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Commissioner Of Wealth-Tax, Bombay City Ii. v. Trustees Of The J.P Pardiwala Charity Trust.
Judgment Summary — Tambe, J.
Factual and Procedural Background
The reference arises under section 27(1) of the Wealth-tax Act concerning assessment years 1957-58 and 1958-59. The trustees of the "Jehangir Pestonji Pardiwala Charity Trust" (the assessees) claim that the trust property is exempt from wealth-tax because the trust is for public purposes of a charitable or religious nature. The trust was created by a deed dated 17 February 1941. Clause 2 of the deed obliges the trustees to apply trust income to objects specified in the third schedule. The first four of six clauses in that schedule (clauses 1–4) are not in dispute and are accepted as public charitable purposes. The controversy concerns clauses 5 and 6, which respectively permit (a) payments to Parsi Anjuman Agiary Fund or Parsee Panchayat or direct expenditure by trustees for certain religious ceremonies (Baj Raojgar, Muktad and other ceremonies) for repose of souls of deceased family members and the settlor and his wife; and (b) payments or contributions towards support and maintenance of certain relations and/or indigent persons, with preference to relations of the settlor and his wife.
The Wealth-tax Officer rejected the exemption claim, taking a view that because the trustees could apply income to any one of the objects (including family relief), the trust as a whole was not exclusively for a public purpose. The Appellate Assistant Commissioner allowed the assessee's appeals, following prior decisions of the Supreme Court and this Court; the Income-tax Appellate Tribunal dismissed the department's appeals. The Tribunal framed and referred the question of law to this Court:
“Whether on the facts of the case the trust property is exempt from wealth-tax under section 5(1)(i) of the Wealth-tax Act?”
Legal Issues Presented
- Whether the trust property is held under trust for any public purpose of a charitable or religious nature within the meaning of section 5(1)(i) of the Wealth-tax Act and therefore exempt from wealth-tax for the assessment years in question.
- Whether clauses 5 and 6 of the third schedule to the trust deed (relating to performance of specified religious ceremonies and payments to relations/indigent persons with preference to relations) render the trust private rather than public in character.
Arguments of the Parties
Revenue / Wealth-tax Officer (as represented by Mr. Joshi)
- The Wealth-tax Officer's view was that because the trustees could apply income to any one of the objects in the deed (including relief to poor descendants of the settlor), and one of those objects was not a public purpose, the trust was not exclusively for public charitable or religious purposes and thus not exempt.
- Mr. Joshi argued that clauses 5 and 6 did not relate to public purposes: clause 5 authorized expenditure for ceremonies for repose of the souls of deceased relations (a private purpose), and clause 6 authorized payments to the relations of the settlor irrespective of their financial condition (a private benefit). Thus the trustees could lawfully spend income solely on private purposes, making the trust non-charitable for wealth-tax exemption purposes.
- Mr. Joshi further contended that clause 6 should be read as creating two categories (relations on the one hand, indigent persons on the other), with payments to relations not limited to indigent relations; and he attempted to distinguish the Supreme Court decision cited by emphasizing differences in clause wording.
Assessees / Trustees
- The trustees maintain that the trust is for public religious and charitable purposes and therefore the trust property is exempt from wealth-tax under section 5(1)(i). (This position is reflected in the appeals they pursued and the relief granted by the Appellate Assistant Commissioner and Tribunal.)
