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PETITIONER: THE TRUSTEES OF GORDHANDAS GOVINDRAM FAMILYTRUST, BOMBAY

       Vs.

RESPONDENT: THE C.I.T. BOMBAY

DATE OF JUDGMENT28/11/1972

BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. VAIDYIALINGAM, C.A. ALAGIRISWAMI, A. DUA, I.D. VAIDYIALINGAM, C.A. REDDY, P. JAGANMOHAN KHANNA, HANS RAJ

CITATION:  1973 AIR  623            1973 SCR  (2)1050  1973 SCC  (3) 346  CITATOR INFO :  R          1977 SC2103  (12)

ACT: Wealth Tax Act, 1957, Ss. 3 and 5(1)(i)-Charging section not expressly mentioning association of persons as a  chargeable entity-Trustees  of  a  trust  whether  can  be  charged  as individuals-Construction of deed Trust whether a  charitable trust within meaning of S. 5 (1) (i) of Act.

HEADNOTE: Four  persons constituted on June 11, 1941 a Trust known  as ’Gordhandas  Govindram  Family Trust’.  In  respect  of  the assessment  years  1957-58  and 1958-59  the  following  two questions were referred to the High Court under S. 27(1)  of the Wealth Tax Act 1957; (a) Whether on a true  construction of  the indenture of trust dated 11-6-1941 the  trustees  of the Trust constitute an assessable unit under the provisions of the Wealth Tax Act; (b) Whether the property held by  the trustees  under  the indenture of trust dated  11-6-1941  is held  for  any public purpose of a charitable  or  religious nature  in India within the meaning of Sec. 5(1)(i)  of  the Wealth-Tax Act?  The High Court answered both the  questions against  the  assessees.. In appeal by  certificate  it  was contended before this court in respect of the first question that  the  charging  section of the Act  did  not  expressly mentions ’association of persons’ as a chargeable entity and therefore the trustees could not be taxed. HELD : (i) Section 21 (1) as well as S. 5 (1) (i) of the Act proceed on the basis that a trust property comes within  the scope  of the Act.  Sec. 3 of the Act does bring within  its scope an individual which expression in view of the  Central General Clauses Act includes individuals as well, unless the context otherwise indicates. in this case, the context,  far from  not  indicating that the individual does  not  include individuals,  clearly  shows  at  any rate  so  far  as  the trustees are concerned that it includes individuals.  As the Indian  Income-tax  Act provides for the  assessment  of  an

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association  of  persons’ the context therein  may  indicate that  individual does not include individuals.  But such  an interpretation  is not permissible when we deal with See.  3 of  the  Act.   Therefore joint trustees  can  be  taxed  as individual under the Act.  Accordingly, the trustees of  the trust  in  the present case constitute  an  assessable  unit under the provisions of the Act. [105 H E] Commissioner  of  income-tax, Madhya Pradesh and  Bhopal  v. Sodra  Devi,  32, I.T.R. 615 at 620 and V.  Venugopala  Ravi Varma  Rajah v. Union of India and Another, 74.  I.T.R.  49, applied. Subashini Karuri and Another v. Wealth-tax Officer, Calcutta and Another, 45 I.T.R. 953 and Abhay L. Khatau and Others v. Commissioner  of Wealth-tax, Bombay City II, 57 I.T.R.  202, approved. Commissioner of Wealth-tax, Bihar and Orissa v. Kripashankar Dayashanker, Worah, 81 I.T.R. 763 referred to. (ii) The  trust in question war. created primarily  for  the benefit of the members of the family of Gordhandas Govindram Seksaria.   This is clear from the title given to the  Trust as  well as from the various provisions of the  trust  deed. Therefore it was not possible to hold that 1051 the Trust in question is a Trust for any public purpose.  It is clearly a private Trust. (1055 F] Trustees  of  Gordhandas Govindram Family Charity  Trust  v. Commissioner of Income-tax (Central), Bombay, 21 I.T.R.  231 at 237 applied. Trustees of the Charity Fund v. Commissioner of Income-.tax, Bombay, 36 I.T.R. 513 referred to.

