{"id":239938,"date":"1995-11-16T00:00:00","date_gmt":"1995-11-15T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/commissioner-of-income-tax-vs-kamla-town-trust-on-16-november-1995"},"modified":"2018-09-04T03:05:22","modified_gmt":"2018-09-03T21:35:22","slug":"commissioner-of-income-tax-vs-kamla-town-trust-on-16-november-1995","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/commissioner-of-income-tax-vs-kamla-town-trust-on-16-november-1995","title":{"rendered":"Commissioner Of Income Tax, … vs Kamla Town Trust on 16 November, 1995"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Commissioner Of Income Tax, … vs Kamla Town Trust on 16 November, 1995<\/div>\n
Equivalent citations: 1996 AIR 620, \t\t 1996 SCC (7) 349<\/div>\n
Author: M S.B.<\/div>\n
Bench: Majmudar S.B. (J)<\/div>\n
           PETITIONER:\nCOMMISSIONER OF INCOME TAX, KANPUR\n\n\tVs.\n\nRESPONDENT:\nKAMLA TOWN TRUST\n\nDATE OF JUDGMENT16\/11\/1995\n\nBENCH:\nMAJMUDAR S.B. (J)\nBENCH:\nMAJMUDAR S.B. (J)\nJEEVAN REDDY, B.P. (J)\n\nCITATION:\n 1996 AIR  620\t\t  1996 SCC  (7) 349\n JT 1995 (8)   364\t  1995 SCALE  (6)517\n\n\nACT:\n\n\n\nHEADNOTE:\n\n\n\nJUDGMENT:\n<\/pre>\n
\t\t      J U D G M E N T
\nS.B. Majmudar, J.\n<\/p>\n
     In this  group of\t17 appeals  by\tspecial\t leave,\t the
\nCommissioner of\t Income Tax, Kanpur has brought in challenge
\nthe judgment  and order\t dated 20th  February  1975  of\t the
\nAllahabad High\tCourt in  Income Tax  References Nos.  18 of
\n1973 and 715 of 1972. Respondent – Kamla Town Trust – is the
\ncommon respondent  in all these appeals. As common questions
\nof law\tand fact  are involved between the very same parties
\nin all\tthese appeals,\tthe appeals  were heard together and
\nare being disposed of by this common judgment.\n<\/p>\n
     The common\t respondent, Kamla  Town Trust, was assessed
\nto income  tax for  the relevant assessment years 1949-50 to
\n1965-66. These\tassessment orders  gave rise to hierarchy of
\nappeals under the Income Tax Act which ultimately culminated
\ninto 17 income tax Appeals by the assessee before the Income
\nTax Appellate  Tribunal,  Allahabad  Bench,  Allahabad.\t The
\ncommon question\t in the\t appeals  before  the  Tribunal\t was
\nwhether for  the relevant  assessment years  the respondent-
\nassessee was  entitled to  exemption from  payment of income
\ntax as\tper the provisions of Section 4(3)(i) of the Income-
\ntax Act,  1922 (hereinafter  referred to as the ‘1922 Act’),
\nand under  Section 11 read with Section 2(15) of the Income-
\ntax Act, 1961 (hereinafter referred to as the ‘1961 Act’) in
\nso far as they applied to the relevant assessment years. The
\nIncome\tTax   Appellate\t  Tribunal   dismissed\t respondent-
\nassessee’s appeals  for assessment  years 1949-50 to 1955-56
\nbut it\tallowed respondent-assessee’s appeals for assessment
\nyears 1956-57  to 1965-66  subject to  the  rider  that\t the
\nincome derived\tfrom the trust property by the assessee will
\nbe exempt  only within\tthe limit  permissible under Section
\n11(1)(a) of  the 1961  Act to the extent to which the income
\nso accumulated\tis not\tin excess  of 25% of the income from
\ntrust property or Rs.10,000\/- whichever is higher, after the
\n1961 Act  came into  force. In other words the rider applied
\nto the assessments for the years 1962-63 to 1965-66. As both
\nthe Revenue  and the  assessee were  partly aggrieved by the
\naforesaid  common   order  of\tthe  Tribunal,\tthey  sought
\nreference of  the questions,  ventilating  their  grievances
\nunder  Section\t 256(1)\t of   the  1961\t Act.  The  Tribunal
\naccordingly  granted   these  reference\t applications  under
\nSection 256(1)\tand referred  the  following  questions\t for
\nopinion\t of   the  High\t  Court.  At  the  instance  of\t the
\nrespondent-assessee two\t questions  were  referred  for\t the
\nopinion of the High Court:\n<\/p>\n
\n“(1) Whether  on the  facts and\t in the circumstances of the
\ncase the Tribunal was justified in holding that the assessee
\nwas not\t a public  charitable trust  and its  income was not
\nexempt under  Section 4(3)(i)  of the  Income Tax Act, 1922,
\nfor the assessment years 1949-50 to 1955-56?
\n(2) Whether  on the  facts and\tin the\tcircumstances of the
\ncase the  Tribunal was\tlegally correct\t in holding that the
\nsecond rectification  decree dated  10th May  1955, in\tsuit
\nno.163 of  1954 operates  prospectively from  the assessment
\nyear 1956-57  and does not have the effect of rectifying the
\ndeed of\t trust dated 27th October, 1941, as from the date of
\nits execution.”\n<\/p>\n
\n     While at  the instance of Revenue the Tribunal referred
\nfive questions as under :\n<\/p>\n
\n“(a) Whether  on the  facts and\t in the circumstances of the
\ncase the  Tribunal was\tright in  holding by  following\t the
\ndecision of the Allahabad High Court in the case of M\/s J.K.
\nHosiery Factory v. Commissioner of Income Tax,<\/a> 81 I.T.R. 557
\nthat even  the unamended  clause 3(19)\tof the Memorandum of
\nAssociation of\tthe settlor  company viz.,  M\/s J.K.  Cotton
\nSpinning &  Weaving Mills Co. Ltd., empowered the company to
\ncreate a  public charitable  trust and the insertion of sub-
\nsection (22) in clause 3 of the Memorandum of Association by
\nthe company was a matter of abundant caution?\n<\/p>\n
(b) Whether  on the  facts and\tin the\tcircumstances of the
\ncase, it  is open  to the  Revenue to  take the objection in
\nthese proceedings  that the second rectification suit no.163
\nof 1954\t was barred by section 11 and Order 2, rule 2 of the
\nCode of Civil Procedure?\n<\/p>\n
(c) Whether  on the  facts and\tin the\tcircumstances of the
\ncase, the  Tribunal was\t legally correct in holding that the
\nobjects\t and  activities  of  the  trust  fell\tobjects\t and
\nactivities of  the trust  fell within  the first limb of the
\ndefinition of charitable purpose in section 2(15) of the new
\nAct and\t the residuary\tclause thereof\tis not attracted for
\nthe assessment years 1962-63 to 1965-66?\n<\/p>\n
(d) Whether  on the interpretation of the various clauses of
\nthe trust  deed even  as amended by the second rectification
\ndecree dated  10.5.1955, the  trust is\tvoid for uncertainty
\nand was not a public charitable trust?\n<\/p>\n
(e) Whether  on the  facts and\tin the\tcircumstances of the
\ncase the  Income Tax  Officer was  entitled to go behind the
\ncivil court  decree dated  10.5.1955 in\t suit No.163 of 1954
\nand adjudge the validity of the rectification?”<\/p>\n
     The Division  Bench of the High Court after hearing the
\nrival contentions  canvassed by the parties answered all the
\nreferred questions  in favour of the respondent-assessee and
\nagainst the  Revenue. It  is under  these circumstances that
\nthe Revenue  through  Commissioner  of\tIncome\tTax,  Kanpur
\nhaving obtained\t special leave to appeal has preferred these
\n17 appeals.  It may  be noted  at the outset that though the
\nRevenue lost  on all the referred seven questions before the
\nHigh Court, in the present proceedings at the stage of final
\nhearing Dr.  Gauri Shankar,  learned senior  counsel for the
\nappellant-Commissioner\tof   Income  Tax   highlighted\t the
\ngrievance of  the Revenue centering round the answers of the
\nHigh Court  on some of the referred questions. The grievance
\nhighlighted on\tbehalf of  the Revenue\tby Dr. Gauri Shankar
\ncentered round\tthe answers  of the  High Court to Questions
\nNos. 1\tand 2  referred on behalf of the assessee-respondent
\nas well\t as answers  of the High Court on Questions Nos. (d)
\nand (e) referred on behalf of the Revenue.\n<\/p>\n
     Before proceeding\tto deal\t with the  main\t submissions
\ncanvassed  by\tlearned\t senior\t  counsel  for\tthe  Revenue
\ncentering round\t the  answers  of  the\tHigh  Court  on\t the
\naforesaid questions  and the  rival contentions canvassed by
\nlearned\t senior\t counsel  Shri\tVerma  for  the\t respondent-
\nassessee in support of these answers, it will be apposite to
\nhave a\tlook at the relevant background facts leading to the
\npresent proceedings.\n<\/p>\n
Background facts\n<\/p>\n
—————-\n<\/p>\n
     The assessee  is a\t trust created by a trust deed dated
\n27.10.1941 executed  between M\/s.  J.K. Spinning  &  Weaving
\nMills Co. Ltd., Kanpur (hereinafter called ‘the company’) of
\nthe one\t part and  Sir Padampat\t Singhania, Lala  Kailashpat
\nSinghania and  Lala Laxmipat  Singhania (hereinafter  called
\n‘the  trustees’)   of  the   other  part.  The\tcompany\t was
\nregistered under  the provisions of the Indian Companies Act
\n7 of 1913 with its registered office at Cawnpore in U.P. The
\nobjects of  the trust deed in its original form show that it
\nwas created  with a view to construct a settlement or colony
\nfor their  workmen together  with amenities  in the shape of
\nhospitals, schools,  temples, mosques, recreation places and
\nfor such  other works  directly concerning  the amenities of
\nworkmen. The  company made an application to the Improvement
\nTrust, Kanpur  for demising  to it  two tracts\tof  land  in
\nKanpur at  concessional rates. The Improvement Trust demised
\none plot  of land to the company for constructing the colony
\nwith an extra plot of land for the purpose of constructing a
\nWater Pump  Station by\tan indenture  dated 19.10.1936 for a
\nconsideration of  Rs. 43,700\/-.\t Another plot  of  land\t was
\ndemised by  the Improvement  Trust  to\tthe  company  by  an
\nindenture dated\t 2.2.1938 for a consideration of Rs.26,300\/-
\nfor constructing  an office  for the  said settlement.\tBoth
\nthese plots  were demised  to the  company  at\tconcessional
\nrates for  the welfare\tof workmen.  The company transferred
\nboth the  plots by  the said trust deed of 27.10.1941 to the
\ntrustees for effectuating its object of settling these plots
\nupon the  charitable trust  thereinafter  mentioned  in\t the
\ndeed.\n<\/p>\n
     We will  deal with\t the relevant  recitals in the Trust
\nDeed, in  details, at an appropriate stage in latter part of
\nthis judgment. Suffice it to state at this juncture that one
\nof the\tobjects of the trust, as mentioned in paragraph 2(b)
\nof the Trust Deed of 1941 was as under :\n<\/p>\n
\n“To erect,  establish, equip,  furnish,\t fit,  maintain\t and
\nrepair on  the said two plots of land, and any land that may
\nhereafter be acquired by the Trust.\n<\/p>\n
(1)  residential  quarters,  chawls  or\t buildings  for\t the
\nworkmen and  staff and\tother employees\t of the\t Company  or
\nother allied  concerns under  the management or in which the
\nDirectors  of\tthe  Company  may  for\tthe  time  being  be
\ninterested and\tfor their respective families and dependents
\nand for\t such other  skilled and unskilled workmen craftsmen
\ntraders merchants  technical or\t professional men  whom\t the
\ntrustees may  permit to reside or work in the said two plots
\nwith a\tview to\t supply their  needs and  requirements or to
\nrender them  services or  to cater  to their  wants comforts
\nconveniences and amenities.”\n<\/p>\n
\nLater on  the Settlor  Company filed a suit being suit No.40
\nof 1945\t in the\t Court of  Civil and  Sessions Judge, Kanpur
\nunder Section  31 of  the  Specific  Relief  Act,  1877\t for
\nrectification of  the Trust  Deed  so  as  to  bring  it  in
\nconformity with\t its  real  intention  to  create  a  public
\ncharitable trust.  It was  alleged in the plaint that having
\nregard to its Memorandum of Association, the Settlor Company
\nintended to  settle the\t properties mentioned  in the  Trust
\nDeed and  transfer them\t to the trustees for the purposes of
\ncreating a public charitable trust including the benefits of
\nits own\t employees, but the operative part of the Trust Deed
\nwas found to be less comprehensive than what was intended by
\nthe parties thereto at the time when instructions were given
\nfor preparing a draft of the same and when they executed the
\nDeed of\t Trust. The  Settlor Company  further  alleged\tthat
\nthrough a  misunderstanding on the part of the draftsman and
\nthrough a  mutual mistake  the Deed  of Trust  did not truly
\nexpress their  intention. It  was  asserted  that  the\treal
\nintention of  the parties  was to create a public charitable
\ntrust, but  the Company\t was advised  that it  was  doubtful
\nwhether the  Trust Deed\t on a  strict  construction  thereof
\nmight not  exclude from\t its benefits the rest of the public
\napart from the employees of the company and residents of the
\nsaid settlement.  In  order  to\t give  effect  to  the\tsaid
\nintention the  company submitted  that certain amendments by
\nway of\trectification of  the deed  should be  made  in\t the
\nObject Clause  2 of  the Trust Deed. The learned Civil Judge
\nby his\tjudgment dated\t18th August 1945 ordered the Deed of
\nTrust to  be rectified\tas prayed for in the Plaint. We will
\nrefer to the relevant rectified paragraphs of the Trust deed
\nas per\tthe aforesaid  order of\t the Civil  Court  a  little
\nlater.\n<\/p>\n
     The Deed of Trust of 1941 as rectified in 1945 became a
\nsubject matter of interpretation by the Appellate Income Tax
\nTribunal and  High Court  of Allahabad\tin the\tcase of J.K.