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Trustees of the Charity Fund v. Commissioner of Income-tax, [1959] 36 I.T.R. 513 (Supreme Court) | The Supreme Court held that a clause providing for aid to indigent persons but directing that preference be given to relations does not affect the character of the trust as a public charitable trust; the proviso giving preference to relations cannot affect the trust's public charitable nature. | The court relied on the ratio in this decision to conclude that clause 6—properly construed as providing for relief to indigent persons (with a directional preference for relations)—does not render the trust private and does not defeat its charitable character for wealth-tax exemption under s.5(1)(i). |
| Jamshedji Curseljee Tarachand v. Soonabai (referenced decision of this Court) | Held that ceremonies such as Baj, Raojgar, Muktad (though performed for repose of an individual's soul) confer benefits on the community and are acts of religious worship that enure to the public benefit; thus trusts for such ceremonies are for a public religious purpose. | The court applied this principle to clause 5 to conclude that payments for Baj, Raojgar, Muktad and similar ceremonies are for a public religious purpose and so clause 5 does not make the trust private. |
| Commissioner of Income-tax v. Trustees of Seth Meghji Mathuradas Charity Trust, [1959] 37 I.T.R. 419 (this Court) | Referenced by the Appellate Assistant Commissioner as an authority followed in allowing the appeals; the specific principle from the decision is not elaborated in the present opinion text. | The opinion records that the Appellate Assistant Commissioner followed this court's decision in allowing the assessee's appeals; the present court notes that the Assistant Commissioner's allowance followed this decision among others. |
Court's Reasoning and Analysis
The court's analysis proceeded in stages, applying textual construction and precedent to the clauses in dispute:
- Preliminary statutory context: Section 5(1)(i) of the Wealth-tax Act excludes from net wealth any property held by an assessee under trust for any public purpose of a charitable or religious nature in India. The issue is whether the present trust falls within that exclusion.
- Clauses 1–4: The court observed that the first four clauses of the third schedule clearly relate to public charitable purposes (relief to deaf/dumb/blind and indigent members of communities; relief to victims of famine/disaster; aid for education and religious ceremonies and marriages of poor Parsis; support and maintenance of hospitals/dispensaries). These are accepted as public and charitable without dispute.
- Clause 5 (religious ceremonies): The court examined clause 5, which authorizes payments to Parsi Anjuman Agiary Fund or Parsee Panchayat or direct expenditure by trustees for Baj, Raojgar, Muktad and related ceremonies for the repose of souls. The court relied on its prior decision in Jamshedji Curseljee Tarachand v. Soonabai, which held that such ceremonies, although performed for repose of individual souls, are acts of religious worship that confer public benefits (advancement of religion, benefits to the Zoroastrian community and the society in which they live). On that authority, clause 5 was held to be a public purpose of a religious nature.
- Clause 6 (payments to relations and indigent persons): The court undertook a close textual construction of clause 6. It rejected the revenue's contention that clause 6 created two distinct categories (relations irrespective of need; and indigent persons). Instead, the court held that clause 6 describes one category only—indigent persons—and that the phraseology ("and/or other", the use of "other", and the concluding directional clause "who in the opinion of the trustee... preference being given to the relations of Jehangir Pestonji Pardiwala and his wife") shows that the relations referred to are indigent relations. The trustees' discretion is to make payments according to need; preference is only a directional guide to favour indigent relations when choosing among indigent beneficiaries.
- Consistency with precedent: The court rejected the distinguishing attempt by Mr. Joshi (based on ordering of language in a precedent clause) and invoked the Supreme Court's decision in Trustees of the Charity Fund v. Commissioner of Income-tax to support the view that preference for relations does not defeat the public charitable character of a trust that otherwise benefits indigent persons. The court found the ratio of that decision applicable to the present clause 6.
- Synthesis and conclusion: Because clauses 5 and 6, when read in the context of the whole deed, are for public religious or charitable purposes (clause 5 being religious/public and clause 6 providing relief to indigent persons, with a directional preference to relations), the trust as a whole is held to be for public charitable and religious purposes within the meaning of s.5(1)(i). Consequently the trust property is excluded from the assessee's net wealth for wealth-tax purposes.
The court's reasoning closely follows textual interpretation of the deed and precedential rulings cited in the opinion; the court declined to accept the revenue's grammatical and purposive arguments that would render clauses 5 and 6 private in character.
Holding and Implications
Holding: The court answered the referred question in the affirmative. The court's core ruling is:
The properties held by the trustees are held on trust for public purposes of a charitable and religious nature and are therefore exempt from wealth‑tax under section 5(1)(i) of the Wealth‑tax Act.
Direct implications (as stated in the opinion):
- The trust property is not to be included in the net wealth of the assessee for the relevant assessment years, and consequently no wealth-tax is leviable on the assessee in respect of the trust property for those years.
- The Commissioner is directed to pay the costs of the assessee.
Broader implications: The opinion applies and follows existing judicial authority (including the Supreme Court decision in Trustees of the Charity Fund and this Court's earlier decision in Jamshedji Curseljee Tarachand v. Soonabai) in construing provisions that combine preference for relations with relief for indigent persons. The opinion itself does not articulate any novel or wider rule beyond applying those precedents to the facts at hand; the direct effect is the exemption of the trust property from wealth-tax and the costs award in favour of the assessee.