JUDGMENT: CIVIL APPELLATE JURISDICTION : Civil Appeals Nos. 2382- 2383 of 1969. Appeals  by  certificate from the judgment and  order  dated 14th  and  15th February 1968 of the Bombay  High  Court  in Wealth Tax Reference No. 1. S.   T. Desai, A. G. Menezes, J. B. Dadachanji, O. C. Mathur and Ravinder Narain for the appellant. T.   A.  Ramachandran, S. P. Nayar and R. N. Sachthey _  for the respondent. The Judgment of the Court was delivered by HEGDE, J.-These are appeals by certificate.  They arise from a  reference under s. 27(1) of the Wealth Tax Act, 1957  (To be  hereinafter  referred  to as the  Act).   Thest  appeals relate  to  the  Wealth  Tax  assessment  of  the  appellant assessee  for the assessment years 1957-58 and 1958-59,  the relevant  valuation  date&  being  December  31,  1956   and December 31, 1957. The two questions of law referred to the High Court are               "1.  Whether  on a true  construction  of  the               indenture   of  trust  dated   11-6-1941   the               trustees of the Trust constitute an assessable               unit  under the provisions of  the  Wealth-tax               Act ?               2.    Whether   the  property  held   by   the               trustees  under the indenture of  trust  dated               11-6-1941 is held for any public purpose of  a               charitable or religious nature in India within               the meaning of Sec. 5 ( 1 ) (1) of the Wealth-               tax Act ?" The  High Court has answered both these questions in  favour of  the Department and against the assessees.   Hence  these

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appeals. The  facts  of  this  case  lie  within  a  narrow  compass. Govindram Gordhandas Seksaria, Ramnath Gordhandas  Seksaria, Makhanlal   Gordhandas  Seksaria  and  Bholaram   Gordhandas Seksaria constituted a Trust on June 11, 1941 in respect  of a sum of Rs. 1 1 lacs (Rupees eleven lacs).  That Trust  was known  as’ ’Gordhandas Govindram Family Trust’.  Clause  (2) of the Trust deed says that it was created "for giving  help or relief to such poor Vaishaya Hindoos or other Hindoos  as the trustees may consider deserving 1052 of  help  in  the  manner  and  to  the  extent  hereinafter specified  and  subjects to the  conditions  and  directions stated  in  the  next  following  clauses  and/or  for   the charitable object or objects hereinafter mentioned."  Clause (3)  (a) of the Trust deed provides that the conditions  and directions  to be observed and followed by the  Trustees  in the execution of the Trusts herein declared as follows               "Poor Vaishaya Hindoos who are members of Sek-               saria  families  shall be  preferred  to  poor               Vaishaya Hindoos of Navalgadh not belonging to               that family."               Sub-clauses (b) to (q) provide for the payment               of  maintenance and marriage expenses  of  the               poor  male or female descendants  of  Seksaria               family.               We shall now set out sub-clauses (r) to (u) of               clause (3).  They read :-               (r)   Rs.  5/- (Rupees five) per month may  be               paid as and by way of maintenance of any  poor               male  Vaishaya Hindoo who may be deserving  of               help.               (s)   Rs., 5/- (Rupees five) per month may  be               paid as               and  by way of maintain to any poor  unmarried               female  Vaishaya  Hindoo or  a  poor  Vaishaya               Hindoo or a poor Vaishaya Hindoo widow who may               be deserving of help.               (t)   Rs.  500/- (Rupees five hundred) may  be               expended  or given for the purpose of  meeting               the  expenses of marriage of any  poor  female               Vaishaya Hindoo who may be deserving of help."               (u)   Rs.  500/- (Rupees five hundred) may  be               expended  or given for the purpose of  meeting               the  expenses of marriage of any  poor  female               Vaishaya Hindoo who may be deserving of help."               The deed further provides :-               "If  the  income of the Trust  Estate  is  not               sufficient   to   carry  out   the   charities               specified in sub-clauses (a) to (u) above  the               charity  specified  in an  earlier  sub-clause               shall   be  given  priority  over  a   charity               specified in a later subclause." From  the  above,,  it is clear that  charity  provided  was primarily  for the benefit of the members of the  family  of Seksaria,   no   doubt  including  both  male   and   female descendants.   It  is  also clear from  the  deed  that  the amounts provided for the payment of maintenance and marriage expenses  for  the poor members of the  Seksaria  family  is bound  to take away a substantial part of the income of  the trust, if not the whole of it. 1053 As  mentioned  earlier, the Trust is  known  as  "Gordhandas Govindram  Family  Trust".  That is a clear  pointer.   That shows that the Trust was primarily intended for the  benefit