\nHosiery Factory\t v. Commissioner  of Income Tax, U.P.<\/a> (1971)
\n81 I.T.R.  557. In  the\t said  partnership  the\t respondent-
\nassessee trust happened to be a partner. The High Court held
\nthe rectification  decree passed  by Civil Court to be valid
\nand further held that it was not possible for the Income Tax
\nOfficer to question the validity of the rectification on the
\nground that conditions for grant of rectification did not in
\nfact exist. However, it was further held that the objects of
\nthe Trust  Deed as rectified in 1945 did not create a public
\ncharitable trust  and on  an analysis  of the  object clause
\n2(b) (i)  of the  Trust Deed held that it being a mixture of
\ncharitable and\tnon-charitable objects, could not be treated
\nto be creating a public charitable trust.\n<\/p>\n
     In the  meanwhile the Settlor Company had filed another
\nsuit being  suit No.163\t of 1954 in the Court of First Civil
\nJudge, Kanpur  for further  rectification of the Trust Deed.
\nIt was\treiterated in  the plaint that the real intention of
\nthe Settlor  Company was to create a public charitable trust
\nfor the\t benefit of the public in the city of Kanpur and the
\nsurrounding areas  particularly, the  members of the working
\nclass  including  the  workmen\temployed  in  the  plaintiff
\ncompany, but  in their\tcapacity as  members of\t the working
\nclass. The  intention, it  was repeated,  was to  create the
\nsaid trust wholly and exclusively for charitable objects and
\npurposes. It  was alleged  that the  trustees had,  in fact,
\nbeen giving  the benefit  of the trust to the members of the
\npublic and  no part  of the  trust moneys  had, at any time,
\nbeen used  for a  non-charitable or  non-religious object or
\npurpose. It  was contended  that the said Deed of Trust even
\nas rectified  was less\tcomprehensive than what was intended
\nby the\tparties thereto\t at the\t time when instructions were
\ngiven for  preparing a\tdraft of  the  same  and  when\tthey
\nexecuted it  and the Settlor Company was advised that it did
\nnot truly  express the\tintention of  the  parties.  It\t was
\nprayed that  the rectifications\t sought for be allowed so as
\nto bring  it in\t conformity with  the real  intention of the
\nparties. In  the said  suit besides the trustees two persons
\ninterested in  the trust  were impleaded  as  defendants  in
\ntheir representative  capacity after the service of a public
\nnotice under  Order 1 Rule 8 of the Code of Civil Procedure.
\nThe  Civil  Judge,  Kanpur  by\tjudgment  and  decree  dated
\n10.5.1955 decreed  the suit.  By  the  second  rectification
\ndecree certain\trectifications were  made in the Preamble of
\nthe Trust  Deed and in paragraphs 1 and 2 of the Trust Deed.
\nAt an  appropriate stage  in latter part of this judgment we
\nwill deal with these rectified clauses inserted in the Trust
\nDeed in 1955.\n<\/p>\n
     The jurisdictional\t Income Tax  Officer issued  notices
\nunder Section 34 of 1922 Act and Section 148 of 1961 Act for
\nthe relevant assessment years to the assessee-trust alleging
\nthat the  income had  escaped assessment  for  the  relevant
\nyears. In  response to\tthe said  notices the assessee filed
\n‘NIL’ returns  for all the assessment years under reference.
\nThe contention\tof the\ttrust before  the Income Tax Officer
\nwas that  it was  a public  charitable trust and, therefore,
\nits income  was exempt\tfrom  income  tax.  The\t Income\t Tax
\nOfficer rejected this contention as discussed in his earlier
\nassessment order  for the assessment year 1948-49. He stated
\nthat in the earlier assessment order, he had come to a clear
\nconclusion that\t the trust  was\t a  private  trust  for\t the
\nbenefit of the employees only and was not at all exempt from
\ntax. With  regard to  the rectifications made by the decrees
\nof the\tCivil Court,  the Income  Tax Officer  held that the
\ntrust was  originally created for the benefit of the settlor
\ncompany and  the objects  of the  trust could not be altered
\nsubsequently unless  the trust\twas revoked  for which there
\nwas no\tpower under  the  Deed.\t The  income  from  it\twas,
\ntherefore, assessed to tax. He relied on the decision of the
\nCalcutta High Court in re. Mercantile Bank of India (Agency)
\nLtd. (1942)  10 I.T.R.\t512 and\t held that  a trust  for the
\nbenefits of  its employees and members of the staff is not a
\ncharitable trust.\n<\/p>\n
     Respondent-assessee preferred  appeals to the Appellate
\nAssistant Commissioner. The Appellate Assistant Commissioner
\ndismissed all  the appeals  of the  respondent. It  is under
\nthese circumstances  that the respondent-assessee approached
\nthe Income  Tax Appellate  Tribunal as\tnoted  earlier.\t The
\nassessee partly\t succeeded while  the Revenue also succeeded
\nin part before the Income Tax Tribunal and that is how seven
\nquestions came\tto be  referred\t to  the  High\tCourt  under
\nSection 256(1)\tby the\tTribunal, two at the instance of the
\nassessee and  five at  the instance of the Revenue and which
\ncame to\t be wholly  decided in\tfavour\tof  the\t respondent-
\nassessee as already noted earlier.\n<\/p>\n
Rival Contentions\n<\/p>\n
—————–\n<\/p>\n
     Learned senior  counsel Dr.  Gauri Shankar\t raised\t the
\nfollowing contentions in support of these appeals :\n<\/p>\n
     (1) The  second  rectification  in\t the  year  1955  as
\ndecreed by  the Civil  Court was  without jurisdiction as in
\nsubstance by  the so-called  rectification a  new Trust Deed
\nwas sought to be substituted, which was beyond the powers of
\nthe Civil Court.\n<\/p>\n
     (2)  The\tcondition   precedent\tfor   invoking\t the
\njurisdiction of\t the Civil  Court under\t Section 26  of\t the
\nSpecific Relief\t Act of\t 1963 or  under Section\t 31  of\t the
\nearlier Act  that there should be mutual mistake on the part
\nof parties  to the  document was  absent in the facts of the
\npresent\t case  and  consequently  the  Civil  Court  had  no
\njurisdiction to grant such rectification.\n<\/p>\n
     (3) The rectification decree was in personam and not in
\nrem to\twhich Revenue was not a party and, therefore, it was
\nnot binding on the Income Tax authorities.\n<\/p>\n
     (4) Even  assuming that Rectification Order of 1955 was
\nvalidly made,  it would operate only prospectively and could
\nnot have  any retrospective effect. This submission was made
\nfor challenging\t the answer  to Question  No.  2  posed\t for
\nconsideration of  the High  Court at  the  instance  of\t the
\nrespondent-assessee.\n<\/p>\n
     (5) Even after the rectification of 1955 the Trust Deed
\nas rectified  did not  create any  public  charitable  trust
\nentitling  the\t respondent-assessee  to  claim\t income\t tax
\nexemption under\t the relevant provisions of 1922 Act as well
\nas 1961 Act as applicable to the concerned assessment years.\n<\/p>\n
     (6) The entire Trust Deed as originally executed and as
\ntwice rectified\t in 1945  and 1955  was merely\ta colourable
\ndevice on  the part  of the  three main\t trustees  Singhania
\nbrothers who  held partnership\tinterest in the firm of J.K.
\nHosiery Factory\t but  went  out\t as  partners  of  the\tsaid
\npartnership and\t entered by  the back door assuming the garb
\nof the\ttrustees of  respondent-trust which became a partner
\nin the\tsame partnership firm claiming income tax exemption.
\nConsequently such  a colourable\t device on  the part  of the
\nrespondent should not be countenanced.\n<\/p>\n
     Shri Verma,  learned senior counsel for the respondent-
\nassessee  on   the  other   hand  combatted   the  aforesaid
\ncontentions of\tlearned senior\tcounsel for  the Revenue and
\nsubmitted that\teven for  the assessment  years\t 1949-50  to
\n1955-56 wherein\t the rectified\tTrust Deed  of 1945 prior to
\nits further  rectification in 1955 was holding the field, it
\nwas a  trust for public charitable purposes and consequently
\neven  apart   from   the   retrospective   effect   of\t the
\nrectification in  1955, the  respondent-asessee was entitled
\nto claim  exemption from  payment of  income tax  for  these
\nrelevant years.\t However, so  far as  the answer to Question
\nNo. 2  referred for  the opinion  of the  High Court  at the
\ninstance of  the  respondent-assessee  was  concerned,\tShri
\nVerma fairly  stated that  he was  not supporting  the\tsaid
\nanswer and  that he was conceding that 1955 rectification of
\nthe Trust Deed had only prospective effect.\n<\/p>\n
     Shri Gauri\t Shankar, learned  senior  counsel  for\t the
\nRevenue in  Rejoinder submitted\t that 1945 rectification did
\nnot create  a public  charitable trust.\t He, however, fairly
\nstated that  as there  was  no\tclear  indication  from\t the
\njudgment of  the High  Court about  any colourable device on
\nthe part  of the  assessee or  its trustees  underlying\t the
\ncreation of  trust  he\twas  not  pressing  that  point\t any
\nfurther.\n<\/p>\n
     In the  light of  the aforesaid  rival contentions\t the
\nbattle\tlines  are  clearly  drawn  between  the  contesting
\nparties wherein\t the first  five  contentions  canvassed  on
\nbehalf of  the Revenue\tby Dr. Gauri Shankar will have to be
\nexamined and  the sixth and the last contention which arises
\nfor consideration  in the light of the additional contention
\nof learned  senior counsel  Shri Verma\tfor the\t respondent,
\nnamely, whether\t the rectification  of 1945 created a public
\ncharitable trust or not, will also fall for determination.\n<\/p>\n
     We shall  now deal\t with the  aforesaid six contentions
\ncanvassed for our consideration seriatim:
\nContention No.1\n<\/p>\n
—————-\n<\/p>\n
     So far  as jurisdiction  of the  Civil Court  to  grant
\nrectification of  the Trust  Deed is  concerned the relevant
\nprovision is found in Section 26 of the Specific Relief Act,
\n1963 which  had succeeded  the prior  Specific Relief Act of
\n1877. Under the earlier Act an analogous provision was found
\nin Section  31 of  the Act.  As per  these provisions a suit
\ncould  be   filed   before   competent\t Civil\t Court\t for
\nrectification of  an instrument\t when  through\tfraud  or  a
\nmutual mistake of the parties a contract or other instrument
\nin writing  does not  express their  real intention.  It  is
\nobvious that  a Trust  Deed is\tnot a contract in the strict
\nsense of  the term  but it would certainly be covered by the
\nexpression  ‘other   instrument\t in   writing’.\t It   could,
\ntherefore, not\tbe urged  with any  emphasis that  competent
\nCivil Court  which was approached by the Settlor Company for
\nrectification of  the instrument  of trust,  was not  having
\nrequisite  jurisdiction\t  to  entertain\t  such\tproceedings.
\nHowever, Dr.  Gauri Shankar,  learned senior counsel for the
\nRevenue pitched\t his faith  on\ta  decision  of\t the  Andhra
\nPradesh High  Court in\tthe case  of Trustees  of H.E.H. the
\nNizam’s Pilgrimage Money Trust v. Commissioner of Wealth-Tax<\/a>
\n(1988) 171  I.T.R. 323.\t In that case the trustees of H.E.H.