Disposition: Question answered in the affirmative; costs awarded to the assessee.
Tambe, J.:— This is a joint reference at the instance of the Commissioner of Wealth-tax under section 27(1) of the Wealth-tax Act. We are here concerned with the assessment years 1957-58 and 1958-59, and the question that has to be considered is whether the trust is for any public purposes of a charitable or religious nature, and, therefore, exempted from payment of wealth-tax.
2. Facts in brief are: The assessees before us are the trustees of a trust known as “Jehangir Pestonji Pardiwala Charity Trust”. One Mr. J.P Pardiwala by a deed dated 17th February, 1941, settled on trust certain properties mentioned therein. Clause 2 of the deed provided that “the trustees shall apply the income of the trust property for defraying the expenses of performing and carrying out the religious ceremonies, charitable, benevolent and other objects specified in the third schedule hereunder written or to such one or more of them in such manner and in such proportions as to the said trustees may from time to time seem expedient and proper.” It is not necessary to reproduce the entire third schedule, inasmuch as it is not in dispute that the first four out of the six objects mentioned in the third schedule are clearly for public purposes of a charitable nature. The dispute centres round the provisions contained in clauses 5 and 6 of the third schedule. The first clause in the third schedule provides for contributions to the support and relief of deaf, dumb and blind and indigent members of the Parsi or any other community. Clause 2 provides for the support and relief of persons of any race suffering from or rendered destitute on account of famine, etc. Clause 3 relates to paying over or contributing to the support of persons of any race, free gifts or donations for the purposes of education, for the performance of navjot and marriage ceremonies of poor Parsis, etc. Clause 4 relates to paying over or contributing to or towards the support and maintenance of hospitals, dispensaries and other institutions of a similar character. Clauses 5 and 6 are in the following terms:
“5. Paying over to Parsi Anjuman Agiary Fund or to the Parsee Panchayat or in their discretion to be retained by the trustees for performing or causing to be performed Baj Raojgar, Muktad and other religious ceremonies for the repose of the soul of the deceased members of the family of Jehangir Pestonji Pardiwala and his wife and on their death of their own including funeral and death ceremonies.
6. Paying over or contributing to or towards the support and maintenance of all or any other lineal descendant of the children of Pestonji Pardiwala and or any or more of the relatives, wife, children and family of Jehangir Pestonji Pardiwala, his brother and sisters, and/or other indigent persons of whatsoever creed or nationality who in the opinion of the trustee or trustees may require support and aid such sums of money as the said trustee or trustees may in their absolute discretion think proper preference being given to the relations of Jehangir Pestonji Pardiwala and his wife.”
3. The Wealth-tax Officer rejected the claim of the assessee for exemption. The statement of the case shows that the view taken by the Wealth-tax Officer was that it being open to the trustees to apply the income of the trust to any one of the objects mentioned in the deed of trust, and one of the objects, viz., to give relief to the poor descendants of the settlor, not being a public purpose, the trust was not for a public purpose of a religious or charitable nature. Mr. Joshi, learned counsel for the revenue, pointed out to us that the order of the Wealth-tax Officer does not show that the Wealth-tax Officer had taken the view that clause 6 provided for giving aid to the poor relations of the settlor. According to Mr. Joshi, the view taken by the Wealth-tax Officer was that the clause having enabled the trustees to aid or contribute towards the support and maintenance of the relations of the settlor whatsoever be their condition, was not a public purpose. From the copy of the order which has been marked as annexure “B.” to the statement of the case, Mr. Joshi's contention that the Wealth-tax Officer has not found that the clause provided for giving relief to the poor descendants of the settor, appears to be correct. The appeals taken by the assessee to the Appellate Assistant Commissioner succeeded. Following the decision of the Supreme Court in Trustees of the Charity Fund v. Commissioner of Income-tax [1959] 36 I.T.R 513 and of this court in Commissioner of Income-tax v. Trustees of Seth Meghji Mathuradas Charity Trust [1959] 37 I.T.R 419., the Appellate Assistant Commissioner allowed the appeals and set aside the order of the Wealth-tax Officer, holding that the assessee was entitled to exemption from the levy of wealth-tax. The department took further appeals to the Income-tax Appellate Tribunal. The appeals were, however, dismissed. On applications made by the Commissioner, the Tribunal has drawn up the statement of the case and made this joint reference for the two assessment years referring to us the following question of law:
“Whether on the facts of the case the trust property is exempt from wealth-tax under section 5(1)(i) of the Wealth-tax Act?”
