Wealth tax---

----Exemption---Property held on trust for religious or charitable purposes-- Tribunal finding that objects of assessee-trust predominantly charitable and religious in nature---Entire property of trust exempt from wealth tax though only 60 percent. of income of trust spent for charitable and religious purposes---Difference between provision in Income-tax Act and Wealth Tax Act-.--Indian Wealth Tax Act, 1957,S. 5(1)(i).

As per the deed of the assessee-trust, 60 percent. of the income of the trust was to be spent for charitable and religious purposes and the remaining 40 percent. was to be spent for the descendants of the settlor for a period of 20 years and thereafter, the entire income was to be utilised for charitable purposes. All the relevant assessment years fell during the interregnum period of 20 years, which expired on January 30, 1964. During the relevant assessment years, the assessee-trust claimed exemption under section 5(1)(i) of the Wealth Tax Act,1957, in respect of the properties held under trust. The Wealth Tax Officer took the view that inasmuch as only 60 percent. of the total income was to be spent for charitable and religious purposes, for the purposes of wealth tax, the property belonging to the trust would be treated to have been held for charitable and religious purposes only to that extent and the remaining part of the property would be assessed to wealth tax. The Wealth Tax Officer apportioned the property and brought the part of the property to. the extent of 40 percent. to wealth tax for the relevant assessment years. On appeal, the Appellate Assistant Commissioner held that the entire property was exempt from wealth tax. On further appeal, the Tribunal held that unlike the provisions of the Income-tax Act, for the purposes of wealth tax the entire property held by the trust had to be treated as exempt from tax under section 5(1)(i), if the predominant object of the trust was charitable and religious in nature and since the predominant object of the assessee-trust was charitable and religious in nature, the assessee-trust was entitled to exemption in respect of the whole property and not to the extent of 60 percent only. On a reference:

Held, that the Tribunal had recorded a finding of fact that the assessee-trust was primarily and predominantly a public charitable trust and, therefore, the assessee-trust would be entitled to exemption under section 5(1)(i) of the Act in respect of the entire corpus of the trust.

Trustees of K.B.H.M. Bhiwandwalla Trust vCWT (1977) 106 ITR 709 (Bom.) applied.

Abdul Sathar Haji Moosa Sait Dharmastapanam v. CIT (1988) 169 ITR 84 (Ker.); Krishna Warrier (P.) v. CIT (1981) 127 ITR 192 (Kei.) and Managing Shebaits of Bhukailash Debutter Estate v. WTO (1977) 106 ITR 904 (Cal.) ref

P.K.R. Menon and N.R.K. Nair for the Commissioner.

C. Kochunni Nair for the Assessee.

JUDGMENT

OM PRAKASH, C. J.---At the instance of the Revenue, the Income-tax Appellate Tribunal referred the following question relating to the consecutive assessment years 1961-62 to 1964-65 for our opinion:

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to exemption under section 5(1)(i) of the Wealth Tax Act, 1957?"

The facts, as briefly stated, are that the assessee is a trust. As per the trust deed, 60 percent. of the income of the trust was to be spent for charitable and religious purposes and the remaining 40 per cent was to be spent for the descendants of the settlor for a period of 20 years and thereafter, .the entire income was to be utilised for charitable purposes. All the relevant assessment years fell during the interregnum period of 20 years, which expired on January 30,1964.

During the relevant assessment years, the assessee claimed exemption under section 5(1)(i) of the Wealth Tax Act (briefly "the Act"), in respect of the properties, held by the trust. The Wealth Tax Officer (WTO) took the view that inasmuch as only 60 percent. of the. total income was to be spent for charitable and religious purposes, for the purposes of wealth tax as well, the property belonging to the trust will be treated to have been held for charitable and religious purposes only to that extent and the remaining part of the property will be brought to wealth tax. This is how the Wealth Tax Officer apportioned the property and brought the part of the property to the extent of 40 per cent to wealth tax for the relevant assessment years. On appeal, the Appellate Assistant Commissioner held that the entire property was exempt.

The Appellate Tribunal relying on Trustees of K. B. H. M. Bhiwandiwalla Trust v. CWT (1977) 106 ITR 709 (Bom.), which was also relied on by the Calcutta High Court in Managing Shebaits of Bhukailash Debutter Estate v. WTO (1977) 106 ITR 904, held that unlike the provisions of the Income-tax Act, for the purpose of wealth tax, the entire property held by the trust will be treated as exempt under section 5(1)(i) of the Act, if the predominant object of the trust is charitable and religious in nature. Relying on a Full Bench decision of this Court in P. Krishna Warier v. CIT (1981) 127 ITR 192,which related to the assessee-trust itself and in which the Full Bench held that the predominant object of the trust was charitable in nature, the Appellate Tribunal held that the exemption under section 5(1)(i) shall have to be allowed in respect of the whole property and not only to the extent of 60 percent.

