Trustees of Heh Nizams Pilgrimage
Money Trust, Hyderabad Vs. The Commissioner of Income Tax, Andhra Pradesh,
Hyderabad [2000] INSC 238 (20 April 2000)
D.P.Wadhwa, S.S.M.Quadri
SYED SHAH MOHAMMED QUADRI,J.
These appeals arise out of two reference
cases under Section 27(1) of the Wealth-tax Act, 1957 decided by the High Court
of Andhra Pradesh, give rise to a common question of law. The appellants are
the assessees. Civil Appeal No.2328 of 1995 is against the order of the
Division Bench of the High Court in R.C.No.192 of 1980 dated March 24, 1987
[reported in 171 ITR 323] pertaining to the Assessment Years 1974- 75 and
1975-76. Following the said order, the High Court disposed of R.C. No.292 of
1982 for the Assessment Years 1976-77 and 1977-78 which gave rise to Civil
Appeal Nos.9269-9270 of 1995. H.E.H. the Nizam of Hyderabad created a trust
with a corpus fund of Rs.22,20,000/-, named H.E.H. the Nizams Pilgrimage Money
Trust on November 2, 1950. The objects of the Trust, inter alia, are that
during lifetime of H.E.H. the Nizam to meet expenses of Haj Pilgrimage of
himself and members of his family accompanying him on such pilgrimage and
expenses on visits to holy places of Hedjaz and Iraq and also for making
religious offerings at such places as the settlor in his absolute discretion
might think fit; that after the death of the Nizam the net income and the
unspent accumulations of income, if any, shall be spent or utilised by the
trustees for all or any of the religious or charitable purposes specified in
clause 3(e) of the said trust deed. H.E.H. the Nizam died on February 24, 1967.
During his lifetime, he did not go either for Haj or on any other pilgrimage.
After his death, the said Trust became a Public Charitable and Religious Trust
and the trustees held the corpus and accumulations of income of the Trust there
under. But the trustees could not have spent the income of the Trust property
in Hedjaz or Iraq under clause 3(e) in view of the restriction imposed by the
Government of India on sending monies outside India.
After obtaining legal opinion, the trustees
passed a resolution dated May 22, 1968 to spend the income of the Trust
property including accumulations thereof only on objects and purposes specified
in sub-clauses (v), (vi) and (viii) of clause 3(e) within the territory of
India. They read as under : 3. The Trustees shall hold and stand possessed of
the Trust Fund UPON TRUST :- (a) to (d) *** *** *** (e) On and after the death
of the Settlor to hold the Trust Fund or the balance thereof then remaining and
the unspent accumulations (If any) of the income of the Trust Fund and the
investment thereof upon trust to expend or utilise the net income of the Trust
Fund as well as the accumulations (if any) of the income thereof made during
the Settlors lifetime and the investments thereof for all or any one or more of
the following religious or charitable objects and purposes at Hedjaz and/or
Iraq in such manner as the Trustees may in their absolute discretion think
proper :- (i) to (iv) *** *** (v) for constructing, establishing and
maintaining dispensaries or hospitals or wards in hospitals and otherwise for
medical aid and relief;
(vi) for constructing, establishing,
maintaining and running schools, madressas and other educational institutions
and otherwise for advancement of education;
(vii) *** *** (viii) for such other religious
or charitable purposes as the Trustees may in their absolute discretion think
fit in such manner and to such extent as they may think fit.
Thereafter, they filed an application before
the Chief Judge, City Civil Court, Hyderabad seeking relief under Section 34 of
the Indian Trusts Act (for short, the Trusts Act). On September 29, 1973, the
Chief Judge, City Civil Court, Hyderabad allowed the application and directed
the trustees to utilise the income of the Trust fund including the accumulated
income for the objects and purposes specified in aforementioned sub-clauses of
clause 3(e) within the territory of India. In assessment proceedings, under the
Wealth Tax Act, 1957 (for short the Act) for the Assessment Years 1974-75 and
1975-76, the trustees claimed exemption under Section 5(1)(i) thereof on the
ground that the properties/assets were held in Trust for public purposes of
charitable and religious nature in India in view of the said order of learned
Chief Judge, City Civil Court, Hyderabad. The Wealth Tax Officer rejected the
claim. The Appellate Assistant Commissioner, however, took the view that by
virtue of the order of the Chief Judge, City Civil Court, the properties of the
Trust were entitled to exemption under Section 5(1)(i) of the Act from the date
of the order. The Revenue carried the matter in appeal before the Income-tax
Appellate Tribunal. Holding that the assessee was not entitled to exemptions
under Section 5(1)(i) of the Act, the Tribunal set aside the order of the
Appellate Assistant Commissioner and allowed the appeal of the Revenue. At the
instance of the assessee, the Tribunal referred the following question of law
to the High Court for its opinion: 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, Hyderbad in the
proceedings under section 34 of the Indian Trust 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?
The High Court on construction of the trust deed and Section 5(1)(i) of the Act
held that all the objects and purposes of the Trust were intended to be
performed outside India and neither the resolution of the trustees nor the
order of the Chief Judge, City Civil Court, alter that position. In that view
of the matter, the High Court answered the question in the affirmative, i.e.,
in favour of the Revenue and against the assessee by the impugned order.