4. Section 5 relates to items of property in respect of which no wealth-tax is payable by an assessee. The material part thereof reads:
“5. (1) 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.”
5. It is not in dispute that the assessees are holding properties under a trust, under an obligation to apply the income of the said trust properties to the objects mentioned in the six clauses of the third schedule. It is also not in dispute that the first four clauses relate to public purposes of a charitable nature, and there can hardly be any doubt about it. The first clause provides for relief to the physically incapable persons like the deaf, dumb and blind persons. The second clause relates to grant of relief to the victims of natural calamity like famine, fire, flood, etc. The third clause relates to grant of aid to the poor for education and religious ceremonies. The fourth clause relates to making of contributions for the support and maintenance of institutions granting medical relief. As already stated, the contention centred round the provisions of clauses 5 and 6 of the third schedule. It is the argument of Mr. Joshi that it may be that the first four clauses relate to public purposes of a charitable nature. But it is not obligatory on the trustees to expend income for those purposes. Clause 2 of the trust deed has permitted the trustees to expend the money on any one or more of the objects mentioned in the six clauses of the third schedule. Clauses 5 and 6 do not relate to public purpose. On the other hand, they relate to the performance of the ceremonies mentioned therein for the repose of the soul of the deceased relations of the settlor and of himself and his wife after their death. Clause 6 authorises the trustees to pay or make contributions for the maintenance and support of the relations of the settlor mentioned therein, irrespective of their financial conditions. The said objects mentioned in clauses 5 and 6 could not be termed as public purposes. The trust deed permits the trustees to expend income solely on these private purposes. The properties, therefore, are not held for purposes of a charitable or religious nature. On the other hand, the trust really is of a private nature, providing for the support and maintenance of the relations of the settlor and for defraying the expenses of the religious ceremonies for the repose of the soul of the deceased members of the family of the settlor and of the settlor and his wife after their death. We find it difficult to accept the contentions raised by Mr. Joshi. When the trust deed is read as a whole, there can hardly be any doubt that the trust is of a public, religious and charitable nature. It is true that clause 5 authorises the trustees to pay the income of the trust properties to Parsi Anjuman Agiary Fund or to the Parsee Panchayat for certain religious ceremonies for the repose of the soul of the members of the settlor's family, as well as for the performance of the said ceremonies for the repose of the soul of the settlor and his wife after their death. The clause also authorises the trustees instead of handing over the amount to the Agiary Fund or the Parsee Panchayat, to expend the income themselves for the said purpose. The said ceremonies which are to be performed are Baj Raojgar, Muktad and other religious ceremonies. Now, it has been held by this court in Jamshedji Curseljee Tarachand v. Soonabai, that though these ceremonies are performed for the repose of the soul of a deceased individual, the performance of these ceremonies also enures for the benefit of mankind at large, and the benefit from the performance of these ceremonies is shared by the public. The trust created for the purposes of these ceremonies, therefore, is for a public purpose of a religious nature. The question that arose in that case for consideration related to the validity of a trust created by one Dinabai under her will, and the question was whether the trust was a public, charitable and religious trust. The trust, inter alia, provided that the income of certain properties be expended for the aforesaid religious ceremonies. Mr. Justice Davar held that the bequest for the performance of these religious ceremonies was a bequest for public purposes, and, therefore, the trust had been validly created. The ratio following from the decision has been summarised in the placitum. The material part reads:
“The ceremonies themselves are acts of religious worship. They include worship, praise, and adoration for the Supreme Deity, and a thanksgiving for all his mercies. They contain petitions for benefits, both temporal and spiritual, for all Zoroastrians—for all holy and virtuous men of all other communities—and they comprise prayers for the well-being and long reign of the sovereign, for good Government by him, and for victory to him over all his enemies. The Muktad ceremonies tend most unmistakably towards the advancement of the religion promulgated by the Persian Prophet Zoroaster, and there can be no doubt that the performance of these ceremonies is an act of Divine Worship in the highest and truest sense…
According to the belief prevailing amongst the faithful followers of the Prophet Zoroaster, the performance of the Muktad ceremonies confers public benefits—benefits on the Zoroastrian community, on the peoples amongst whom they live and upon the country which they have chosen as their home. The fundamental principle underlying this belief is faith in the efficacy of prayers addressed to the Great Creator.”
