Ahmedabad Rana Caste Association Vs.
Commissioner of Income Tax, Gujarat [1971] INSC 247 (16 September 1971)
GROVER, A.N.
GROVER, A.N.
HEGDE, K.S.
CITATION: 1972 AIR 273 1972 SCR (1) 744 1971
SCC (3) 475
ACT:
Income-tax Act, 1922, s. 4(3) (i) and
Income-tax Act, 1961 s. 11 Income of assessee to be utilised for benefit of a
community-Beneficiaries members of the community resident in a city and others
admitted according to caste customs and usage-If united by common quality of
impersonal nature.
HEADNOTE:
The assessee was an association of persons
and held various properties for the purposes set out in its constitution.
One of the purposes was the management of the
movable and immovable properties of the Rana community of the City of
Ahmedabad, doing acts to improve education in the community and to give medical
help to the community, etc. The definition of Rana community comprised two
classes-one class consisting of those who are natives of Ahmedabad while the
other consists of such persons who are admitted by the Rana caste according to
the old custom or the usage of the community.
On the question whether the income of the
assessee-trust was exempt under s. 4(3)(1) of the Income-tax Act, 1922, or s. 11
of the Income tax Act, 1961, the High Court held that since the second class of
persons consisted-of those who had been accepted by the caste according its old
custom or usage, all the beneficiaries were not united by a common
characteristic or attribute of an impersonal nature and therefore, the
beneficiaries did not constitute a community or a section of the Community
Allowing the appeal to this Court, Allowing the appeal to this Court,
HELD : An object beneficial to a section of
the public is an object of general public utility. But the section of the community
sought to be benefitted must be sufficiently defined and identifiable by some
common quality of a public or impersonal nature. The common quality, in the
present case, uniting the potential beneficiaries consists of being members of
the Rana caste or community of Ahmedabad whether as natives or as being
admitted to that caste or community under custom or usage. The mere fact that a
person of the Rana community who is not an original native of Ahmedabad has to
prove his credentials and according to the custom and usage of that community
cannot introduce a personal element.
Whenever a question arises whether a person
belongs to a particular community or caste the custom or usage prevailing in
that community must play a decisive and vital part. The personal element or
personal relationship which takes a group out of a section of the community is
their personal relationship to a single propositus or to several proposition or
a relationship of a similar nature. Therefore, the members of the Rana caste
who are not natives of Ahmedabad but who come to reside there and are accepted
as members of that caste according to its usage and customs could be said to
have a relationship of an impersonal nature. [748 B-D; 749 D-G; 750 BvD] Hazrat
Pirmohamed Shah Saheb Roza Committee v. Commissioner of Income-tax, Gujarat, 58
I.T.R. 360, Commissioner of Income-tax, Madras v. Andhra Chamber of Commerce,
55 I.T.R.
722, Re Compton, Powell v. Compton &
Ors., (1945) Ch. 123, Trustees of the Londonderry Presbyterian Church House v.
Commissioners of Inland Revenue, 27 T.C. 431
and Oppenheim v. Tobacco Securities Trust Co. Ltd. & Ors., (1951) A.C.
745 297, referred to.
CIVIL APPELLATE JURISDICTION : Civil Appeals
Nos, 2146-2148 of 1968 and 1284 to 1286 of 1971.
Appeals by certificate/special leave from the
judgment and order dated July 25, 1967 of the Gujarat High Court in Incometax
Reference No. 4 of 1966.
S. T. Desai, R. P. Kapoor for I. N. Shroff
for the appellant (in allthe appeals).
S. K. Aivar, R. N. Sachthey and B. D. Sharma,
for the respondent (in all the appeals).
The Judgment of the Court was delivered by
Grover, J. These appeals (C.As. 1284-1286/71) are by special leave from a
judgment of the Gujarat High Court in an Income tax Reference. Originally the
appeals had been filed by certificate (C.As. 2146-2148/68) but that was found
to be defective as no reasons were stated therein.
The Reference relates to the assessment years
1960-61, 196162 and 1962-63 the relevant accounting years being the ,financial
years ending 31st March 1960, 31st March 1961 and 31st March 1962. During the
relevant years the assessee which is an association of persons held various
properties for the purposes set out in its constitution. It is unnecessary to
refer to all the clauses therein. It would suffice to mention that among ,the
objects and purposes of the institution were the management of the movable and
immovable properties of the Rana community of the city of Ahmedabad, doing acts
to improve the education in the community, to give medical help to the
community etc. The Income tax Officer took the view that the objects were not
charitable and therefore the assesses was not entitled to the exemption under
s. 4(3) (i) of the Income tax Act, 1922.
The Appellate Assistant Commissioner held
that although the assessee was registered under the Bombay Public Trust Act the
beneficiaries were not the public and the class of community sought to be
benefitted was very vague and ill defined and the number was also negligible.