The contention of Mr.P.Murli Krishnan,
learned counsel for the appellant-assessees, is that as the situs of the Trust
property is in India, so the property is exempted under Section 5(1)(i) of the
Act irrespective of where the income thereof is utilised; therefore, the High
Court was in error in answering the question in favour of the Revenue.
Mr.M.L.Verma, learned senior counsel
appearing for the Revenue, argued that the exemption under the said provision
was rightly denied to the assessee as the income of the Trust was required to
be spent for religious and charitable purposes outside India. The question
whether the Trust property enjoys exemption, under Section 5(1)(i) of the Act,
depends on its true interpretation. The provision is in the following terms :
5(1). Subject to the provisions of sub-section (1A) wealth tax shall not be
payable by an assessee in respect of the following assets, and such assets
shall not be included in the net wealth of the assessee :
(i) any property held by him under trust or
other legal obligation for any public purpose of a charitable or religious
nature in India;
Provided that nothing contained in this
clause shall apply to any property forming part of any business not being a
business referred to in clause (a) or clause (b) of sub-section 4(A) of Section
11 of the Income Tax Act in respect of which separate books of account are
maintained or a business carried on by an institution, fund or trust referred
to in clause (22) or clause (22A) or clause (23B) or clause (23C) of Section 10
of that Act.
A perusal of the provision shows that wealth
tax is not payable in respect of any property held by the assessee under the
Trust or other legal obligation for any public purpose of a charitable or
religious nature in India. There is no controversy that to claim exemption
under this provision : (i) the property must be held under a trust or legal
obligation and that (ii) it must be for a public purpose of charitable or
religious nature. What is, however, contended by Mr. Murli Krishnan is that it
is enough if the situs of the Trust property is in India and that the public
purpose of a charitable or religious nature need not be performed in India. On
a plain reading of the provision, it is evident that the situs of the property
held in Trust is irrelevant; what is relevant for granting exemption is that
the public purpose of charitable or religious nature should be in India. It may
be pointed out that the words in India are used in clause (i) not after the
words any property but after the words for any public purpose of a charitable
or religious nature. This leaves no room to contend that exemption is available
to a property situated in India even if it is held for any public purpose of a
charitable or religious nature outside India. This being the position, the
contention of the learned counsel is devoid of any substance and it is
rejected. It is next contended that after the resolution of the Board of
Trustees dated 22.5.1968 which has the approval of the Chief Judge, City Civil
Court, and the property must be deemed to be held for charitable or religious
purposes in India. A perusal of the judgment shows that it is passed under
Section 34 of the Trusts Act. There is no gainsaying that the Trusts Act
applies only to private trusts and admittedly after the death of the settlor on
February 24, 1967, the Trust became a public charitable and religious Trust.
However, the learned counsel submitted that Section 34 of the Trusts Act might
be taken as wrongly mentioned and the order passed by the court be treated as
on a suit/petition for change of the objects of the Trust by applying the
doctrine of Cypres to save the Trust from failing. He relied on the decisions
of Ors. [1974 (1) SCC 446]. The principle laid down in those cases is that the
general principles of trust adumbrated in the provisions of the Trusts Act can
be applied by invoking the universal rules of equity and good conscience even
though provisions of the Trusts Act proprio vigore do not apply to public
charitable trusts. A caveat is added therein that care must certainly be
exercised not to import by analogy what is not germane to the general law of
trust.
In the case first-mentioned, fiduciary
relationship of a trustee and in the case second-mentioned, the principle of
resultant trust in favour of the settlor were involved. In the instant case, no
general principle of law of trusts is embodied in Section 34 of the Trusts Act
which is a special provision conferring jurisdiction on the courts to pass
appropriate order in the management of the Trust. We cannot also accept the
contention of the learned counsel that the application under Section 34 of the
Trusts Act be treated as a suit under Section 92 of the Code of Civil Procedure
for reasons more than one. Suffice it to say that the application purported to
be under Section 34 of the Trusts Act does not satisfy requirements of Section
92 of the Code of Civil Procedure. Mr. Verma has relied on the judgment Ors.
(supra) to support his contention that application of the doctrine of cypres
would not arise in this case. It cannot be disputed that when to give effect to
a charitable and religious trust is impossible or impracticable initially or
becomes so subsequently, the court will save the trust from failing by invoking
the cypres doctrine and utilise the Trust property for some other charitable and
religious purpose as near as possible to the object of the Trust mentioned by
the settlor. But having regard to the nature of the present proceedings the
question of invoking doctrine of cypres does not arise, therefore, we do not
propose to deal with that aspect. From the above discussion, it follows that
the judgment of the Chief Judge, City Civil Court, Hyderabad does not have the
effect of altering the object of the Trust. Therefore, the second contention of
the learned counsel for the appellant also fails. For the foregoing reasons we
hold that the High Court has rightly answered the question in favour of the
Revenue. The Judgments and orders under appeal do not suffer from any
illegality. The appeals are without any merits and they are accordingly dismissed
with costs.
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