JUDGMENT
This case arises on a reference made by the Income-tax Appellate tribunal under Section 66(1) of the Indian Income-tax Act, 1922.
The facts are that in 1896 one Seth Narayandas Geda, by his will, settled all his property upon trusts directing that a temple be erected and the annual income be utilized for the temple, dharmashala (rest house) and sadavart (house for feeding or distributing charity to the poor).
The trust income is derived from several sources including money and grain-lending business. It was admitted that this business was not a business carried on in the course of carrying out the primary purposes of the trust and that the trust was not entitled to exemption from tax under clause (ia) of Section 4(3) of the Income-tax Act. But it was contended that the income was not liable to be taxed at the maximum rate under the proviso to sub-section (1) of Section 41 of the Income-tax Act, 1922, for the reason that the income was devoted to the purposes of the temple of Shri Radha Madho, who, as a juridical person, was a known beneficiary. The Income-tax authorities, while conceding that the idol was the beneficiary, held that as the beneficiaries of the dharmashala and the sadavart were a fluctuating body of persons and therefore indeterminate, the trustees did nor receive the income as a whole on behalf of any one person or a determinate body of persons, and rejected the contention. The Income-tax Appellate Tribunal heard the assessees appeal on two points :-
(i) That the trust income was exempt from taxation under Section 4(3)(i) of the Act.
(ii) That, at any rate, the amount of income fell below the maximum not chargeable to the tax in the year of the assessment (1940-41) and that the maximum rate was inapplicable.
The Tribunal overruled both these contentions. The assessee acquiesced in the Tribunals decision on the first point but sought for reference of his case under Section 66 of the Act on the following question of law :-
Whether the first proviso to Section 41(1) has been correctly applied in the circumstances or whether the entire income being less than the maximum not taxable is exempt from taxation ?
This question has been referred to us by the tribunal in somewhat different words as fallows :-
Whether the circumstances of the case, the total income of Rs. 1,175, which is income from business carried on by the trustees had been properly charged to income-tax at the maximum rate in view of the proviso to Section 41(1) of the Indian Income-tax act, 1922, as amended in 1939 ?
In this Court, the assessee has applied, relying on Charitable Gadodia Swadeshi Stores v. Commissioner of Income-tax, for permission to debate the point which he had conceded before the Tribunal, viz., that the entire income of the trust is exempt from taxation even though trustees carried on business. this matter will be considered later.
The argument bearing on the question referred to this Court is two-fold :-
(a) that Section 41(1) of the Income-tax Act has no applicability as there are no persons who can be said to be the beneficiaries although there may be some specified objects for which the income is to be spent;
(b) that in any case the proviso to Section 41(1) is inapplicable as the total income is below the taxable limit.
There is no substance in the first branch of the contention for the obvious reason that the beneficiaries connoted by the temple, the dharmashala and the sadavart are all persons in the juristic sense. The idol installed in a temple is a juridical person as was held by their Lordships of the Privy Council in Prosunno Kumari Debya v. Golab Chand Baboo and Pramatha Nath Mullick v. Pradyumna Kumar Mullick. Not only idols but maths also are juridical persons : see Mullas Hindu Law, Section 413.
The argument that the income is devoted to specified “objects” and not for the benefit of “persons” is fallacious since here the objects cannot be divorced from the persons; the worship of the idol or the maintenance of the temple and the idol; the dharmashala and the travellers seeking shelter there; and the sadavart and the poor people who receive food. These are so inextricable bound up together as to make it impossible to separate the objects from the persons. These persons become in the eye of law the cestui que trusts, i.e. the persons for whom the trust exists. Objects without “persons” would be mere abstractions. What can reasonably be said is that beneficiaries are not a specific, fixed or limited body of persons but wholly indeterminate as are implied by the words, the travellers or the indigent : see Harendra Kumar v. Commissioner of Income-tax, Bengal.
It must therefore be held that Section 41(1) of the Income-tax Act applies to the class of trustees to which the assessee belongs. But there is manifestly a difficulty in the application of the section as it stands to the assessee in the present case. The assessment was made by the Income-tax officer on March 11, 1941, under the Amendment Act (VII of 1939) which came into force on April 1, 1939. On that date, the relevant part of the section as amended read as follows :-
“or any trustee or trustees appointed under a duly executed trust deed (including the trustee under any way deed which is valid under the Mussalman Waqf Validating Act, 1913) are entitled to receive on behalf of any person, the tax shall be levied upon and recoverable….”
Does the word “trust deed” apply to a testamentary instrument which creates a trust ? The answer must be in the negative as will be presently shown.
Section 5 of the Indian Trusts Act provides that a trust can be created either by a non-testamentary instrument in writing” and registered, or by the will of the author of the trust.” The non-testamentary instrument clearly signifies creation of the trust inter vivos, viz., by the execution of a trust deed. A trust deed takes effect on registration, whereas a will takes effect on the death of the testator.
The word “deed” is defined in Halsburys Laws of England (2nd Edition), Volume X, page 163. It is necessary for every transaction which the Common Law required to be in writing (ibid page 168) and inasmuch as all declarations of trust respecting any land or any interest therein must be evidenced by writing (ibid page 239), it follows that such declarations of trust inter vivos must be made by a deed of trust. Delivery is essential for the deed to take effect (ibid page 197). What is essential to delivery of the document as a deed is that the party whose deed the document is expressed to be (having first sealed it) shall, by words and conduct, expressly or impliedly acknowledge his intention to be immediately and unconditionally bound by the provisions contained therein : see ibid page 198. It is this evident that a deed is a non-testamentary instrument which is intended to come into operation immediately or at some time during the lifetime of the executant. It cannot, therefore, be construed in a manner as to include a will. It must, therefore, be held that the income of the trust under consideration was not liable to tax under Section 41(1) of the Income-tax Act and that the action of the Income-tax authorities was ultra vires.