He held certain clauses among the objects to, be charitable but others were
held by him not to be charitable. The matter was taken in appeal to the
Tribunal. The Tribunal held that the beneficiaries as found in the Constitution
were the Rana community meaning thereby the "natives of Ahmedabad only and
other community members accepted by the community as per old rules of the
community and staying in Ahmedabad..
746 This is a well defined cross-section of
the public of Ahmedabad, certain and ascertainable. This number, we are told,
is about 2,400(?) but no minimum number is prescribed to constitute a clear,
ascertainable cross-section of the general public. It cannot be said,
therefore, that there is any vagueness about the beneficiaries or of their
public character." After considering vanous other matters the Tribunal
came to the conclusion that the trust was a charitable trust and therefore
entitled to the exemption claimed. The Commissioner of Income tax moved the
Tribunal for stating the case and referring the question of law arising from
its order. The Tribunal referred the following question to the .High Court :"Whether
on the facts and in the circumstances of the case the income of the assessee
trust is exempt under s. 4 (3) (i) of the Income tax Act 1922 and s. 11 of the
Income tax Act 1961." The High Court decided the whole matter only on one
point.
It considered the question whether the
purpose for which the properties were held by the assessee had the public
character which the income tax law required of the charities it recognised for
The purpose of exemption. The question that was posed was " are the
purposes directed to the benefit of the community or a section of the community
as distinguished from private individuals or a fluctuating body of private
individuals"? There can be no doubt, according to the High Court, that the
beneficiaries did not constitute a community since they were confined only to
the members of the Rana Caste residing in Ahmadabad and fulfilling one or the
other conditions set out in the definition clause. It had, therefore, to be
decided whether the beneficiaries could be said to constitute a section of the
community.
After referring to certain English cases and
the decision of this Court in Hazrat Pirmohamed Shah Saheb Roza Committee v. Commissioner
of Income tax, Gujarat (1), the High Court rightly held that the enquiry must
be directed to what the common quality was which united the parties within the
class and whether that quality was essentially impersonal or personal. If the
former, the class would rank as a section of the community if the latter, the
answer would be in the negative. According to the High Court having, regard to
the common opinion amongst the people and the conditions of 'Indian life if the
beneficiaries were the members of the Rana caste residing in Ahmedabad and were
natives of Ahmedabad they would be section of the community because the common
quality uniting them within the class would be essentially an impersonal
quality. But the High Court proceeded to say:
747 "the class of beneficiaries before
us consists of two sections; one comprising members of the Rana Sect who are
natives of Ahmedabad and the other comprising members of the Rana Sect who are
residing in Ahmedabad and who have been accepted by the community according to
the old usage of the caste. It is difficult to see how this class of
beneficiaries can besaid to constitute a well section of the public connected
together by a common quality or characteristic".
Although it was recognised that even the
second class of beneficiaries were members of the Rana caste and were residing
in Ahmedabad but the distinguishing feature, in the view of the High Court, was
that. the second section or class consisted of persons who had been accepted by
the caste according to its old custom or usage. This led the High Court to
conclude that all the beneficiaries comprised in this class were not united by
a common characteristic or attribute. The question referred was answered in the
negative.
Section 4(3) (i) to the extent it is material
is in the following terms :"4(3) Any income, profits or gains falling
within the following classes shall not be included in total income of the
person receiving them (i)Subject to the provisions of clause (c) of subsection
(1) of section 16, any income derived from property held under trust or other
legal obligation wholly for religious or charitable purposes, in so far as such
income is applied or accumulated for application to such religious or
charitable purposes as relate to anything done within the taxable territories,
and in the case of property so held in part only for such purposes, the income
applied or finally set apart for application thereto:
Provided that....................." The
operative part of S. 11 (1) (a) of the Income tax Act 1961 is in similar terms.
There are certain points of difference between the provisions of the two Acts.
Some of them may be noticed. In the 1922 Act a charitable purpose included
relief of the poor, education, medical relief and advancement of any other
object of general public utility.
Section 2(15) of the Act of 1961 introduces
the following qualifying words to general public utility, " not involving
the carrying on of any activity for profit". Under the Act of 1922 a trust
for the benefit 'of any particular religious community or caste was entitled to
exemption but under the Act of 1961 a charitable trust which is created for
such benefit on or 748 after the first day of April 1962 would be disentitled
to the exemption. In the present case the trust was created prior to first
April 1962 and therefore no question arises of its not being entitled to the
exemption if other conditions were satisfied even though it was created for the
benefit of the Rana caste of Ahmadabad.