\nNizam’s Pilgrimage  Money Trust\t had applied  to  the  Chief
\nJudge, City  Civil Court, Hyderabad, under Section 34 of the
\nIndian Trusts  Act, 1882  seeking his  opinion,\t advice\t and
\ndirections with\t respect to the utilisation of the income of
\nthe trust  fund in  terms of  the resolution.  By  the\tsaid
\nresolution the trustees contrary to the objects of the trust
\nhad resolved  to utilise  the income  of the  trust fund for
\ncharitable purposes  in India  when the\t settlor had clearly
\nlaid down  in the Trust Deed that the trust fund and unspent
\naccumulations, if  any, were to be utilised for religious or
\ncharitable objects at Hedjaz and\/or Iraq. It was, therefore,
\nheld that the resolution of the trustees was invalid and the
\norder of  the Chief  Judge permitting  the trustees to spend
\nthe trust  income  in  India  was  equally  inoperative\t and
\nwithout jurisdiction.  It was  also held  that the Trust Act
\napplied only to private trusts and not to public trusts. And
\nthat after  the death of the settlor, the trust had become a
\npublic trust. Moreover, Section 34 of the Trust Act provided
\nonly for  a  summary  enquiry  and  order  with\t respect  to
\nmanagement or  administration of  the trust  property  other
\nthan questions\tof detail, difficulty or importance. We fail
\nto appreciate  how the\taforesaid decision  can\t be  of\t any
\nassistance to  the learned senior counsel for the Revenue in
\nthe present  case. On  the facts  of the  case before Andhra
\nPradesh High  Court the\t City Civil Court, Hyderabad, had no
\njurisdiction under  Section 34\tof the\tTrust Act  to  bring
\nabout any changes in the objects of trust which had become a
\npublic trust. On the facts of the present case Section 31 of
\n1877  Act   (Specific  Relief\tAct)  or  the  corresponding
\nprovisions of  Section 26  of 1963  Act could be effectively
\ninvoked for rectification of the instrument of trust. Such a
\ncourt  does   not  suffer   from  any\tinherent   lack\t  of
\njurisdiction, like  the\t City  Civil  Court  in\t the  Andhra
\nPradesh case which had no such jurisdiction under Section 34
\nof  the\t Indian\t Trusts\t Act.  The  first  contention  must,
\ntherefore, be rejected.\n<\/p>\n
Contention No. 2<\/span><\/p>\n
—————-\n<\/p>\n
     So\t far   as  this\t  contention  is  concerned  it\t was
\nvehemently contended  by  learned  senior  counsel  for\t the
\nRevenue that  Civil Court will get jurisdiction to entertain
\nrectification proceedings provided any of the two conditions
\nprecedent are  satisfied, namely, (i) through fraud; or (ii)
\nby mutual  mistake of parties the instrument in writing does
\nnot express  real intention  of parties.  So far as fraud is
\nconcerned it  is not the case of anyone that either party to
\nthe instrument\thad committed any fraud. In fact the learned
\nsenior counsel\twent to\t the extent of submitting that there
\nare not\t two parties  in  an  instrument  of  trust.  It  is
\ndifficult to  agree. Settlor  is one  party to the trust who
\nsettles his  property in trust for the benefit of others who
\nbecome beneficiaries and the legal ownership of the property
\nis transferred to the trustees. Thus not only there are more
\nthan one  party to the instrument of trust but in fact there
\nwould at  least be  two main parties, namely, the settlor on
\nthe one\t hand and  the trustees\t on the other and also there
\nwill be\t the beneficiaries  who would  be  indirectly  third
\nparties to  the instrument  though not\tbeing direct parties
\nthereto. Thus  it would\t be almost a tripartite transaction.
\nDr. Gauri  Shankar then\t submitted that even if it is so, no
\nmutual mistake was alleged in the rectification proceedings.
\nEven this contention cannot be accepted. The Settlor Company
\nhad clearly  indicated in the rectification proceedings that
\nthe real  intention  of\t the  settlor  to  create  a  public
\ncharitable trust was not clearly brought out on the wordings
\nof the\toriginal Trust\tDeed and,  therefore,  the  need  to
\nrectify the  instrument, as  neither the Settlor Company nor
\nthe trustees who assumed the legal ownership of the property
\nsettled in  trust would\t have agreed  to the  transaction in
\nquestion  if  it  had  purported  not  to  create  a  public
\ncharitable trust.  It was this mutual mistake on the part of
\nboth  the   parties  that   required  rectification  of\t the
\ninstrument to  make, what was latent intention a patent one.
\nEven that apart it is strictly not open to the Revenue which
\nis not\ta  party  to  the  instrument  to  take\t up  such  a
\ncontention about non-fulfilment of condition precedent as it
\nwould be  a fact  in issue  before the competent court which
\nwas called  upon to  rectify the instrument by either of the
\nparties to the instrument. Absence of such a condition would
\nat the\tmost make  the order  erroneous\t and  which  can  be
\nchallenged by  either of  the parties to the proceedings but
\nit will\t have no  impact on  the jurisdiction  of the  Civil
\nCourt to  pass such an order however erroneous it may appear
\nto be  to the  Revenue. At  the highest\t such an error would
\nremain in the realm of error in the exercise of jurisdiction
\nand not\t an error  depriving jurisdiction  to the  competent
\ncourt to  entertain such  rectification proceedings. In this
\nconnection it  is profitable  to have a look at the decision
\nof Delhi High Court in the case of Jagdamba Charity Trust v.
\nCommissioner  of  Income-Tax,  Delhi  (Central)<\/a>\t (1981)\t 128
\nI.T.R. 377.  In that case Deed of Trust was got rectified by
\nthe parties  from the  Civil Court. These proceedings had to
\nbe initiated  in the  light of\tjudgment of  the High  Court
\nwhich had  held that due to provisions in certain clauses of
\nthe Trust  Deed the  trust was\tnon-charitable and the trust
\nwas not\t entitled to exemption under Income-tax Act and that
\nsince the  decision had\t created some  doubts regarding\t the
\nvalidity of  some clauses  of the deed it was necessary that
\nthe deed  should be  rectified. The  Civil Court  granted  a
\ndecree and  directed that  the Trust  Deed be rectified. The
\nquestion was  whether such  rectification order of the Civil
\nCourt was  binding on  the Income  Tax Department  when\t the
\nassessee-trust armed  with such\t rectification order claimed
\nexemption from\tincome tax under Section 11 of the 1961 Act.
\nS. Ranganathan,\t J., as\t he then was, speaking for the Delhi
\nHigh Court  took the view that the word ‘instrument’ used in
\nSection 26  of the  Specific Relief  Act  has  a  very\twide
\nmeaning and  includes every  document by  which any right or
\nliability is,  or is  purported to  be created, transferred,
\nlimited, extended,  extinguished or  recorded. There  is  no
\nreason to  exclude a  Trust Deed  from its  purview. A Trust
\nDeed  is   a  document\twhich  sets  out  the  terms  of  an
\nunderstanding between  the  author  of\tthe  trust  and\t the
\ntrustees. Though  in form,  the trustees are not signatories
\nto the\tinstrument as  drawn up,  they are  parties  to\t the
\ninstrument in  a real  sense for  it is\t on the terms of the
\ninstrument that they accept office and proceed to administer
\nthe trust. The law obliges them to act upon the terms of the
\nTrust Deed  and they  cannot commit  a breach  thereof. If a
\ngift deed,  sale deed or promissory note could be within the
\nterms of  the section,\tthere is  no reason why a Trust Deed
\ncannot be  rectified under  Section 26.\t It was further held
\nthat since  there was an order of Civil Court binding on the
\nauthor and  the trustees,  they could  administer the  trust
\nonly in\t terms of  the amendment  directed by the Court. The
\ntrustees were  and must\t be deemed,  from the  beginning, to
\nhave been  under a  legal obligation  to hold the properties
\nonly for the object and with the powers set out in the Trust
\nDeed  as   amended.  Therefore,\t  whatever  might   be\t the
\ncorrectness or\totherwise of  the order\t passed by the Civil
\nCourt under  Section 26 of the Specific Relief Act, 1963, it
\nwas not\t open to  the Income-tax  Officer to  say  that\t the
\ntrustees could\tadminister the\ttrust in accordance with the
\noriginal deed  and that\t the claim  for exemption  had to be
\ndealt with  on the  basis of  the original  deed. Nor was it
\nopen to\t the Income-tax\t Officer to say that in the relevant
\naccounting year,  the trustees\theld the property subject to
\nthe terms  of the  original and not the amended deed. In our
\nview the  aforesaid decision  of the  Delhi High  Court lays
\ndown  the   correct  legal   position  in   connection\twith
\nproceedings for\t rectification\tof  instruments\t like  trust
\ndeeds, initiated  before competent  civil courts  under\t the
\nrelevant provisions of the Specific Relief Act.\n<\/p>\n
     In the  case of  Laxminarain Lath Trust v. Commissioner
\nof Income-tax  (1988) 170  I.T.R. 375  a Division  Bench  of
\nRajasthan High\tCourt speaking\tthrough S.C. Agrawal, J., as
\nhe then\t was, had  to  consider\t the  question\twhether\t any
\nrectification of  the Trust  Deed which changed character of
\nthe private  trust into\t public charitable  trust  could  be
\nrelied upon  before the\t Income Tax authorities for claiming
\nexemption under\t Section 11  of the  Income-tax Act, 1961 by
\nthe assessee-trust.  In that  case the\toriginal Trust\tDeed
\nexecuted in August 1948 did not bring out the real intention
\nof the\tsettlor to  create  a  public  charitable  trust  on
\naccount of  certain sub-clauses\t of Object  Clause No. 2. It
\nwas, therefore, felt necessary to rectify the mistake in the
\noriginal settlement  deed so  as to  put on  record the true
\nintention of the settlor and of the trust created by him. It
\nwas held by the Rajasthan High Court that it was permissible
\nfor the\t settlor to  clarify his  intention  increating\t the
\ntrust under  the original  settlement deed  by executing the
\nsupplementary deed.  Even in the original deed, a discretion
\nhad been  conferred on\tthe trustees  to apply the income of
\nthe trust  in rendering\t aid to\t persons belonging  to the L
\nfamily and  it was permissible for the trustees not to apply
\nthe income  of the trust for the said object and in fact the
\nincome of  the trust had never been applied for that object.
