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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.