Trustee, Chevalier Christian Gomes Charitable Trust V. Deputy Commissioner Of Inland Revenue

1963     Present :Sansoni, J., and L. B. de Silva, J

TRUSTEE, CHEVALIER CHRISTIAN GOMES CHARITABLE
 TRUST, Appellant, and DEPUTY COMMISSIONER
 OF INLAND REVENUE, Respondent

S. C. 6/63-Income Tax Case No. BRA/320

Income Tax Ordinance (Cap 242)-Sections 6 (1] (a) to (h), 6 (1A), 70-" Any offertory, subscription or other donation to a charitable institution "-Trusts Ordinance (Cap. 87), a. 6.

        Section 6 (1 A) of the Income Tax Ordinance, as amended by Act No. 44 of 1958, reads as follows:

       " Any offertory, subscription or other donation to a charitable institution shall be deemed to be such income as is referred to in paragraph (h) of sub-section (1). "

      By deed No. 1897 of 4th November, 1960, a person,-who was entitled to certain immovable property, constituted himself and three others to be the Trustees of that property and transferred it to himself and three others in trust for certain uses and purposes, subject to certain conditions and restrictions recited in the deed. The trust thereby created was admittedly a trust established for a charitable purpose.

     Held that the transfer of the property under deed No. 1897 was not a donation within the meaning of section 6 (1 A) and, therefore, was not liable to tax.

CASE stated under section 78 of the Income Tax Ordinance.

       H. V. Perera, Q.C., with  S. Ambalavanar and C. Pathmanathan, for the Assessee-Appellant.

     V. S. A. Pullenayegum, Crown Counsel, with H. L. de Silva, Crown Counsel, for the Respondent.

Cur. adv. vult.

December 13, 1963. SANSONI, J.-

By deed No. 1897 dated 4th November 1960 Chevalier Christian Gomez, who was entitled to a  share of certain immovable property in Kandy, constituted himself and three others to be the trustees of that share and transferred it to himself and three others in trust for certain uses and purposes, subject to certain conditions and restrictions recited in the deed. The Trust thereby created was to be called the Chevalier Christian Gomez Charitable Trust, and it is not in dispute that it is a Trust established for a charitable purpose.

The share in question was valued at Rs. 150,000 in the deed. The transfer of the property to the trustees was treated by an assessor under the Income Tax Ordinance as a donation to a charitable institution and taxed accordingly for the year of assessment 1961-62. Appeals by the trustees to the Commissioner of Inland Revenue and to the Board of Review respectively were dismissed, and the matter has now come before us on a case stated upon the application of the trustees.

Under the Income Tax Ordinance, Cap. 242, the words " profits " and "income " are defined in section 6. In section 6 (1) (a) to (g) certain categories of profits and income are specified, and section 6 (1) (h) adds " income from any other source whatsoever, not including profits of a casual and non-recurring nature."

     The income of a public charitable institution or trust, or a religious body or institution, used to enjoy exemption from tax by reason of section 7 (1) (d) and (e). The Income Tax (Amendment) Act, No. 44 of 1958, however, made certain amendments to the principal Ordinance. Section 6 (1A) which was added immediately after Section 6 (1) provided that "Any offertory, subscription or other donation to a charitable institution shall be deemed to be such income as is referred to in paragraph (k) of sub-section (1)." Further, section 7 of the principal Ordinance was amended by the omission of clauses (d) and (e) of section 7(1).

    The appellants contended always that these amendments did not render the transfer of the property under deed No. 1897 taxable (1) because it is not a donation within the meaning of section 6 (1 A), and (2) because there was no charitable institution in existence when the deed was executed. On the first point, I think t

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