\nIt could  not be  said that  the beneficiaries\tunder clause
\n2(vi), namely,\tpersons belonging to the family of L, had an
\nenforceable right  to the  application of  the income of the
\nassessee for  the object  mentioned in\tclause 2(vi), and in
\nthese circumstances  their consent  was not necessary before
\naltering the  terms of\tthe Trust Deed. In any case although
\nthe supplementary deed was executed in May 1958, none of the
\npersons belonging  to the  family of  L had  challenged\t the
\nvalidity of  the same in a court of law. After the execution
\nof the\tsupplementary deed,  it was not open to the trustees
\nto apply  the  funds  of  the  assessee\t for  non-charitable
\npurposes. The  assessee-trust had  acquired the\t status of a
\ntrust wholly for charitable and religious purposes after the
\namendment of  the Trust Deed in May 1958. It was entitled to
\nexemption under\t Section 11 of the Income-tax Act, 1961. The
\ndoctrine of  cy pres  was also\tinvoked in  the said case by
\nobserving that\tin respect  of christie the courts apply the
\ndoctrine  of   cy  pres\t which\tenvisaes  that\tif  a  clear
\ncharitable intention  is expressed, it will not be permitted
\nto fail\t because the  mode, if specified, cannot be executed
\nand the\t law will  substitute another mode cy pres, i.e., as
\nnearly as  possible to\tthe mode specified by the donor. The
\nsaid doctrine  is applied  on the  principle that  the court
\nwould  lean  in\t favour\t of  charity  and  where  a  general
\ncharitable goal\t is projected  and  particular\tobjects\t and
\nmodes are indicated, the court, acting to fulfil the broader
\nbenevolence of the donor and to avert the frustration of the
\ngood to\t the community,\t reconstructs, as  nearly as may be,
\nthe charitable\tintent and  makes viable  what otherwise may
\ndie. The aforesaid decision of the Rajasthan High Court also
\ntakes a\t view which  is almost parallel to the view taken by
\nthe Delhi  High Court  though  the  binding  nature  of\t the
\nrectification order  of the  civil court  on the  Income Tax
\nOfficer is  not highlighted  as no  such occasion  arose for
\nRajasthan High\tCourt to  pronounce on the same on the facts
\nof that\t case. However,\t the fact  remains  that  after\t due
\nrectification of  the original\tTrust  Deed  either  by\t the
\nsettlor himself\t by executing  a supplementary\tdeed  or  by
\ngetting it rectified through competent civil court under the
\nrelevant provisions of the Specific Relief Act, the trustees
\nwould be  bound to  carry  out\tthe  amended  and  rectified
\nobjects of the trust and if they fail to do so they would be
\nguilty of  breach of trust for which even proper proceedings
\ncan be\tinitiated against  them under Section 92 of the Code
\nof Civil  Procedure. For  all these  reasons, therefore,  it
\nmust be\t held that when such rectified Trust Deed is pressed
\nin service  before the\tIncome-tax authorities in assessment
\nproceedings concerning\tthe relevant  assessment  years\t the
\nIncome-tax Officer  will have  to interpret  such  rectified
\ninstrument for\tfinding out its correct legal effect. But it
\nwill not be open to the Income-tax Officer to refuse to look
\nat such rectified instrument of trust and to insist that the
\ntrustees of  the trust\tshould\tignore\tthe  said  rectified
\nobjects and  should stick  to the  instrument as  it existed
\nprior to its rectification. The Income-tax officer will have
\nto take\t the instrument\t as it\texists in its actual amended
\nform  when   it\t is  pressed  in  service  for\tframing\t the
\nassessment concerning  the relevant assessment year in which
\nsuch  rectified\t instrument  holds  the\t field.\t The  second
\ncontention, therefore, fails and is rejected.\n<\/p>\n
Contention No. 3<\/span><\/p>\n
—————-\n<\/p>\n
     So far  as\t this  contention  is  concerned  Dr.  Gauri
\nShankar, learned  senior counsel  for the  Revenue was right
\nwhen he\t contended that\t order of  rectification by  a civil
\ncourt is  not a\t judgment in  rem. It would be a judgment in
\npersonam binding on the parties to the rectified instrument,
\nnamely, the  settlor on the one hand and the trustees on the
\nother as  well as  on the ultimate beneficiaries. It is also
\ntrue that Section 41 of the Indian Evidence Act cannot apply
\nto such rectification order as under the said provision only
\njudgments  and\t orders\t passed\t  in  exercise\tof  probate,
\nmatrimonial admirality or insolvency jurisdiction would have
\nthe character  of judgments  in rem. Similarly Section 42 of
\nthe Indian Evidence Act also could not make them relevant in
\nany enquiry  or proceedings unless they relate to matters of
\na public  nature relevant  to the  enquiry.  However  it  is
\nSection 43  of the  Evidence Act  which would  squarely\t get
\nattracted  in  such  cases.  Said  section  lays  down\tthat
\njudgments, orders  or decrees  other than those mentioned in
\nsections 40, 41 and 42, are irrelevant, unless the existence
\nof such\t judgment, order or decree is a fact in issue, or is
\nrelevant under\tsome other provision of this Act. Section 40
\ndeals with ‘previous judgments relevant to bar a second suit
\nor trial’. That obviously cannot have any application. But a
\nrectified Trust\t Deed pursuant\tto the\torder of  the  court
\nwould certainly\t make the rectification order relevant under
\nthe provisions\tof Section 11 of the Indian Evidence Act, as
\nthe fact  in issue  in\tan  enquiry  before  the  Income-tax
\nOfficer would be whether on the basis of the rectified trust
\ninstrument the\tassessee-trust is entitled to get its income
\nexempted from  tax under  the  relevant\t provisions  of\t the
\nIncome-tax Act.\t In such  proceedings, therefore,  the order
\ngranting rectification\tof such\t instrument of\ttrust  would
\ncertainly remain  relevant. Consequently  it cannot  be said
\nthat  such  rectification  orders  passed  by  civil  courts
\npermitting rectifications  of trust deeds under the relevant
\nprovisions of  the Specific  Relief Act\t could not be relied
\nupon by\t the assessee-trust in assessment proceedings before
\nthe Income-tax Officer was not a party to such rectification
\nproceedings. It\t will  be  for\tthe  Income-tax\t Officer  to
\nconsider the  real scope  and ambit  of the  Trust  Deed  as
\npresented to  him in  rectified form  with a view to finding
\nout whether  on the basis of such a rectified instrument the
\nassessee trust\thad earned  exemption from payment of income
\ntax under  the relevant\t provisions holding the field in the
\nconcerned  assessment\tyears.\tThe   third  contention\t is,
\ntherefore,   decided\tby   answering\t that\tthough\t the
\nrectification orders of the civil court are not judgments in
\nrem they  are relevant\tin assessment proceedings before the
\nIncome-tax Officer  and will  have to be given effect to for
\nwhatever they are worth.\n<\/p>\n
Contention No. 4<\/span><\/p>\n
—————-\n<\/p>\n
     So far  as this  contention is concerned learned senior
\ncounsel for  the Revenue  is spared  his  pains\t as  learned
\nsenior counsel\tfor respondent-assessee fairly stated in the
\nlight of the debate that took place in the Court that he was
\nnot supporting\tthe answer given by the High Court in favour
\nof assessee  on Question  No. 2\t referred for the opinion of
\nthe High  Court at  the instance  of the  assessee-trust. In
\nshort he submitted that he would treat 1955 rectification of
\nthe instrument\tof trust  as creating  almost a new trust or
\nsubstituting the  new for  the old  and, therefore, he would
\nnot press  that such  rectification of\t1955 would  have any
\nretrospective effect. In view of the fair stand taken by the
\nlearned senior\tcounsel for  the  respondent-assessee,\tthis
\ncontention will\t have to be decided in favour of the Revenue
\nand against  the  assessee  by\tholding\t that  rectification
\nbrought about  by the  order of\t the civil  court  in  1955,
\nnamely, the second rectification had no retrospective effect
\nand would  operate prospectively from the date on which such
\nrectification saw  the light  of the  day  and\twould  cover
\nassessment years 1956-57 onwards upto assessment years 1965-
\n66 and\twould not look back on the previous assessment years
\nfrom 1949-50  to 1955-56. In other words the decision of the
\nTribunal on  referred Question\tNo. 2  will remain operative
\nand that  contrary answer of the High Court on this question
\nwould stand rejected.\n<\/p>\n
Contention No. 5<\/span><\/p>\n
—————-\n<\/p>\n
     Having cleared  the Revenue’s  stand in connection with
\nthe Trust  Deed in question for the assessment years 1949-50
\nto 1955-56  as aforesaid,  Dr. Gauri Shankar, learned senior
\ncounsel for  the Revenue  set his  sails on  the  subsequent
\nassessment years  1956-57 onwards  wherein the Trust Deed as
\nrectified in  1955 held\t the field.  He submitted  that even
\nafter the rectification of 1955 the situation had not at all
\nimproved for  the respondent-trust and it remained a private
\ntrust and  not a  public charitable  trust. So\tfar as\tthis
\ncontention is concerned it was vehemently opposed by learned
\nsenior counsel\tfor respondent-assessee, Shri Verma. In fact
\nthis has  remained now\tthe real  bone of contention between
\nthe warring parties.\n<\/p>\n
     In\t order\tto  resolve  this  controversy\tit  will  be
\nprofitable to  have a  close look at the relevant provisions
\nof the Trust Deed of 1941 as amended in 1955 pursuant to the
\nsecond rectification  order of\tthe civil  court.  The\tsaid
\nTrust Deed  as amended\tin 1955\t is found at Annexure ‘J’ to
\nthe Paper  Book Volume\tII. Leaving  aside the\tintroductory
\nrecitals, the  relevant operative recitals in the Trust Deed
\nread as under :\n<\/p>\n
\n“1. That  in exercise  of the power reserved to it under the
\nMemorandum of Association and for effectuating its object of
\nestablishing a\ttrust or  settlement for public religious or
\ncharitable  purposes  including\t trust\tor  settlements\t for
\nrelief of property, education medical relief and advancement
\nof any\tother object  of general public utility of religious
\nor charitable  nature, the  Company both hereby grant convey
\nand assure  upto the  Trustees the said plot of land situate
\nat Cawnpore  and numbered  as 1\t in Block  H Factory Workmen
\nArea containing\t by admeasurement 43.70 (forty three decimal
\npoint  seventy)\t  acres\t more\tor  less  and  more  clearly
\ndelineated and\tshown  on  the\tplan  annexed  to  the\tsaid
\nIndenture bearing  date the  19th day  of October  1936\t and
\nthereon marked\tred as also the said plot of land situate at
\nCawnpore and  numbered as  2 in Block H Factory Workmen Area
\ncontaining by  admeasurement 26.30 (twenty six decimal point
\nthirty) acres  more or\tless and more clearly delineated and
\nshown on  the plan  annexed to\tthe said Indenture dated the
\n2nd day\t of February  1938 and\tthereon marked\tred TOGETHER
\nWITH   all way\twells waters  water  courses  swers  ditches
\ndrains trees  shrubs liberties\teasements profits privileges
\nand appurtenances  whatsoever to  the  said  plots  of\tland
\nrespectively belonging\tor in any wise appertaining with the
\nsame or\t any part  thereof now\tor at  any  time  heretofore
\nusually held occupied or enjoyed therewith and all the state
\nright title  interest claim  and demand whatsoever at law or
\nin equity  of it  was the  company into or upon the said two
\nplots of land and every part thereof TO HAVE AND TO HOLD THE
\nSAID two plots of land hereby conveyed granted or assured or
\nexpressed so  to be  and every\tpart thereof unto and to the
\nuse of\tthe Trustees  for ever\tto be  by them held upon the
\ntrusts\tand  with  the\tsubject\t to  the  powers  provisions
\nagreements and\tdeclarations in\t respect thereof hereinafter
\nappearing and contained.\n<\/p>\n
2. The\tTrustees do  hereby declare that they shall hold and
\nstand possessed\t of the\t said two  plots of  land  upon\t the
\ntrusts following namely :\n<\/p>\n
(a) To manage the said two plots of land (hereinafter called
\n“the Trust Properties” which term shall include any security
\nor securities  or investments  of any  kind whatsoever\tinto
\nwhich the  same or  any part  thereof may  be converted\t and
\nvaried from  time to time and such as may be acquired by the
\nTrustees or  come to their hands by virtue of these presents
\nor by  operation of  law or otherwise however in relation to
\nthese trusts  as also  all  donations  funds  or  endowments
\neither in  the shape  of cash  shares  securities  or  other
\nmovable or  immovable properties  which may  be given to the
\nTrustees by  any person\t whosoever for\tthe benefit  of\t the
\nTrusts hereby  created) and to collect and recover the rents
\nprofits and  other income  thereof and\tto pay\tthereout the
\nexpenses of  collection of  such income\t and the rates taxes
\nassessments and other outgoings in respect of any properties
\nthat may  at any  time be  comprised in the Trust properties
\nincluding the  premia for  insurance of\t any  such  property
\nagainst loss  or  damage  by  fire  or\tlightning  or  civil
\ncommotion air-raids  and other risks or losses or damages as
\nthe Trustees  may in  their absolute discretion think proper
\n(but so\t that nothing  herein  contained  shall\t impose\t any
\nobligation on  the Trustees  to insure\tany of\tthe premises
\ncomprised in  the Trust Properties which they do not wish to
\ndo  so)\t  as  also  to\tpay  the  expenses  of\tpainting  or
\nwhitewashing  the  buildings  and  structures  that  may  be
\ncreated on  the said  Trust Properties\tand of effecting all
\nrepairs additions  and alterations thereto as well as to all
\nplant and  machinery which  may be  lying thereon or affixed
\nthereto.\n<\/p>\n
(b) To\terect, establish,  equip, furnish,  fit maintain and
\nrepair on the said two plots of land any other land that may
\nhereafter be  acquired by  the Trustees\t on  behalf  of\t the
\nTrust.\n<\/p>\n
(i)  residential  quarters,  chawls  or\t buildings  for\t the
\nworkmen in  the town of Kanpur and the surrounding areas and
\nextensions and\tfor their respective families and dependents
\nand for\t such other  skilled and unskilled workmen craftsmen
\ntraders merchants  technical or\t professional men  whom\t the
\nTrustees may  permit to reside or work in the said two plots
\nproved that the benefit in this clause shall be granted only
\nto those  persons who  on account  of poverty are in need of
\nhelp and really deserve help.\n<\/p>\n
(ii) Public  schools, pathshalas, colleges, libraries public
\nhalls, hostels or boarding houses.\n<\/p>\n
(iii) Hospitals,  dispensaries, museum places or recreation,
\ninstruction, swimming  baths,  lakes,  parks,  play-grounds,
\ntemples, mosques,  churches, a\tmarket or  markets and\tsuch
\nother works and institutions of general public utility.\n<\/p>\n
(iv) such  other works,\t building and  installations as\t the
\nTrustees may  in their\tdiscretion think  fit to provide for
\nthe advancement\t of any\t other\tsimilar\t object\t of  general
\npublic utility.\n<\/p>\n
(c) To\terect, establish,  equip, furnish  fit maintain\t and
\nrepair on  the second of the aforesaid two plots a temple, a
\nhospital with  all necessary quarters for housing its staff,
\nan office  or offices  for the management and administration
\nof the\tColony or  Settlement to  be established on the said
\ntwo plots  and quarters\t for the  office staff\tand a  water
\npumping station and similar other works.\n<\/p>\n
(d) To\tcharge such  rent or fees for the use and occupation
\nof any\tof the\tsaid premises  as the  Trustees may in their
\ndiscretion from time to time think fit.\n<\/p>\n
(e) To\tuse and\t spend the income of the Trust properties or
\nthe corpus  of any  funds or  donations given or endowed for
\nthe  benefit   of  these   trusts  for\tthe  objects  herein
\nmentioned.”\n<\/p>\n
\nA mere\tlook at\t the aforesaid\tobjects of  the trust  which
\nremained   operative\tand   kicking\tafter\tthe   second
\nrectification  of  1955\t shows\tthat  each  of\tthe  objects
\nmentioned in  clauses (b), (c), (d) and (e) of Object Clause
\n2 clearly partakes the character of a charitable disposition
\nmeant for the benefit of a well demarcated mass of humanity.
\nThere is  not much  dispute on\tthis aspect, so far as paras
\n2(a) and  (b)(ii) to  (iv), (c),  (d) and (e) are concerned.
