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PETITIONER:

TRUSTEES OF HEH NIZAMS PILGRIMAGE MONEY TRUST, HYDERABAD

Vs.

RESPONDENT:

THE COMMISSIONER OF INCOME TAX, ANDHRA PRADESH, HYDERABAD

DATE OF JUDGMENT: 20/04/2000

BENCH:

D.P.Wadhwa, S.S.M.Quadri

JUDGMENT:

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 thereunder. 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

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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?

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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

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dated 22.5.1968 which has the approval of the Chief Judge,

City Civil Court, 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

this Court in Sheikh Abdul Kayum Vs. Mulla Alibhai [1963

(3) SCR 623] and State of Uttar Pradesh Vs. Bansi Dhar and

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

of this Court in State of Uttar Pradesh Vs. Bansi Dhar &

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.