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of the family of Gordhandas Govindram.  This is made further clear  from  the various provisions in the  Trust  deed.   A reading  of the Trust deed as a whole clearly goes to  prove that  the charity under that deed begins with the family  of Gordhandas Govindram and possibly ends with it.  Charity  in favour of the Vaishaya Hindoos other than the members of the family  of Gordhandas Govindram is not: only  marginal,  but also quite tenuous. We  shall now take up the two questions of law  referred  to the  High Court to ascertain its opinion.  It was  contended before  the  High  Court that the Wealth-tax  Act  does  not provide  for  levy of any tax on Trusts.  As  seen  earlier, this  contention did not find, favour with the High  Court. But  that  contention was repeated before  this  Court.   In order to decide that contention, it is necessary to refer to three provisions in the Act viz.  Sections 3, 5 (1) (1)  and 21.  Section 3 is the charging section.  It says :-               "Subject to the other provisions contained  in               this  Act,  there shall be charged  for  every               assessment  year  commencing on and  from  the               first  day of April, 1957, a tax  (hereinafter               referred  to as wealth-tax) in respect of  the               net wealth on the corresponding valuation date               of  every individual, Hindu "undivided  family               and company at the rate or rates specified  in               the Schedule." Section  5  provides  for exemption in  respect  of  certain assets.  One of the exemptions provided is in respect of any property  held  by an assessee under Trust  or  other  legal obligation  for  any  public  purpose  of  a  charitable  or religious-nature  in  India.   Section  21  to  the   extent material for our present purpose may be recast thus :-               "In the case of assets chargeable to tax under               this Act which are held by a Trustee appointed               under   a  Trust  deed  by  a  duly   executed               instrument in writing, whether testamentary or               otherwise, the wealth-tax shall be levied upon               and  recoverable from the trustee in the  like               manner  and to the same extent as it would  be               leviable upon and recoverable from the persons               on  whose behalf the assets are held, and  the               provisions    of   this   Act   shall    apply               accordingly." It was urged that unlike the charging section in the income- tax  Act, the charging section in the Act does  not  provide for  the levy of tax on association of persons.   It  merely provides  for  assessing an individual  or  Hindu  undivided family  or a company, Trustees cannot be  considered  either individual or as Hindu Un- 1054 divided Families or Companies.  They could have been charged as  an  association  of  persons.   But  that  body  is  not assessable  under  the  Act.  Hence, the  trustees  are  not chargeable  under  the Act.  It Wu conceded at  the  hearing that  sec. 5 (1) (i) as well as s. 21 proceed on  the  basis that  a Trust property is also liable to be taxed under  the Act.   But  what  was urged before us was that  there  is  a lacunae in the charging section and, therefore, the trustees of  a Trust cannot be taxed under the Act.  We see no  merit in this contention. In  Commissioner of Wealth-tax, Bihar and Orissa  v.  Kripa- shankar  Dayashanker  Worah, (1) the contention  raised  was that trustees could not be assessed under the Act as Sec. 21 (1 ) of the Act provides for assessing the trustees who held the  Trust  property  " on behalf of"  others.   In  law,  a