\nHowever learned\t senior counsel\t for the  Revenue vehemently
\nsubmitted that\tleaving aside  the objects mentioned in para
\n2(b), sub-paras\t (ii), (iii) and (iv) so far as sub-para (i)
\nof clause  (b) of  para 2 is concerned, at least that object
\ndoes not  create a  public charitable  trust as\t the  object
\nmentioned therein  namely constructing residential quarters,
\nchawls or  buildings for  the workmen  in the town of Kanpur
\nand surrounding\t areas was  a very vague object. It was next
\ncontended that\tthough the object is so widely worded, it in
\nsubstance is  meant to\tbenefit\t only  the  workmen  of\t the
\ncompany if the entire history of the trust from 1941 onwards
\nis minutely  scrutinised. It  was  submitted  by  Dr.  Gauri
\nShankar that  initially when  the two  pieces of  land\twere
\nobtained on  concessional rates\t from the Improvement Trust,
\nKanpur in  1941 by  indentures of  19.10.1936  and  2.2.1938
\nrespectively,  they  were  meant  to  be  utilised  for\t the
\nconstruction of\t colonies of  workmen of the Settlor Company
\nitself. That  the original Trust Deed of 1941 without latter
\nrectifications of  1945 and  1955 clearly indicated that the
\nbeneficiaries were only the employees of the Settlor Company
\nand there  was no  whisper about  the benefit to humanity at
\nlarge or  to members  of the  general public.  Thus  it\t was
\nclearly a  private trust.  That though\tby rectification  of
\n1945 the  term\t‘workmen  in  general’\twas  introduced\t for
\nindicating the\tclass of  beneficiaries,  in  substance\t the
\nbenefit was  reserved to  the workmen of the Settlor Company
\nitself, and  that even\tafter 1955  rectification, the words
\n‘workmen in  general’ in  Kanpur and  surrounding areas\t and
\nextensions remained a mere camouflage. It is not possible to
\nagree with  the aforesaid  submissions of the learned senior
\ncounsel Dr.  Gauri Shankar, for the Revenue. The reasons are
\nobvious. It cannot be said that the indicated beneficiaries,
\nnamely, the  workmen in\t the town  of Kanpur and surrounding
\nareas and  extensions are  so vague as to make the object of
\nthe trust  inoperative or options. Workmen in town of Kanpur
\nand the\t surrounding areas  and extensions  formed a clearly
\nearmarked class or category of members of general public and
\nthey were certainly a part and parcel of the general public.
\nIt is  also not\t possible to countenance the submission that
\nthe words  ‘surrounding areas and extensions of Kanpur town’
\nintroduced   vagueness,\t   in\t the\tidentification\t  of
\nbeneficiaries.\tSurrounding   areas  and   extensions  would
\nnaturally include  those areas which are on the periphery of
\nKanpur town,  and which\t are adjacent  to Kanpur  town. They
\nwould  not   obviously\t include   any\t areas\t which\t are
\ngeographically\tfar   removed  from  and  situated  at\tlong
\ndistance from  Kanpur town and which could not be said to be
\nin the\tvicinity of  the Kanpur town. The words ‘surrounding
\nareas and  extensions of  Kanpur town’ indicate proximity of
\nsuch areas  with the Kanpur town and have a clear nexus with
\nthe geographical boundary of Kanpur town. It is also easy to
\nvisualise that\tthe trustees will have to make available the
\nbenefit of  the clause\tonly to those workmen in the town of
\nKanpur and  surrounding areas  and extensions  and to  their
\nrespective families and dependents who on account of poverty
\nare in\tneed of\t help and really deserve help. Any provision
\nmade for  a poor class of public well earmarked as recipient
\nof such\t benefits would\t certainly make\t the object  of such
\nbounty a  charitable one.  In fact  Dr. Gauri Shankar fairly
\nstated that  if one  only goes by the verbiage of the clause
\nas found in 1955 rectified deed then it would appear to be a
\npublic charitable trust. But he submitted that we have to X-
\nray the\t clause and  try to  find out as to who are the real
\nbeneficiaries  of   the\t said  trust.  It  is  difficult  to
\ncountenance even  this submission.  In\torder  to  find\t out
\nwhether the relevant clauses of a trust deed create a public
\ncharitable trust  or not  we have to go by the express words
\nemployed by  the Trust Deed. In our view for finding out the
\nreal intention\tof the\tsettlor, the  words used in the Deed
\nwould  be  the\treal  vehicle  of  thought  of\tthe  settlor
\nexpressing his\tintention in  cold print. This would be much
\nmore so\t when such  recitals  in  the  Trust  Deed  are\t not
\nchallenged on  the ground  that they  are a  camouflage or a
\nresult of  a colourable\t device. As  we have  noted earlier,
\ncontention regarding  colourable device\t was not  pressed by
\nDr. Gauri  Shankar for\tthe Revenue and rightly so as it did
\nnot arise  out of  the judgment\t under appeal.\tOn the other
\nhand, on  the express language of clause 2(b)(i) of the 1955
\nrectified deed,\t it cannot be said that it does not create a
\npublic charitable trust. On the contrary it becomes clear on
\na close\t reading of  relevant provisions of this clause that
\nthe objects  are specific  and\tcharitable  in\tnature.\t The
\nbeneficiaries are  also clearly\t indicated. There is also no
\nambiguity about\t the trustees  or the trust properties. Thus
\nall  the   basic  requirements\tfor  creation  of  a  public
\ncharitable trust  do exist  on the  express language  of the
\nrelevant sub-clauses  of clause\t (2) of 1955 rectified deed.
\nDr. Gauri  Shankar, learned  senior counsel  for the Revenue
\nthen submitted\tin any case absolute discretion is vested in
\nthe trustees  under the\t Trust Deed  to\t utilise  the  trust
\nincome for  the benefit of any of the sub-classes of workmen
\nin the\ttown of\t Kanpur and  they were\tlikely to divert the
\nentire benefit\tto their own workmen. To say the least it is
\nmerely\ta  discretion  left  to\t the  trustees\tand  not  an
\nobligation of  the trustees that they must necessarily spend
\nthe income  of the  trust for  the workmen  of\tthe  settlor
\ncompany itself\tand not for the benefit of any other outside
\nworker. We  shall deal\twith this  aspect in greater details
\nwhen we\t will refer to Contention No. 6 canvassed by learned
\nsenior counsel\tfor the\t assessee trust that even apart from
\nthe rectification  of 1955 the earlier rectification of 1945
\ndid create  a public charitable trust. However so far as the
\nsecond rectification  of 1955  is concerned  it has  clearly
\nindicated that\tonly a\tdiscretion is vested in the trustees
\nto utilise  the trust  income for benefit of poor workmen in
\nthe  town  of  Kanpur  and  in\tthe  surrounding  areas\t and
\nextensions and\tthat may include even poor and needy workmen
\nof the settlor company itself. In this connection Shri Verma
\nalso rightly invited our attention to Section 92 of the Code
\nof  Civil  Procedure  and  clause  (i),\t sub-clause  (b)(iv)
\nwhereby trustees  in  their  discretion\t could\tprovide\t for
\nadvancement of\tother  similar\tobjects\t of  general  public
\nutility. Relying  on a\tseries of decisions of this Court in
\nCommissioner of\t Income-Tax, Madras  v.\t Andhra\t Chamber  of
\nCommerce<\/a> (1965) 55 ITR 722; Ahmedabad Rana Caste Association
\nv. Commissioner\t of Income-Tax,\t Gujarat<\/a> (1971)\t 82 ITR 704;
\nAbdul Sathar  Haji Moosa Sait Dharmastapanam v. Commissioner
\nof Agricultural\t Income-Tax, Kerala<\/a>  (1973) 91\tITR 5;\tSole
\nTrustee, Loka  Sikshana Trust v. Commissioner of Income-Tax,
\nMysore<\/a>\t(1975)\t 101  ITR  234;\t Yogiraj  Charity  Trust  v.
\nCommissioner of\t Income-Tax, New  Delhi<\/a> (1976)\t103 ITR 777;
\nand Commissioner  of Income-Tax,  Madras etc.etc.  v. Andhra
\nChamber of  Commerce etc.etc.  (1981) 130  ITR\t184  it\t was
\nsubmitted that\tobjects\t of  general  public  utility  would
\nclearly indicate  that they are meant for public benefit and
\nwould create a public charitable trust. That in the light of
\nthe objects of the trust as rectified in 1955 even a workmen
\nwho is\tnot an\temployee of  the settlor  company  could  in
\nappropriate case seek direction under Section 92, Code
\nof Civil  Procedure, from  competent civil court against the
\ntrustees to  act according  to the  object of  the trust and
\ngive  benefit  to  such\t an  applicant\tbeneficiary  if\t the
\ncircumstances so  permit and  the income  of  the  trust  is
\nsufficient to cater to his needs.\n<\/p>\n
     When confronted  with these  very widely worded objects
\nof the\ttrust, Dr. Gauri Shankar, learned senior counsel for
\nthe Revenue  mounted his attack in the light of clause 30 of
\nthe Trust Deed as rectified in 1955 which reads as under :<\/p>\n
“30. The Trust premises shall be held by the Trustees hereof
\nsubject\t to  the  terms\t and  provisions  of  the  said\t two
\nindentures bearing date the 19th day of October 1936 and 2nd
\nFebruary 1938  and the\tTrustees shall\taccordingly duly and
\nfaithfully observe perform and comply with all the terms and
\nprovisions thereof and all such other terms provisions rules
\nand regulations\t which the  said Cawnpore  Improvement Trust
\nmay from  time to  time impose\tupon them or require them to
\nobserve perform\t and comply with or such as may from time to
\ntime  be   mutually  agreed   upon  between   the   Cawnpore
\nImprovement Trust  and the  Trustees consistently  with\t the
\npowers reserved\t by the\t said Cawnpore\tImprovement Trust in
\nthat behalf under the said two Indentures.”<\/p>\n
It is  no doubt\t true that  the\t trustees  are\tenjoined  to
\nutilise the  trust  properties\tsubject\t to  the  terms\t and
\nprovisions of the indentures dated 19th October 1936 and 2nd
\nFebruary 1938  which require  the trustees  to\tutilise\t the
\ntrust property\tfor the\t benefit of  settlor  company’s\t own
\nworkmen. But  as rightly  submitted by\tShri Verma,  learned
\nsenior counsel for the assessee-trust, the said clause would
\nnot detract  from the  public charitable nature of the trust
\nas projected  by the  relevant operative parts of the object
\nclause to  which we  have made\tdetailed reference  earlier.
\nShri Verma  was also  right when he contended that if at all
\nthe trustees diverted the benefit to the beneficiaries other
\nthan the workmen of the company itself it would give a cause
\nof  action   to\t the   original\t vendor,  namely,  the\tTown
\nImprovement Trust,  which had  taken no\t steps in  all these
\nyears or  made any  grievance about the same and secondly as
\nprovided by  the indentures themselves all that would result
\non account  of any  alleged breach  of the conditions of the
\nindentures on  the part of trustees would be that they would
\nbe  liable  to\tpay  additional\t quantified  amount  to\t the
\noriginal vendor\t and the  concessional rate of consideration
\nfor the\t grant in that eventuality, may stand withdrawn. But
\nit would  not amount  to any  breach of trust on the part of
\nthe trustees if such benefit is conferred on outside workmen
\nwho fell within the clearly earmarked class of beneficiaries
\nas per\tobject clause 2(b)(i). On the contrary, the trustees
\nnot only  would not be alleged to be guilty of any breach of
\ntrust but can be said to have acted according to the objects
\nof the trust.\n<\/p>\n
     Dr. Gauri\tShankar,  learned  senior  counsel  for\t the
\nRevenue next  contended that  as observed  by the  Appellate
\nAssistant Commissioner\tin connection  with assessment\tyear
\n1948-49 not  a pie  of the  income of the trust was utilised
\nduring the  relevant years  by the  trust for the benefit of
\noutside workmen\t and almost nothing was spent on charity. He
\nparticularly  invited\tour  attention\t to  the   following
\nobservations as\t found in  Annexure F-2\t in Volume II of the
\nPaper  Book  which  contains  the  order  of  the  Appellate
\nAssistant Commissioner\tof Income Tax, Range II, Kanpur, for
\nassessment year 1948-49. In paragraph 13 of the judgment the
\nlearned Appellate  Assistant Commissioner  has\tobserved  as
\nunder :\n<\/p>\n
\n“13. The  appreciation of the real nature of the trust would
\nnot be\tcomplete without referring to its balance sheets and
\nthe income  and expenditure  accounts right from the year of
\ninception of  the trust\t upto the  date. I have gone through
\nthe income and expenditure accounts of the various years and
\nI find\tthat not  a single paisa was ever spent by the trust
\nfor charity.  The balance  sheet of the trust shows that all
\nits funds  were mostly employed by the various companies and
\nfirms of  J.K. Group  to whom  huge advances  were made from
\ntime to\t time. A  certain portion  of the trust funds was no
\ndoubt employed\tin the construction, maintenance and repairs
\nof quarters  which were\t let out  to the  employees of\tJ.K.
\nCotton Spg.  & Wvg.  Mills Co.\tLtd.  and  to  other  allied
\nconcerns like J.K. Jute Mills Company, J.K. Hosiery Factory,
\nJ.K. Iron  & Steel  Co. Ltd.  and J.K.\tCotton Manufacturers
\nLtd. but  all the  surplus funds available to the trust were
\neither given  over to the various concerns of J.K. Group for
\nthe advancement\t of  their  business  or  advanced  to\tJ.K.
