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Andhra Pradesh High Court
Judges : B.P.JEEVAN REDDY, UPENDRA LAL WAGHRAY
Trustees of H.E.H.The Nizams Pilgrimage Money Trust - Appellant
Versus
Commissioner of Wealth-tax/income-tax - Respondent
Decided On : 03-24-87
WEALTH TAX ACT - SECTION 5 (1) (I) - INCOME TAX ACT - SECTION 11 - TRUST - CHARITABLE OR RELIGIOUS PURPOSES - EXEMPTION - TRUST PROPERTY HELD FOR CHARITABLE OR RELIGIOUS PURPOSES OUTSIDE INDIA - NO EXEMPTION UNDER SECTION 5 (1) (I) OF THE WEALTH TAX ACT - INCOME DERIVED FROM PROPERTY HELD UNDER TRUST FOR CHARITABLE OR RELIGIOUS PURPOSES - EXEMPTION UNDER SECTION 11 (1) (A) OF THE INCOME TAX ACT IF INCOME SPENT WITHIN INDIA.
Fact of the Case:
Late H. E. H. the Nizam had created a number of trusts one of which is "h. E. H. the Nizams pilgrimage Money Trust", constituted under a deed of trust dated 2/11/1950 settling securities of the value of Rs. 22,20,000 as the corpus of the trust. The object of the trust was to provide for the expense of Haj pilgrimage for himself and members of his family accompanying him and for other charitable or religious purposes after his lifetime. The settlor died on 24/02/1967, without ever having gone on pilgrimage. Consequently, the income of the trust was not utilized for any purpose and was accumulating. The case of the assessee-trust is that on account of the restrictions imposed by the Government of India on remittances abroad, they could not spend any money outside India and, therefore, they passed a resolution dated 22/05/1968, resolving to utilize the income of the trust fund, including the accumulation, only for the objects and purposes specified in sub-clauses (v), (vi) and (vii) of clause (e) of paragraph 3.
Finding of the Court:
The court held that the trust property cannot be said to have been held in trust for charitable or religious purposes in India, as contemplated by section 5 (1) (i) of the Wealth-tax Act and, therefore, not entitled to exemption. Under the Income-tax Act, the Tribunal merely chose to follow its earlier decision relating to the assessment years 1969-70 to 1973-74 and negatived the assessees claim for exemption under section 11 of the Act.
Issues: Whether the corpus of the trust fund can be said to have been held in trust for charitable or religious purposes in India and the assessee trust, is therefore, not entitled to exemption under section 5 (1) (i) of the Wealth-tax Act, 1957, in respect of the corpus of the trust fund ?
Ratio Decidendi: The court held that the objects and purposes of the trust are located outside India, and that none of the objects and purposes are to be performed within, nor were intended to be performed within, India. Therefore, the exemption under section 5 (1) (i) is not available to the trust property. The court also held that the resolution of the trustees dated 22/05/1968, is invalid and ineffective. Similarly, the order of the learned Chief Judge dated 29/09/1973, under section 34 of the Trusts Act is equally inoperative and without jurisdiction.
Final Decision: The court answered the question referred to it in R. C. No. 192 of 1980 in the affirmative, i. e. , in favour of the Revenue and against the assessee. There shall be no order as to costs. The court answered the question referred in R. C. No. 139 of 1980 in the following terms : If any part of the income of the trust has been applied to charitable or religious purposes in India in the assessment year 1974-75 or is accumulated or is set apart for application to such purposes in India, the income to that extent is entitled to be dealt with under section 11 (1) (a) and exemption granted in accordance with the said section. The Tribunal shall verify the necessary facts and pass appropriate orders in this matters under section 260 of the Act.
( 1 ) THESE two references one under the wealth-tax act and the other under the income-tax Act - arise on the same facts. R. C. No. 19 of 1980 is a reference under section 27 (1) of the wealth-tax Act, 1957 and the question referred is. "whether on the facts and in the circumstances of the case and on a proper construction of the scope and effect of the judgment of the Chief Judge of the City Civil Court, Hyderabad in the proceedings under section 34 of the Indian Trusts Act, the Tribunal is correct in holding that as on the relevant valuation dates corresponding to the assessment years 1974-75 and 1975-76 the corpus of the trust fund cannot be said to have been held in trust for charitable or religious purposes in India and the assessee trust, is therefore, not entitled to exemption under section 5 (1) (i) of the Wealth-tax Act, 1957, in respect of the corpus of the trust fund ?"r. C. No. 139 of 1980 is a reference under section 256 (1) of the Income-tax Act, 1961, and the question refereed herein is :"whether, on the facts and in the circumstances of the case, the assessees income for the assessment year 1974-75 is not liable to be taxed in view of the provisions of section 11 of the Income-tax Act, 1961 ?"late H. E. H. the Nizam had created a number of trusts one of which is "h. E. H. the Nizams pilgrimage Money Trust", constituted under a deed of trust dated 2/11/1950 settling securities of the value of Rs. 22,20,000 as the corpus of the trust. The object of the trust was to provide for the expense of Haj pilgrimage for himself and members of his family accompanying him and for other charitable or religious purposes after his lifetime, It is necessary to notice the relevant recitals in the trust deed. The settlor recited in the first instance that he had, during the last 35, years, set apart 30,000 hold sovereigns to form a fund for providing thereout the expenses of the settlor for visit and pilgrimage to various mahomedan shrines and other holy places in Hedjaz and Iraq and for making religious offerings and expending moneys for charitable purposes at such places and that taking advantage of the rise in the price of gold, he had sold the said sovereigns and invested the sale proceeds in 3% Government of India conversion loan, 1946 of the total face value of Rs. 22,20,000 yielding an annual income of Rs. 66,600 specified in the schedule to the deed. He expressed his desire of making and declaring a trust of the said securities. Paragraph 3 of the trust deed contains several calluses and sub clauses. Clauses (a) and (b) of paragraph 3 empower the trustees to manage the trust fund do all other things and take all necessary steps in that behalf. Clauses (c), (d) and (e) read as follows :" (C) During the lifetime of the settlor to defray the expenses of Haj of the settlor and of such of the members of his family as he may take with him and of their visit and pilgrimage to various mahomedan shrines and holy places in Hedjaz and Iraq and for making religious offerings and expending monies for charitable purposes at such places for such other religious or charitable purposes as the settlor in his absolute discretion may from time to time think fit and require out of the income as well as the corpus of the trust fund in such manner and to such extent as the settlor may from time to time direct and for all or any of such purposes as aforesaid to pay such monies out of the income or the corpus of the trust fund as the settlor may from time to time require. (d) During the lifetime of the settlor and so long as the income of the trust fund or any part thereof is not required for the purposes mentioned in the preceding sub-clause (c), to accumulate such income or part thereof not required for such purposes and to invest the same and all resulting produce thereof in authorized securities and to use such accumulations and investments or any part thereof or the income therefor any part thereof for the purposes ment
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