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trustees  does  not hold the trust property "on  behalf  of" others.  Hence, trustees cannot be assessed to tax under the Act.   That  contention  was rejected  by  this  Court.   No contention  was  raised in that case that trustees  did  not come within the scope of sec. 3 of the Act.  The judgment in that  case  proceeded  on the basis  that  trustees  can  be assessed  to wealth-tax in respect of the trust property  of which they are trustees. There  is  also no dispute that s. 5 ( 1 ) (i)  of  the  Act proceeds on the basis that a trust property  comes  within the  scope of the Act.  Sec. 3 of the Act does bring  within its  scope  an individual which expression in  view  of  the Central  General Clauses Act includes individuals  as  well, unless  the context otherwise indicates.  In this case,  the context,  far from not indicating that the  individual  does not include individuals, clearly shows at any rate so far as the trustees are concerned that it includes individuals.  As the Indian Income-tax Act provides for the assessment of "an association  of persons", the context therein  may  indicate that  individual does not include individuals.  But such  an interpretation  is not permissible when we deal with sec.  3 of the Act. In Commissioner of Income-tax, Madhya Pradesh and Bhopal v.   Sodr a Devi,(2) this Court observed :-               "The word assessee is wide enough to cover not               only   an  "individual"  but  also   a   Hindu               undivided family, company and local  authority               and  every  firm  and  other  association   of               persons  or  the partners of the firm  or  the               members of the association individually."               In  V. Vnugopala Ravi Varma Rajah v. Union  of               India and Another,($) a question arose whether               s.  3 of the Expenditure-tax Act, 1957,  which               reads               (1)   81  I.T.R.  763.                (2)   32               I.T..R. 615 at 620.               (3)   74 I.T.R. 49.               1055               "(1) Subject to the other provisions contained               in this Act, there shall be charged for  every               financial  year  commencing on  and  from  the               first  day of April, 1958, a tax  (hereinafter               referred to as expenditure-tax) at the rate or               rates specified in the Schedule in respect  of               the expenditure incurred by any individual  or               Hindu   undivided  family  in   the   previous               year........ " brought   within   the   not   of   taxation   a    Mappilla Marumakkattayam family.  As seen earlier, under s. 3 of  the Expenditure Tax Act, the only entities which are  mentioned, are individuals or Hindu undivided family.  This Court  came to the conclusion that Mappilla Marumakkattayam Family could also be assessed as an individual. In Subashini Karuri and Another v. Wealth-tax Officer,  Cal- cutta  and Another, (1) the Calcutta High Court opened  that the  joint trustees could be assessed as  individuals  under the Act.  A similar view was taken by the Bombay High  Court in Abhay L. Khatau and Others v. Commissioner of Wealth-tax, Bombay  city II. (2).  We are in agreement with  that  view. We,  accordingly, agrees with the High Court and  hold  that the  trustees of the trust, with which we are  concerned  in these  appeals,  constitute  an assessable  unit  under  the provisions of the Act. Now,  let  us turn to the other question  viz.  whether  the

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trust  in question can be considered as a trust created  for public purpose of a charitable or religious nature.  As seen earlier, the trust in question was created primarily for the benefit of the members of the family of Gordhandas Govindram Seksaria.   That is clear from the title given to the  Trust as  well as from the various provisions to which  we  have made  reference earlier.  Therefore, it is not  possible  to hold  that the Trust in question is a Trust for  any  public purpose.   It is clearly a private Trust.  The character  of the  Trust in question came to be considered by  the  Bombay High  Court  in  Trustees  of  Gordhandas  Govindram  Family Charity  Trust  v.  Commissioner  of  Income-tax  (Central). Bombay,  (3) under sec. 4 (3) (1) of the  Indian  Income-tax Act.   After  examining the I various provisions,  the  High Court opined that it was not a trust (1)  46 I.T.R. 953. (2) 57 I.T.R. 202. (3)  21 IT.R. 231 at 237. 1056 for charitable purpose within the meaning of Indian  Income- tax Act, 1922.  It was held that the primary purpose of  the settlor  was  to  benefit  the members  of  his  family  and remotely  and indirectly to benefit the general public.   We agree with that conclusion.  The decision in the above  case came  up for consideration by this Court in Trustees of  the Charity Fund v. Commissioner of Income-tax, Bombay(1).  This Court did not differ from the view taken by the High  Court. But distinguished the same. In  the  result, these appeals fail and they  are  dismissed with costs-one hearing fee. G.C.                                  Appeal dismissed. (1) 36 IT.R. 513. 1057