The legislature appears to have realised this defect which it removed by the Amending Act (XXIII of 1941) where the old wording of 1939 was substituted by the following :-
“or any trustee or trustees appointed under a trust declared by a duly executed instrument in writing whether testamentary or otherwise.”
This Act No. XXIII of 1941 came into force on November 26, 1941. It does not purpose to be retrospective and the assessment already made in this case before that act came into force cannot be sustained. This was the view taken by the Madras High Court in Commissioner of Income-tax, Madras v. Venkatachalam Chettiar, with which we respectfully agree.
The learned Government Pleader contended that the testamentary character of the trust ceased with the death of the author of the trust and that the will was capable of being with on the footing of a gift deed on the date of the assessment. The argument is specious but not sound. The very wording of the two Amending Acts of 1939 and 1941 makes it clear that the legislatures conceived of two kinds of trust; one created by a trust deed and another by a testamentary instrument. The first of the two Amending acts contemplated only those trusts which were created interviwe and it cannot apply to those which were to come into effect after the death of the testator. Although the effect of the testamentary trust was at the time of the assessment the same as that of a trust deed, it cannot, strictly speaking, be regarded as identical with a trust deed for the purpose of Section 41(1) of the Income-tax Act.
It is clear that the assessee was not liable to be assessed under the proviso to Section 41(1) of the Income-tax Act as the substantive section itself did not apply to testamentary trusts on the date of the assessment.
That disposes of the reference. The assessee has raised a further point by an application for permission to contest the Appellate Tribunals finding on the point of law that the trust income from business was not exempt from taxation under Section 4(3)(i) of the Income-tax Act having regard to the amendment of that section by the insertion of clause (ia). The assessee had accepted that finding whether it was conceived as a point of law or otherwise, and in his application under Section 66(1), he did not pray for the inclusion of that point in the reference by the Appellate Tribunal to this Court. The assessee invites our attention to the case published in Charitable Gadodia Swadeshi Stores v. Commissioner of Income-tax, as an authority for the proposition that the trust business such as the present is not covered by clause (ia). That may or may not be so. That is a question which arises on the merits. But before we go into the merits, we have to decide whether we have jurisdiction to deal with a point which is not referred to us. In the present case, we know that it was not referred to us because the assessee accepted the Tribunals finding. We cannot admit any new question, even one of law, unless we are sure that we have power to act on our own motion to prevent what appears to us to be an illegality or injustice. But we think we have no such power. As pointed out by their Lordships of the Privy Council in Rajendra Narayan v. Commissioner of Income-tax, Bihar and Orissa, the function of the High Court in cases referred to it under Section 66 of the Income-tax Act is advisory only, and is confined to considering and answering the actual question referred to it : see also Commissioner of Income-tax, Bihar and Orissa v. Maharajadhiraj Kameshwar Singh of Darbhanga; Trustees Corporation Ltd. v. Commissioner of Income-tax, Bombay; National Mutual Life association of Australasia Ltd. v. Commissioner of Income-tax, Bombay Presidency and Aden; Gurmukh Singh v. Commissioner of Income-tax, Lahore; Noperam Ram Gopal v. Commissioner of Income-tax, Bihar and Orissa and Hanmantram Ramnath v. Commissioner of Income-tax, Bombay. It is urged that words in clause (5) of Section 66 of the Act viz., “case raised thereby” authorise this court to raise any question of law suo motu for the purpose of deciding the case as a whole irrespective of whether any point of law is indicated in the reference or not. This contention also must be overruled in view of the clear exposition of that clause by the Judicial Committee in Commissioner of Income-tax, Bihar and Orissa v. Maharajadhiraj Kameshwar Singh of Darbhanga, in the following words :-
“The duty of the High court under Section 66(5) is to decide the questions of law raised by the case referred to them by the Commissioner and it is for the Commissioner to state formally the questions which arise.”
Our attention is invited to Seth Gangasagar, In the matter of, Jai Dayal Madan Gopal, In the matter of and Vadilal Lallubhai Mehta v. Commissioner of Income-tax Bombay, but these cases are not ad rem as the observations made in them were in respect of a reference under Section 66(2) of the Income-tax act. They only lay down that when, on the mandamus issued by the High Court, the Appellate Tribunal states the facts of the case, but the issue or issues of law formulated by it are not clear or correct, it is open to the High court to frame and decide the issue of law. The present case does not fall under Section 66(2) of the Act. Here the Appellate tribunal did not refer the case on the point because the assessee accepted its finding on it. The ways in which the question of law is to be brought before the High Court are clearly prescribed by Section 66 read with Section 2(10) and with the rules framed under Section 59 of the Act and no question of law, unless it comes before this Court in any of the modes prescribed by law, can be considered. We cannot, therefore, admit the question of law raised by the assessee in this Court.
The result is that we answer the reference in the negative by saying that the total income of Rs. 1,175 could not be charged at the maximum rate under the proviso to Section 41(1) of the act as that section as amended in 1939 did not affect the assessee.
The costs of the assessee will be paid by the Crown. Counsels fees Rs. 50.
Reference answered in the negative.