\nCharitable Trust.  From the  day to day working of the trust
\nalso  it  is  thus  quite  clear  that\tit  ensured  for  no
\ncharitable purposes.”\n<\/p>\n
\nNow it\tmust be at once noted that the said observations are
\nmade in connection with the assessment proceedings for 1948-\n<\/p>\n
49. They would be governed by the Trust Deed as rectified by
\nthe  first   rectification  in\t 1945.\tConsequently   these
\nobservations  cannot  apply  to\t the  interpretation  of  an
\nentirely different  set of  recitals found  in the rectified
\ndeed of\t 1955. Even  that apart\t Shri Verma,  learned senior
\ncounsel for  the  assessee  has\t invited  our  attention  to
\nvarious documents  which are  on record\t in Volume  I of the
\nPaper Book  at pages  21, 28,  176,  179,  183\tand  184  to
\nindicate that  in fact\tbenefit of the income from the trust
\nwas made available not only to workmen of the company but to
\noutside workmen\t also who resided within Kanpur town. It was
\nalso submitted\tthat the  aforesaid documents clearly showed
\nthat the  rent recovered from the workmen who occupied these
\n160 cottages put up by the settlor company on the trust land
\nwas minimal  and was  highly subsidised\t as compared  to the
\nmarket rent.  That water  and electricity were given free to
\nthe beneficiaries  and a  part of  the land  was  also\tmade
\navailable to the Municipality to establish a primary school.
\nIt was also contended that the income tax appellate tribunal
\nitself had  noted in  the common  judgment  from  which\t the
\nreferences arose,  that Appellate Assistant Commissioner had
\nhimself conceded  that no exorbitant rents were charged from
\nthe  tenants   who  occupied  the  residential\tquarters  in
\nquestion and  in fact the average rent recovered showed that
\nthe rents  were only nominal. Shri Verma also submitted that
\nthe Income  Tax Tribunal  had noted the contention on behalf
\nof the\tassessee that as regards rent charged it was pointed
\nout that the average rent realised from 160 cottages was Rs.
\n7660\/- per  annum from 1947-48 to 1964-65. That amenities of
\nwater and  electricity\twere  provided\tfree  and  even\t the
\nschools were free. In other words rent including service and
\nelectricity charges  work out  to less\tthan  Rs.  16\/-\t per
\nmensem for  the accommodation  whose fair  market rate in an
\nindustrial city\t like Kanpur  would be\tover Rs.  150\/-\t per
\nmensem. This  according to  assessee’s\tcounsel\t shows\tthat
\ncottages were  given to poor employees at concessional rent.
\nIn our\tview these contentions on behalf of the assessee are
\nwell  supported\t on  the  evidence  on\trecord.\t It  cannot,
\ntherefore, be  urged that  the trustees\t had indulged in any
\nprofit making while employing the income of the trust on the
\nbeneficial objects  of the Trust Deed and in discharging the
\nobligations with  which they  were charged  under  the\tsaid
\nTrust Deed.  In fact  in fairness  it must be stated that Dr
\nGauri Shankar  did not\talso pursue this aspect any further.
\nBefore parting\twith the  discussion on\t this aspect  we may
\nalso mention  that at  page 410\t of the Paper Book Vol. II a
\nlist of\t tenants not  working in J.K. Group of Mills but who
\nare living  in Kamla  Town Trust  quarters, was furnished by
\nthe respondent-assessee before the Income Tax Tribunal along
\nwith the affidavit of one Shri R.B. Somnath, Engineer of the
\nrespondent-trust. This also showed that the beneficiaries of
\nthe trust  income and properties are not only the workmen of
\nthe  settlor  company  but  also  outside  workmen  who\t are
\nresiding in  Kanpur town  being a  part and  parcel  of\t the
\ngeneral\t public.  It  must,  therefore,\t be  held  that\t the
\nrectified Trust\t Deed of 1955 did create a public charitable
\ntrust as  rightly held\tby the High Court. Contention No. 5,
\ntherefore, stands rejected.\n<\/p>\n
Contention No. 6<\/span><\/p>\n
—————-\n<\/p>\n
     So far  as this contention is concerned it is canvassed
\nfor the\t first time  before us by Shri Verma, learned senior
\ncounsel for  the assessee  trust for supporting the ultimate
\nanswer given  by the  High Court  on Question No. 1 referred
\nfor the\t opinion of  the High  Court at\t the instance of the
\nassessee. Shri\tVerma  submitted  that\tleaving\t aside\t1955
\nsecond rectification even the original Trust Deed of 1941 as
\nrectified in  1945 did create a public charitable trust. The
\nmain plank  of his  argument  was  based  on  the  following
\npremises :\n<\/p>\n
1. Workmen  in general\tand in particular of the company are
\nalso a\tpart and parcel of public and it cannot be said that
\nthey are  not members  of the  general\tpublic\tresiding  in
\nKanpur.\n<\/p>\n
2. We  have to\tjudge the  correct connotation\tof the\tterm
\n‘workmen in  general’ in  the light  of economic  and social
\nconditions  that   prevailed  in  1945\twhen  the  deed\t was
\nrectified.\n<\/p>\n
According  to\tShri  Verma,   construction  of\t residential
\nquarters, chawls or buildings for the workmen in general and
\nin particular  for the workmen, staff and other employees of
\nthe company or other allied concerns under the management of
\nor in  which the  Directors of\tthe company may for the time
\nbeing be  interested and  for their  respective families and
\ndependents and\tfor such other skilled and unskilled workmen
\ncraftsmen traders,  merchants, technical or professional men
\nwhom the  trustees may\tpermit to reside or work in the said
\ntwo plots with a view to supply their needs and requirements
\nor to  render them  services or\t to cater  to  their  wants,
\ncomforts, conveniences\tand amenities, as enjoined by clause
\n2(b)(i) of  the\t Trust\tDeed  as  rectified  in\t 1945  would
\nindicate a  well defined class out of general members of the
\npublic in Kanpur city. It is trite to note that workmen as a
\nclass would  consist of poor and needy persons and it cannot
\nbe said that they would be representing an affluent class of
\nsociety or  public who\twould not  be in need of a roof over
\ntheir head  for themselves  as well as for their dependents.
\nConsequently, implicit\tin the\tsaid provision is the object
\nof charity  for these  poor and\t well defined class of needy
\npersons constituting a part and parcel of the general public
\nresiding in Kanpur.\n<\/p>\n
     On this  premises it  was submitted  that even the 1945
\ndeed did  create a  public charitable  trust.  It  was\talso
\ncontended that\tthe Tribunal  and the High Court had wrongly
\ntaken the  view that  because of the earlier judgment of the
\nAllahabad High\tCourt in  J.K. Hosiery\tFactory (supra), the
\nTrust Deed  as rectified  in 1945  could not be said to have
\ncreated\t a  valid  public  charitable  trust.  That  in\t the
\nproceedings before the Allahabad High Court in the said case
\nrespondent-trust was  not a party. The assessment was of the
\npartnership. Even  otherwise the  said decision could not be
\nbinding on  parties in\tthe present  assessment\t proceedings
\npertaining to  entirely different  years  and  for  entirely
\ndifferent assessee.  Shri  Verma  relying  on  a  series  of
\ndecisions of different courts including this Court submitted
\nthat if\t the Trust Deed provides a charitable object for the
\nbenefit of  a class of public and also gives preference to a
\nsmaller class  of public  which\t may  consist  of  even\t the
\nworkmen of  the settlor\t company or  even the poor and needy
\nrelatives of  the  settlor  himself  the  public  charitable
\nnature of  the trust  does not get whittled down or effaced.
\nOn the\tother hand Dr. Gauri Shankar for the Revenue relying
\nupon number  of other  judgments including  the judgments of
\nChancery Division of English Court submitted that workmen by
\nthemselves cannot  be treated to be a poor class of citizens
\nfor whom  any benefit  given  under  the  Trust\t Deed  would
\nnecessarily make  it a\tpublic charitable  object and if the
\ntrustees under\tthe deed  are under an obligation to provide
\nthe benefit  of the trust properties to the employees of the
\nsettlor company\t itself the  company by\t giving such benefit
\nwould in  turn be  exonerating\titself\tfrom  its  otherwise
\ncontractual  obligation\t or  even  statutory  obligation  of
\nproviding welfare  facilities and  residential facilities to
\nits own\t workmen who  because of these facilities would work
\nmore efficiently  for the  company. Thus there would be quid
\npro quo\t between  the  settlor\ton  the\t one  hand  and\t the
\nbeneficiaries, namely,\tthe workmen  and  employees  of\t the
\ncompany on  the other.\tThat such  a provision would detract
\nfrom real  public charitable nature of the endowment. In the
\nlight of  the aforesaid\t rival contentions  on this issue we
\nshall now proceed to examine this moot question.\n<\/p>\n
     Before we deal with these rival submissions, it will be
\nprofitable to  have a  look at\tthe relevant recitals in the
\nrectified Trust\t Deed of 1945. Clause 2(b)(i) of the Deed of
\nTrust after the said rectification dated 18.8.1945 laid down
\namongst others, the following object :\n<\/p>\n
\n“To erect,  establish, equip,  furnish,\t fit,  maintain\t and
\nrepair on the said two plots of land and any other land that
\nmay hereafter  be acquired  by the Trustees on behalf of the
\nTrust.\n<\/p>\n
(i)  residential  quarters,  chawls  or\t buildings  for\t the
\nworkmen in  general and\t in particular for the workmen staff
\nand other  employees of the company or other allied concerns
\nunder the  management of  or in\t which the  Directors of the
\ncompany may  for the  time being be interested and for their
\nrespective  families  and  dependents  and  for\t such  other
\nskilled and  unskilled workmen\tcraftsmen traders  merchants
\ntechnical or  professional men\twhom the trustees may permit
\nto reside  or work  in the  said two  plots with  a view  to
\nsupply their  needs  and  requirements\tor  to\trender\tthem
\nservices or  to cater  to their\t wants comforts conveniences
\nand amenities.”\n<\/p>\n
\nShri Verma  submitted that if workmen in general represent a
\npoor and needy class of persons who are a part and parcel of
\nthe  general  public  residing\tin  Kanpur,  as\t residential
\nquarters, chawls  or buildings\thad  to\t be  constructed  in
\nKanpur, then  even if  a preference  is given  to  similarly
\nneedy and  poor workmen staff members or the other employees
\nof the\tcompany it  could not  be said\tthat only because of
\nsuch preference the charitable aspect of the endowment would
\nget frustrated\tor would become a private trust. In order to
\nsupport his contention Shri Verma invited our attention to a
\ndecision of  this Court\t in the\t case  of  Trustees  of\t the
\nCharity Fund v. Commissioner of Income-Tax, Bombay<\/a> (1959) 36
\nI.T.R. 513.  In that  case, the\t clause in the Deed of Trust
\nprovided for  grant of\trelief and  benefit to\tthe poor and
\nindigent members  of Jewish community or any other community
\nof Bombay  or other  parts of  Idea  or\t of  the  world\t and
\npreference  was\t to  be\t given\tto  the\t poor  and  indigent
\nrelations or  members of  the  family  of  the\tsettlor\t Sir
\nSassoon David.\tIt was held that despite such preference the
\ntrust would  remain a  public charitable  trust. Relying  on
\nsub-clause (a)\tto (f)\tof clause 13 of the Deed of Trust it
\nwas held that the deed constituted a valid public charitable
\ntrust and  as the  relations or members of Sir Sassoon David
\ndid not\t figure as  direct recipients  of any benefits under
\nsub-clauses  (b)   to  (f)  and\t the  circumstance  that  in
\nselecting the  beneficiaries under sub-clause (a) preference
\nhad to\tbe given  under the  provisos to  the  relations  or
\nmembers of  the family of Sir Sassoon David could not affect
\nthat public charitable trust, the income from the properties
\ncame within  the scope of Section 4(3) (i) of the Income Tax
\nAct and\t were exempt.  Reliance was also placed on number of
\nother decisions\t of various High Courts which obviously fell
\nin line\t with the aforesaid decision of this Court and which
\nhad taken  the view  that if the main benefit of the settled
\nproperty in trust had to go to charity, if the trustees were
\npermitted to  give  preference\tto  poor  relations  of\t the
\nsettlors the  trust would  remain a public charitable trust.
\nIn  this   connection  our  attention  was  invited  to\t the
\ndecisions of  Gujarat High  Court in Commissioner of Income-
\nTax v.\tMoosa Haji  Ahmed and  others  (1964)  52  ITR\t147.
\nCalcutta High  Court in Commissioner of Income-Tax, Calcutta
\nv. Board  of Mutwallis\tto the Wakf Estate, Ebrahim Solaiman
\nSaleji (1968)  69 ITR 758 and three decisions of Bombay High
\nCourt in  Commissioner of  Income-Tax.\tBombay\tCity  II  v.
\nTrustees of  Seth Meghji  Mathuradas Charity Trsut (1959) 37
\nITR 419:  Commissioner of  Wealth-Tax,\tBombay\tCity  II  v.
