1987 Supreme(Raj) 622

RAJASTHAN HIGH COURT AT JAIPUR BENCH
S.C.Agrawal, Farooq Hasan, JJ.
Laxminarain Lath Trust - Appellant
Versus
Commissioner of Income - Respondent
D.B. Income-tax Reference No. 10 of 1979.
Decided On : 14-05-1987

The provisions of the Indian Trusts Act, 1882, relating to the modification of the terms of a trust with the consent of the beneficiaries, do not apply to public trusts, as the beneficiaries of such trusts are generally indeterminate.

Headnote:

INCOME TAX - Charitable trust - Whether the assessee-trust has acquired the status of a trust wholly for charitable and religious purposes in order to be entitled to exemption under section 11 of the Income-tax Act, 1961.

Fact of the Case:

The assessee, Laxminarain Lath Trust, was established by a settlement deed in 1948. The objects of the trust included advancement of education, puja to Shiva, establishment of temples, dharamshalas, hospitals, orphanage homes, provision of medical aid and relief to suffering people, etc. One of the objects was to render aid to any persons belonging to the family of Laths. In 1958, a supplementary deed was executed to clarify the intention of the settlor and of the trust. By this deed, amendments were made in the settlement deed, including the deletion of the words "belonging to the family of Laths" from the object clause relating to rendering aid to persons in distress. The Income-tax Appellate Tribunal held that the assessee-trust was not entitled to exemption under section 11 of the Income-tax Act, 1961, as it had not acquired the status of a trust wholly for charitable and religious purposes.

Finding of the Court:

The High Court held that the Tribunal was not justified in holding that the assessee-trust was not entitled to exemption under section 11 of the Income-tax Act, 1961. The Court held that the supplementary deed of 1958 was valid and binding on the trustees, and that it clarified the intention of the settlor to create a public charitable trust for the benefit of the public in general and not for the benefit of any particular family or community. The Court also held that the doctrine of cy pres could be applied to rectify the mistakes in the original settlement deed and to give effect to the true intention of the settlor.

Issues: 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that by the amended trust deed of 1958, the assessee-trust has not acquired the status of a trust wholly for charitable or religious purposes in order to entitle it to exemption under section 11 of the Income-tax Act, 1961 ? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee-trust is not entitled to exemption under section 11 of the Income-tax Act, 1961 ?

Ratio Decidendi: 1. The provisions of the Indian Trusts Act, 1882, relating to the modification of the terms of a trust with the consent of the beneficiaries, do not apply to public trusts, as the beneficiaries of such trusts are generally indeterminate. 2. The supplementary deed of 1958 was executed by the settlor and the trustees to clarify the intention of the settlor and to rectify the mistakes in the original settlement deed. The deed was valid and binding on the trustees, and it clarified the intention of the settlor to create a public charitable trust for the benefit of the public in general and not for the benefit of any particular family or community. 3. The doctrine of cy pres can be applied to rectify the mistakes in the original settlement deed and to give effect to the true intention of the settlor.

Final Decision: The reference is answered in favour of the assessee and the questions referred are answered as under : 1. On the facts and in the circumstances of the case, the Tribunal was not justified in holding that by the amended trust deed of 1958, the assessee-trust has not acquired the status of a trust wholly for charitable and religious purposes in order to be entitled to exemption under section 11 of the Income-tax Act, 1961. 2. On the facts and in the circumstances of the case, the Tribunal was not justified in holding that the assessee-trust is not entitled to exemption under section 11 of the Income-tax Act, 1961.