to assess the income from the said two properties in the hands of the assessee who is the Chemists and Druggists Association Building Trust, Madras. While making the assessment, the Tribunal is directed to assess the income from the properties in the hands of the trust as to be assessed in the hands of the beneficiaries. Accordingly, we answer the question referred to us in the negative and in favour of the Department. There is no order as to costs. Counsels fee is fixed at Rs. 1,000.