\nTrustees of  the J.P.  Pardiwala Charity Trust<\/a> (1965) 58 ITR
\n46: and\t Commissioner of Income-Tax, Bombay city III v. D.D.
\nDeshpande (1976) 102 ITR 390.\n<\/p>\n
     On the  other hand\t Dr. Gauri  Shankar, learned  senior
\ncounsel for  the Revenue  submitted that  as the  benefit is
\nmade available\tunder the  Trust Deed  to workmen in general
\nand in\tparticular to  the workmen staff and other employees
\nof the\tcompany it  cannot necessarily\tbe held\t that  these
\nworkmen must be poor and needy as no such words are found in
\nthe clause.  He submitted  that any  Trust  Deed  conferring
\nbenefit on  an identified  group of  persons like workmen or
\nemployees of  the company  would make  the trust  a  private
\ntrust and  not a public charitable trust. In support of this
\ncontention he  heavily relied  upon decision  of the  Madras
\nHigh Court  in Sakthi  Charities v.  Commissioner of Income-
\nTax, Madras<\/a>  (1984) 149\t ITR 624.  In that  case it was held
\nagreeing with  the view\t of the\t Tribunal that\tas the Trust
\nDeed provided  for conferring  benefit only on the employees
\nof M\/s\tSakthi Sugar  Ltd. and the relatives of the deceased
\nemployees, the\tsaid benefits  could not be available to the
\nmembers of  the general public not connected with M\/s Sakthi
\nSugar  Ltd.   Consequently  all\t  these\t clauses   were\t not
\ncharitable in  nature. Our attention was also invited by Dr.
\nGauri Shankar  to two  decisions of the Chancery Division of
\nthe High  Court of  Justice in\tEngland in  Trustees of\t the
\nWilliam Vernon\t& Sons, Ltd. Employees Fund v. Commissioners
\nof Inland  Revenue 36  Tax Cases (Chancery Division) 484 and
\nin Ashworth  v. Drummond  1914 (2)  Chancery Division 90. In
\nTrustees of  the William  Vernon (supra)  the  question\t was
\nwhether a  bequest under  the  will  directing\t20%  of\t the
\nreceived moneys\t to be\tpaid to some organisation or charity
\nat the\tdiscretion of  the  executors  for  the\t benefit  of
\nemployees of  the firm\twould constitute a public charitable
\nendowment. It  was held\t that the objects of the scheme were
\nnot charitable\tonly. Justice  Upjohn at  page\t495  of\t the
\nReport observed as under :\n<\/p>\n
\n“Thirty years  ago it  was not\talways appreciated  that  in
\norder to  constitute a\tvalid charitable  trust it must be a
\npublic trust,  and  that  if  a\t trust\tis  limited  to\t the
\nemployees of  a company\t the personal  nexus constituted  by
\nthat common  employment does  not satisfy the necessary test
\nof the character of publicity. That is now well established,
\nand it\twas established\t in a  line of authorities after the
\nlast war culminating in Oppenheim v. Tobacco Securities Co.,
\nLtd. in\t the House of Lords in 1951. Therefore, it is common
\nground that  the scheme does not constitute valid charitable
\ntrusts…”\n<\/p>\n
\nIn Re  Drummond (supra)\t it was\t held that  work  people  in
\nquestion could\tnot be\tregarded as  poor people  within the
\nstatute of Elizabeth. In our view the aforesaid decisions of
\nEnglish Chancery Courts cannot ipso facto be made applicable
\nto workmen  residing in\t this country  and who\thad to\tface
\nentirely different  socio-economic conditions, especially in
\n1945, when  the rectified  object of  the Trust Deed saw the
\nlight of  the day.  While interpreting\tthe word ‘workmen in
\ngeneral’ as  employed in  1945 rectified Trust Deed, we have
\nto sit\tin settlor’s  arm chair\t with a\t view to visualizing
\nwhat was  meant by  the Settlor\t Company when  it used these
\nterms in  1945, keeping\t in view  the then  prevalent socio-
\neconomic conditions in this country. It is easy to visualise
\nthat workmen  who were\tto toil\t for their  existence  would
\nnecessarily represent  a class\tof needy persons requiring a
\nshelter over  their head,  when the  settlor company in 1945
\ncontemplated to\t construct residential\tquarters, chawls  or
\nbuildings for  workmen it necessarily meant to provide these
\nfacilities  for\t  a  needy   class  of\t persons  who  could
\nlegitimately be\t presumed to  be  a  class  of\tdown-trodden
\npersons suffering  from penury\tand want. The socio-economic
\nsituation prevailing  in England  treating  workmen  as\t not
\nnecessarily poor,  cannot almost  automatically be  imported
\nand applied for judging the economic status of working class
\nin India  especially in\t 1945 when  even the  definition  of
\n‘workmen’ under\t the Industrial\t Disputes Act, 1947 had also
\nstill to  see the  light of  the day.  We, therefore, cannot
\nagree with  the general\t proposition canvassed\tby Dr. Gauri
\nShankar for  the Revenue  that any  provision made  for\t the
\nbenefit of  workmen in\tgeneral would  not necessarily\tbe a
\nprovision for  needy or\t poor class  of citizens  who may be
\nforming part of the general public.\n<\/p>\n
     Shri Verma,  learned  senior  counsel  for\t respondent-
\nassessee was  also right  when he  submitted,  relying\tupon
\ndecision of  this Court\t in Trustees  of  the  Charity\tFund
\n(supra) and  other decisions  of the High Courts to which we
\nhave made  a reference\tearlier, that  when any\t property is
\nsettled for charitable purposes for catering to the needs of
\na class\t of public  which is  poor and needy, any preference
\ngiven to poor and needy workmen of the settlor company would
\nnot  necessarily   detract  from   the\t charitable   object
\nunderlying such\t bequest  or  settlement.  It  is  trite  to
\nobserve that if settlor’s poor relatives can legitimately be
\nthe  recipients\t  of  charitable  benefits  under  a  public
\ncharitable trust,  then if  such preference is given to poor
\nworkmen of  the settlor\t company who are not even related to
\nthe settlor,  they would stand at least on an equal if not a
\nbetter footing\tand in no eventuality on a worse footing, in
\njudging the  public charitable\tnature of  the settlement in
\ntheir favour.  However, the  basic fact must remain that the
\nsettlement is  made in\tfavour of  a well earmarked class of
\nneedy and  poor persons\t who may  form a part of the general
\npublic and  for whom such charitable bequest or endowment is
\nmade, and  the preferred  class of beneficiaries must form a
\npart and  parcel of  that very\tgeneral earmarked  class. It
\nmust, therefore, be held that the provision for construction
\nof houses  for ‘workmen\t in  general’  as  found  in  clause
\n2(b)(i) of  1945 rectified  Deed, so  far as  it  went,\t did
\nconstitute a charitable object.\n<\/p>\n
     However, this  conclusion of  ours\t does  not  end\t the
\ncontroversy centering  round the aforesaid clause. There are
\ntwo  clear  hurdles  in\t the  way  of  Shri  Verma  for\t the
\nrespondent which  militate against  his submission  that the
\nsaid clause  when read\tas a  whole  does  create  a  public
\ncharitable trust  in favour of workmen in general. The first
\nhurdle is  that the term ‘workmen in general’ as employed in
\nthe clause  is too  general and vague but even assuming that
\nin the\tcontext\t of  the  residential  quarters,  chawls  or
\nbuildings to  be constructed  for them on the lands situated
\nat Kanpur which are settled in trust by the Settlor Company,
\nit would refer to workmen in Kanpur town, even then the more
\nsubstantial hurdle in the way of the respondent is projected
\nby the fact that there is an obligation cast on the trustees
\nto construct these residential quarters, chawls or buildings
\nin particular  for the workmen, staff and other employees of
\nthe company or other allied concerns under the management of
\nand in\twhich the  directors of the company may for the time
\nbeing be  interested and  for their  respective families and
\ndependents. In\tthe light  of the  words ‘in  particular’ as
\nfound in  this clause,\tDr. Gauri  Shankar,  learned  senior
\ncounsel for Revenue rightly submitted, that they represent a
\nscheme of  priority for\t workmen of  the Settlor Company and
\nnot a  scheme of preference. In other words the trustees are
\nbound under  an obligation to construct residential quarters
\netc. first  for the  workmen or\t employees  of\tthe  Settlor
\nCompany or  its allied\tconcerns. They have no choice in the
\nmatter. They  cannot in\t their discretion  select an outside
\nworkman as  recipient of the benefit under the scheme of the
\nTrust Deed.  In effect\tthe general  class of  beneficiaries
\nconstituted by\tthe words ‘workmen in general’ gets whittled
\ndown and  circumscribed by  the\t words\t‘in  particular\t for
\nworkmen of the company etc.’. Thus in substance it becomes a
\ntrust for  the benefit\tof a  well defined  smaller class of
\nbeneficiaries, namely,\temployees or  workmen of the company
\nand its allied concerns and it fails to meet the requirement
\nof a  genuine or  public or  charitable\t trust.\t We  are  in
\nagreement with\tthis submission\t of Dr.\t Gauri Shankar. Once
\nsuch an\t obligation is\tcast  on  the  trustees\t the  public
\ncharacter  of  the  endowment  gets  whittled  down  and  in
\nsubstance becomes  the settlement for an identified group of
\npersons. In  this connection  we may  profitably refer\tto a
\nDivision Bench judgment of the Bombay High Court in the case
\nof Commissioner\t of Income-Tax,\t Bombay City  II v. Walchand
\nDiamond Jubilee\t Trust<\/a> (1958)  34 ITR  228  wherein  Chagla,
\nC.J., spoke  for the  Bench. In\t that case  the question was
\nwhether the  provision made  in Trust  Deed to\tutilise\t the
\naccumulated  income   of  the\tproperty  of  the  trust  on
\ncharitable objects  like giving\t scholarships  to  deserving
\nstudents or  giving medical  reliefs of\t the nature and kind
\nsuch as\t starting maternity  homes etc.,  or giving monetary
\nhelp to\t the poor and needy persons and for providing relief
\nto the\tpoor and  distressed in\t time of  famine  would\t get
\nadversely affected and would cease to be a charitable object
\nif preference  was to  be  given  to  such  persons  as\t are
\neligible under\tthe aforesaid provisions who are at the time
\nor have\t in the\t past been employees of Premier Construction
\nCo. Ltd. and of the associated companies and their relatives
\nand dependents as the trustees may in their discretion think
\nexpedient and  proper.\tIn  this  connection  the  following
\npertinent observations\twere made by Chief Justice Chagla at
\npage 236 of the Report :\n<\/p>\n
\n“… Now,  undoubtedly, we would have taken a different view
\nof this\t trust if  there was an obligation upon the trustees
\nto prefer  the employees.  In  other  words,  if  the  other
\nmembers of the public were postponed to the employees of the
\nPremier Construction  Co. Ltd.,\t then, looking\tto the other
\nprovisions of  the deed, we might easily have taken the view
\nthat the  main purpose\tof the\ttrust  was  to\tbenefit\t the
\nemployees and the charity to the public was merely illusory.
\nBut there  is no  obligation cast  upon the trustees by this
\nproviso to  prefer the employees of the Premier Construction
\nCo.  Ltd.   It\tis   for  the  trustees\t to  exercise  their
\ndiscretion. In\tthe first  place, they\thave to\t utilise the
\nincome for  carrying out the four objects, and any member of
\nthe public  who comes  within these  four objects  would  be
\nqualified to  receive the bounty of the settlor. If a member
\nof the\tpublic also happens to be an employee of the Premier
\nConstruction Co.  Ltd., it  is open  to the trustees to give
\nhim preference.\t Therefore, the trustees would not be guilty
\nof committing  any breach  of trust if they selected for the
\nbounty of  the settlor such members of the public as did not
\nfall  in   the\tcategory   of  employees   of  the   Premier
\nConstruction Co.  Ltd. That  is the  real test which we have
\ngot to\tapply. We  must not  assume that  the trustees\twill
\nexercise their\tdiscretion dishonestly\tor  improperly.\t The
\ntest is\t whether the  exercise\tof  the\t discretion  of\t the
\ntrustees is  so fettered  that\tthey  are  bound  to  select
\nparticular persons  in preference to others. That is clearly
\nnot the case here…….”\n<\/p>\n
\nIn our\tview aforesaid\tis the\tcorrect test  evolved by the
\nHigh Court. Applying the said test to the clause in question
\nwe  find   that\t though\t  residential  quarters,  chawls  or
\nbuildings are  to be  constructed for the workmen in general
\nand who,  as we\t have already  shown earlier,  may be a well
\ndefined class  of workmen  residing in Kanpur and who may be
\npoor  and   needy  in  the  light  of  their  socio-economic
\nconditions as prevailed in 1945 when the clause was drafted,
\nonce we\t turn to  the second  part of this clause which lays
\ndown in\t clearest terms\t that in particular the quarters are
\nto be  constructed for the workmen staff and other employees
\nof the\tcompany and of its allied concerns, it becomes clear
\nthat no\t discretion is\tleft with  the trustees\t and on\t the
\ncontrary   they are  enjoined,\tcalled\tupon  and  under  an
\nobligation to construct these quarters, chawls and buildings
\nnecessarily for\t the workmen,  staff and  other employees of
\nthe company  and its  allies. It  is also  easy to visualise
\nthat  other  employees\tof  the\t company  may  include\teven
\naffluent employees  who may  not necessarily  constitute  an
\nobject of  charity. Once  this\tconclusion  flows  from\t the
\nwording of  the clause,\t it becomes  clear that reference to
\nworkmen in  general becomes  illusory and the settlement can
\nbe said\t to be\tin substance  meant only for catering to the
\nneeds of  a well  defined group of persons, namely, workmen,
\nstaff and  other employees  of the  company and\t its  allied
\nconcerns and  in that  case on\tthe aforesaid  ratio of\t the
\ndecision of  the Bombay\t High Court,  which we\tapprove, the
\nobject clause  in question  would fall short of creating any
\npublic charitable  trust. In  this connection  we  may\talso
\nrefer to  two decisions,  one of  Calcutta  High  Court\t and
\nanother of  Allahabad High Court, to which our attention was
\ndrawn by  Dr. Gauri  Shankar for the Revenue. In the case of
\nMercantile Bank\t of India (Agency), Ltd., (supra) a Division
\nBench  of   the\t Calcutta   High  Court\t  speaking   through
\nDerbyshire, C.J.,  held that  in order to constitute a valid
\ncharitable trust  it should be for the benefit of the public
\nor the\tspecified section  of  it.  A  fluctuating  body  of
\nprivate individuals  such as the present and future officers
\nand members  of the  staff and\tother employees of a company
\ncould not  be a part of the general public or of any section
\nof the public and therefore the income of the trust fund was
\nnot exempt  from the  payment of  income-tax  under  Section
\n4(3)(i). It  was further  observed that\t Andrew Yule  &\t Co.