We have carefully gone through the decision of the Bombay High Court in Trustees of K.B.H.M. Bhiwandiwalla Trust v. CWT (1977) 106 ITR 709. It proceeds on the footing that there is a difference in the language between the Indian Income-tax Act and Wealth Tax Act. Whereas under the former, the income applied for charitable and religious purposes can be conveniently apportioned, the same is not possible for allowing exemption under section 5(1)(i) of the Act. It was held that for the purpose of wealth tax either a property can be said to have been held for charitable and religious purposes or not at all; apportionment is not possible. The Bombay High Court summed up the distinction in between the two Acts as follows (last paragraph at page 716):

"It is quite clear that there is change in the language between these two enactments. The question to be decided is whether the change is deliberate and intentional or whether it is just a case, to use Halsbury's expression, of slovenly draftsmanship. If one turns again to section 4(3)(i) of the Indian Income-tax Act, 1922, under clause (i) to earn the exemption, income is required to have been derived from property under trust wholly or in part held for religious or charitable purposes. If it was wholly held on trust for religious or charitable purposes, the whole of the income is exempt, and in case of property held in part only for such purposes the income applied or finally set apart for application thereto is exempt. This is of course subject to other requirements mentioned in the subsection and in the proviso. Now in the case of the Wealth Tax Act, where a property is held on trust for objects which are partly charitable and partly non-charitable, there cannot be any apportionment as is tobe found under the Indian Income-tax Act. Such apportionment is possible only in case of income and is not possible with respect to the corpus or assets which yield income. In my view, the commission of the word 'wholly' in the above section of e Wealth Tax Act and the omission of a similar provision as is to be found in the latter part of the subsection in the Indian Income-tax. Act was deliberate andintentional and the Legislature advisedly avoided or omitted the said word. The reason for this also is not far to seek. In the case of income, as stated earlier, arising from property held partly on trust for a public charitable purpose and partly for other objects, apportionment was possible and so section 4(3)(i) of the Indian, Income-tax Act provided for exempting a portion of the income. As indicated earlier, this was not possible viz. in respect of the corpus."

Before the Bombay High Court, the Revenue contended the same thing which is being contended before us by learned senior standing counsel that unless all the objects of the trust are of public charitable nature, the corpus would not qualify for exemption. However, the contention raised on behalf of the assessee before the Bombay High Court was that if the primary or predominant objects of the trust of a public charitable nature, the corpus would qualify for exemption under section 5(1)(i) of the Wealth Tax Act. The Bombay High Court, however, considered the contention raised on behalf of the assessee as a better view and upheld the same. It is this view of the Bombay High Court, which has been followed by the Appellate Tribunal in the case of instant assessee. Similar view was taken by the Calcutta Hicas Court in the case of Bhukailash Debutter Estate (1977) 106 ITR 904.

This Court in Abdul Sathar Haji Moosa Sait Dharmastapanam v. CIT (1088) 169 ITR 84, taking the same view held that section 5(I)(i) extends exemption only to a particular class of property and for considering the question of exemption, what is material is the nature of trust. If it is a public charitable trust, then exemption will be allowed in respect of the entire property held by the trust.

The submission of learned senior standing counsel before us is that the interpretation of section 5(1)(i) will turn up the word "any", occurring in clause (i) of section 5(1), which precedes the word "property" and that according to the dictionary meaning the word "any" means "all". The argument of senior standing counsel, therefore, is that unless the whole property is held by the trust for religious and charitable purposes, exemption could not be granted under section 5(1)(i). This submission runs counter to the view taken .by the Wealth Tax Officer. The Wealth Tax Officer has not rejected the case in entirety, but exemption has been allowed under section 5(1)(i) to the extent of 60 percent. on the parity of the provisions of the Income-tax Act and the exemption was refused for the remaining 40 percent. only.

The Appellate Tribunal has recorded a finding of ,fact that the assessee-trust was primarily and predominantly a public charitable trust. That being, applying the ratio of the decision of the Bombay High Court in Trustees of K.B.H.M. Bhukandiwalla Trust (19771 1-D6 I'IR 709, we agree with the view taken by the Appellate Tribunal that the assessee will be entitled to exemption under section 5(1)(i) of the Act in respect of the entire corpus of the trust It is to be made clear that this view we have on the basis of the finding of fact recorded by the Appellate Tribunal that the assesee-trust is predominantly a public charitable trust. It will depend on the facts and circumstances of each case whether a trust is predominantly a public charitable and religious trust. 60 per cent anti 40 percent. ratio, as it is in this case, will not always be regarded as a norm coming to the conclusion that a trust is predominantly of charitable wad religious nature.

In the result. we answer the aforementioned question in the affirmative, that is, in favour of the assessee and against the Revenue.

M.B.A./4235/FC Reference answered.