It is well settled by now and the High Court
also has rightly taken that view that an object beneficial to a section of the
public is an object of general public utility. To serve a charitable purpose it
is not necessary that the object should be to benefit the whole of mankind or
all persons in a particular country or State. It is sufficient if the intention
to benefit a section of the public as distinguished from a specified individual
is present. This Court in Commissioner of Income tax, Madras v. Andhra Chamber
of Commerce(1) overruled the view of Beaumont C.J. in Commissioner of Income
tax v. Grain Merchants' Association of Bombay(2) on the point. It was, however,
observed that the section of the community sought to be benefitted must be
sufficiently defined and identifiable by some common quality of a public or
impersonal nature. Where there was no common quality uniting the potential
beneficiaries into a class the trust might not be regarded as valid. In the
various orders the clause relating to the beneficiaries has not been clearly
and accurately set out. In the petition of appeal dated October 7, 1968 the
provisions of the constitution of the assessee are set out and with reference
to The community it is stated, "Rana community means natives of Ahmadabad
only and the other community brothers accepted by the community as per old
rules of the community staying in Ahmadabad". It is common ground that the
word " old rules" do not represent the correct translation of the
original word in Gujarati which is Riwaj meaning custom. The learned judges of
the High Court also, who are conversant with that language, have proceeded on
the basis that the correct rendering of the aforesaid word is custom or usage.
That is why according to the High Court the definition comprises two classes of
members of Rana caste residing in Ahmedabad, one class consisting of those who
are natives of Ahmedabad while the other class consists of such persons who are
admitted by the Rana caste according to the old custom or usage of the
community. The reason which prevailed with the High Court for treating the
second class as not being united with the first class by a common
characteristic or attribute was that its members have to be accepted by the
community according to the old custom or usage and that the entry of the
members of this class into the Rana caste residing in Ahmedabad was dependent
on the decision of the caste to (1) 55 I.T.R. 722. (2) 6 I.T.R. 427.
749 admit them. We are altogether unable to
concur in the approach or the conclusion of the High Court on the above point.
We may usefully refer to the judgment of Lord
Greene M.R. in re Compton, Powell v. Compton & Others(1). The Master of
Rolls declared that no definition of what was meant by "a section of the
public" had, so far as he was aware, been laid down. But he indicated that
the trust of a public character is one in which the beneficiaries do not enjoy
the benefit when they receive it by virtue of their character as individuals
but by virtue of their membership of a specified class the common quality,
uniting potential beneficiaries into the class being essentially an impersonal
one. This common quality he said was "definable by reference to what each
has in common with the others and that is something into which their status as
individuals does not enter".
Andrew, L.C.J. accepted this statement of law
without hesitation in Trustees of the Londonderry Presbyterian Church House v.
Commissioners of Inland Revenue(2). What has to be seen in the present case is
whether the members of the Rana caste who are not natives of Ahmedabad but who
come to reside there and are accepted as members of that caste according to its
usage and customs can be said to have a relationship which is an impersonal one
dependent on their condition as members of the Rana community. We are unable to
comprehend how such members of the Rana caste can be regarded as having been
introduced into that caste by consideration of their personal status as
individuals. As a matter of fact the predominant content and requirement of the
clause defining "beneficiaries" in the constitution of the assessee
is the factum of their belonging to the Rana community of Ahmedabad. The common
quality, therefore, uniting the potential beneficiaries into the class consists
of being members of the Rana caste or community of Ahmedabad whether as natives
or as being admitted to that caste or community under custom or usage. The mere
fact that a person of the Rana community who is not an original native of
Ahmedabad has to prove his credentials according to the custom and usage of that
community to get admitted into that community cannot introduce a personal
element. In Oppenheim v. Tobacco Securities Trust Co. Ltd. & Others(1) the
trustees were directed to apply certain income in providing for the education
of children of employees or "former employees" of a British limited
company or any of its subsidiary or allied companies. It was held by the House
of Lords by a majority that though the group of persons indicated was numerous,
the nexus between them was employment by particular employers and accordingly
the trust did not satisfy the test of public (1) [1945] Ch. 123.
(3) [1951] A.C. 297.
(2) 27 T.C. 431.
75O benefit requisite to establish it as
charitable. This is what Lord Simonds observed "A group of persons
relationship which takes a group nexus between them is their personal
relationship to a single propositus or to several propositi, they are neither
the community nor a section of the community for charitable purposes".
The personal element of personal relationship
which takes a group out of sestion of the community for charitable purposes is
of the nature which is to be found in cases of the aforesaid type. We cannot
possibly discover a similar element of personal nature in the members of the
Rana community who settle in Ahmedabad and have been accepted by the Rana
community of that place as members of that community. As regards the acceptance
of such persons as members of the community or caste, according to custom and
usage, it is well known that whenever a question arises whether a person
belongs to a particular community or caste the custom or usage prevailing in
that community must play a decisive and vital part. That cannot be regarded as
an element which would detract from the impersonal nature of the common
quality.
For the reasons given above the appeals are
allowed and the answer returned by the High Court is discharged. The matters
are remitted to the High Court for returning the answer to the question
referred after determining the,other points which were left undecided. The
parties shall bear their own costs in these appeals. Appeals by certificate
(i.e. C.As. 2146-2148 of 1968) are dismissed, the certificate being defective
for want of reasons.
V.P.S. Appeals allowed.
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