\nLtd., and  their subsidiary  concerns  for  whose  employees
\nbenefit was conferred under the deed employed a large number
\nof persons.  The trust\twas for\t the benefit  of  the  past,
\npresent and  future officers, members of the staff and other
\nemployees of  those concerns.  Anyone from  the Secretary or
\nsome other  highly paid\t member of  the staff  down  to\t the
\nlowest menial  may be  included within\tthe benefit  of this
\nfund. Necessitous  circumstances might include the case of a
\nsuperior employee  earning  some  thousands  of\t rupees\t per
\nmonth, who  owing to  some misfortune – say the burning down
\nof his\thouse, or  the loss  of his  property –\t might\tfind
\nhimself suddenly  in Necessitous  circumstances, and in need
\nof money  to replace  his lost\tproperty. The  learned Judge
\ncould see  no reason  why the  administrators  of  the\tfund
\nshould not be in a position to make a grant to such a person
\nto make\t up his\t loss. It might be a most desirable thing to
\ndo and\tthe administrators  might justly think that they had
\nused some  of the  funds to the best advantage. But such use
\ncannot be  said to be for the relief of poverty. Even if (as
\nhad been  argued) the  administrators are  bound to use this
\nfund solely  “to relieve  persons suffering  from indigence,
\nill-health  or\tother  Necessitous  circumstances,”  it\t was
\nimpossible to say that the fund is – to use the words of the
\nsection –  “property held  in trust  wholly  for  charitable
\npurposes.” A  Division Bench  of the Allahabad High Court in
\nthe case  of J.K. Hosiery Factory (supra) had an occasion to
\nconsider the very same clause of the rectified deed of 1945.
\nIt is  of course true that the said decision was rendered in
\nassessment  proceedings\t of  the  firm\twherein\t respondent-
\nassessee was a partner and not in the assessment proceedings
\nof the\trespondent firm\t itself.  Still\t the  interpretation
\nplaced on  the very  same Trust Deed as rectified in 1945 in
\nproceedings to\twhich respondent-assessee  was\ta  party  in
\nanother capacity  cannot be  said to  be totally irrelevant.
\nH.N. Seth,  J., speaking  for the  Division Bench  made\t the
\nfollowing observations in this connection :<\/p>\n
“We are\t doubtful whether  the construction  of\t residential
\ncolony for  workmen in\tgeneral can be regarded as an object
\nof public  charity. While enabling the trustees to construct
\nresidential quarters,  etc., for  the benefit of the workmen
\nin general,  the settlor  made it  clear that such buildings
\nwere not  to be constructed for the benefit of the public in
\ngeneral. The  expression “workmen in general” does not fix a
\ndefinite class\tof public  which is intended to be benefited
\nunder the  deed. What  types of\t employees or workers can be
\nsaid to\t be covered  by this expression is not at all clear.
\nMoreover, the  precise language\t used by  the settlor is “to
\nerect …  residential quarters,  etc., for  the workmen  in
\ngeneral and  in particular  for the workmen, staff and other
\nemployees of  the company or other allied concerns under the
\nmanagement of  …”. This shows that the expression “workmen
\nin general”  was not intended to mean merely poor labourers.
\nThe expression\twas intended  to cover\teven such classes of
\npersons who might be employed in any concern in any capacity
\nwhatsoever and\twho may\t be drawing  high salaries. Making a
\nprovision for  constructing residential\t quarters, etc., for
\nthe benefit  of the  employees irrespective  of whether they
\nare poor  or not,  can hardly  be said\tto be  a  charitable
\nobject or a work of general public utility.”<\/p>\n
As we  have discussed  earlier the term ‘workmen in general’
\nwhen read in the context socio-economic situation prevailing
\nin 1945\t in this  country and  when also  considered in\t the
\ncontext of  construction of  residential quarters, chawls or
\nbuildings in  Kanpur may  partake the  character of  a\twell
\ndefined class  of workmen in Kanpur city who may be poor and
\nneedy, still  as the  trustees\tare  enjoined  to  construct
\nresidential quarters,  Chawls or buildings in particular for
\nthe workmen,  staff and\t other employees  of the  company it
\nfollows that  other employees  of the  company who  are\t the
\nbeneficiaries may  not\tnecessarily  be\t poor  or  needy  or
\naffluent. We,  therefore, concur with the second part of the
\nreasoning of  Allahabad High Court in the aforesaid judgment
\nthough we  are not in a position to subscribe to the general
\nproposition that  construction of  residential colonies\t for
\nworkmen in general cannot by itself be regarded as an object
\nof public  charity. As a result of the aforesaid discussion,
\ntherefore, it  must be held that rectified clause 2(b)(i) of
\n1945 deed  fell short  of projecting  an object\t of a public
\ncharitable nature  and it  could not  be said that under the
\nrectified deed\tof 1945\t the trust  properties were  held by
\nrespondent-trust  wholly   for\t religious   or\t  charitable
\npurposes. It  is of course true that rest of the sub-clauses
\nof clause 2(b) did refer to charitable objects but as one of
\nthe objects  was not  of a public charitable nature it could
\nnot be\theld that  the entire trust was wholly for religious
\nor charitable purposes.\n<\/p>\n
     Now is left the consideration of one submission of Shri
\nVerma, learned\tsenior counsel for the Respondent who relied
\nupon Explanation to sub-section (3) of Section 4 of 1922 Act
\nwhich read as under :\n<\/p>\n
\n“In this sub-section ‘charitable purpose’ includes relief of
\nthe poor,  education, medical  relief and advancement of any
\nother  object\tof  general   public  utility,\tbut  nothing
\ncontained in  clause (i)  or clause  (ii) shall\t operate  to
\nexempt from  the provisions  of this  Act that\tpart of\t the
\nincome from  property held  under a  trust  or\tother  legal
\nobligation for\tprivate religious  purposes which  does\t not
\nensure for the benefit of the public.”\n<\/p>\n
\nIn our\tview the  said Explanation  cannot be of any avil to
\nthe respondent-assessee so far as the rectified deed of 1945
\nis  concerned.\t The  emphasis\tin  the\t Explanation  is  on
\ncharitable objects  of general public utility like relief of
\npoor, education, medical relief and advancement of any other
\nobject of  general public  utility. Once  it  is  held\tthat
\nclause\t2(b)(i)\t  of  1945  rectification  deed\t imposed  an
\nobligation on the trustees to utilise the trust property for
\nthe  benefit  of  the  settlor\tcompany’s  own\tworkmen\t and
\nemployees, it  would cease  to be  projecting an  object  of
\nproviding relief  to poor workmen only. Nor would it advance
\nany other  object of  general public  utility but  would  be
\nconfined to the utility of a well defined class of employees
\nand workmen  of the  settlor company and its allied concerns
\nonly. For  all these  reasons, therefore, it is not possible
\nto accept  the submission  of  Shri  Verma,  learned  senior
\ncounsel for  respondent-assessee based\ton this Explanation.
\nThis contention, therefore, stands rejected.
\nConclusions\n<\/p>\n
———–\n<\/p>\n
     The aforesaid decisions on the contentions canvassed on
\nbehalf of  the rival  contesting parties  by  their  learned
\nsenior advocates, yield the following result :\n<\/p>\n
(i) For\t assessment years 1949-50 to 1955-56 the respondent-
\nassessee would not be entitled to get the benefit of Section
\n4(3)(i) of  the 1922  Act and  income derived by it from its
\nproperties would not get exemption from income tax under the
\nsaid provision.\n<\/p>\n
(ii) For  the assessment years 1956-57 to 1961-62 the income
\nderived by  the respondent-assessee  from  trust  properties
\nduring these  years will  get exempted under Section 4(3)(i)
\nof 1922\t Act as\t the 1955 rectified Trust Deed is held by us
\nto be having objects of wholly charitable nature.\n<\/p>\n
(iii) For the assessment years 1962-63 to 1965-66 the income
\nderived from  trust properties\tby the respondent-trust will
\nbe entitled to exemption from income tax under Section 11 of
\nthe 1961  Act subject  to the compliance with the conditions
\nlaid down  therein as  even during this period the rectified
\nTrust Deed  of 1955  as interpreted by us will be treated to
\nhave held the field.\n<\/p>\n
Final Order\n<\/p>\n
———–\n<\/p>\n
     In the  light  of\tthe  aforesaid\tdiscussion  and\t the
\nconclusions to\twhich we have reached the questions referred
\nfor opinion of the High Court will stand answered as under :
\nQuestions referred at the instance\n<\/p>\n
———————————-\n<\/p>\n
of the assessee in ITR No. 18\/73\n<\/p>\n
——————————–\n<\/p>\n
Question No. 1<\/span><\/p>\n
————–\n<\/p>\n
     Answered in  the affirmative  in favour  of the Revenue
\nand against the assessee.\n<\/p>\n
Question No. 2<\/span><\/p>\n
————–\n<\/p>\n
     Answered in  the affirmative  in favour  of the Revenue
\nand against  the assessee as the answer of the High Court on
\nthis question  was not\tsupported by the learned counsel for
\nthe respondent.\n<\/p>\n
Question referred at the instance\n<\/p>\n
———————————\n<\/p>\n
of Revenue in ITR No. 715\/72\n<\/p>\n
—————————-\n<\/p>\n
Question No. (a)\n<\/p>\n
—————-\n<\/p>\n
     Answered in  the affirmative  in favour of the assessee
\nand against  the Revenue as answer of the High Court was not
\nchallenged before us by learned counsel for the Revenue.
\nQuestion No. (b)\n<\/p>\n
—————-\n<\/p>\n
     Answered in  the negative in favour of the assessee and
\nagainst the  Revenue as the answer of the High Court was not
\nchallenged by learned counsel for the appellant-revenue.
\nQuestion No. (c)\n<\/p>\n
—————-\n<\/p>\n
     Answered in  the affirmative  in favour of the assessee
\nand against  the Revenue as the answer of the High Court was
\nnot challenged by learned counsel for the Revenue.
\nQuestion No. (d)\n<\/p>\n
—————-\n<\/p>\n
     Answered in  the negative in favour of the assessee and
\nagainst the Revenue.\n<\/p>\n
Question No. (e)\n<\/p>\n
—————-\n<\/p>\n
     Answered in  the negative in favour of the assessee and
\nagainst the Revenue.\n<\/p>\n
     In the  result, out  of these  17 appeals\tfiled by the
\nRevenue seven appeals pertaining to assessment years 1949-50
\nto 1955-56  will stand allowed while Revenue’s remaining ten
\nappeals pertaining  to assessment  years 1956-57  to 1965-66
\nwill stand  dismissed. In the facts and circumstances of the
\ncase there will be no order as to costs in these appeals.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Commissioner Of Income Tax, … vs Kamla Town Trust on 16 November, 1995 Equivalent citations: 1996 AIR 620, 1996 SCC (7) 349 Author: M S.B. Bench: Majmudar S.B. (J) PETITIONER: COMMISSIONER OF INCOME TAX, KANPUR Vs. RESPONDENT: KAMLA TOWN TRUST DATE OF JUDGMENT16\/11\/1995 BENCH: MAJMUDAR S.B. (J) BENCH: MAJMUDAR S.B. (J) […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-239938","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nCommissioner Of Income Tax, ... vs Kamla Town Trust on 16 November, 1995 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/commissioner-of-income-tax-vs-kamla-town-trust-on-16-november-1995\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Commissioner Of Income Tax, ... vs Kamla Town Trust on 16 November, 1995 - 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