6. In this view of the matter, the validity of the trust was upheld. No good reasons have been shown to us to take a different view than taken by this court in the said decision. In our judgment, therefore, the object or purpose mentioned in clause 5 is a public purpose of religious nature.
7. We also find it difficult to accept the contention of Mr. Joshi that clause 6 of the third Schedule authorises the trustees to make payments or contributions towards the support and maintenance of the relations of the settlor and/or his father irrespective of their financial condition. The argument of Mr. Joshi is that clause 6 speaks of persons falling under two categories to whom the trustees could in their discretion make payment towards their support and maintenance. The first class or category consists of the lenial descendants of the children of Pestonji Pardiwala (father of the settlor) and/or any or more of the relatives, wife, children and family of Jehangir Pestonji Pardiwala, his brother and sisters (for brevity's sake we would refer to the persons falling under this category as “the relations”); and the persons falling under the second category or class consists of “indigent persons” of whatsoever creed or nationality who in the opinion of the trustee or trustees require support. As already stated, the argument of Mr. Joshi is that it is left to the discretion of the trustees to make payment or contribution towards the support and maintenance of the first category irrespective of their financial condition. It is only if the trustees desire to make payments or contributions towards the support of persons other than the relations, then their power is restricted to make payments or contributions to indigent persons only. In view of the phraseology used in clause 6, it is not possible for us to accept the argument of Mr. Joshi. In our opinion, the clause speaks of one category only, and the category is of indigent persons. They may be relatives of the settlor or his deceased father, or they may be persons of whatsoever creed or nationality. The power given to the trustees under clause 6 is to make in their discretion payment according to the need of the persons requiring it. In making the choice the trustees have been directed to give preference to the relations of Jehangir Pestonji Pardiwala and his wife. The relations of Jehangir Pestonji Pardiwala and his wife would get aid not merely because they are the relations, but also because they are indigent persons. The difficulty in our way in accepting the contention of Mr. Joshi, firstly, is that the clauses relating to the said relations and indigent persons are joined by clause “and/or other”. The deed thus directs the trustees to make payment or contribution in support and aid to the said relations and/or other indigent persons. The use of the word “other” leaves no doubt that the reference to the relations is reference to the indigent relations only and not to all the relations irrespective of their financial condition. In the second instance, Mr. Joshi's contention would render the concluding clause commencing from “who in the opinion of the trustee… Pardiwala and his wife” entirely meaningless. We asked Mr. Joshi whether the said clause would govern the relations or the indigent persons. Mr. Joshi stated that the said clause would govern only the indigent persons. Now, when the said clause is read only in conjunction with indigent person's the latter half of the said clause “preference being given to the relations of Jehangir Pestonji Pardiwala and his wife” becomes meaningless. If the relations form one separate category and the indigent persons of whatsoever creed and nationality form another separate category, then the question does not arise of giving preference to the relations in considering the question as to who required the support and aid. Similarly, if this clause is read only in conjunction with the relatives, the entire clause becomes meaningless, because then there would be no question of ascertaining as to who requires support and aid. The concluding clause could be consistently read only as governing the relations as well as indigent persons. The clause authorises the trustees to give aid to all indigent persons including his relations as well as his father's relations and other persons of whatever creed or nationality. However, a direction has been given that in considering the case of all indigent persons, preference should be given to the indigent relations of the settlor and his wife. The dominant object is to grant relief to the indigent persons by making payment or contribution towards their support and aid. The circumstance that a direction has been given that in considering the case of such indigent persons preference be given to the relations, does not affect the validity of the trust or does not in any manner derogate from the trust being one for public purpose of a charitable nature. This is the view taken by the Supreme Court in Trustees of the Charity Fund v. Commissioner of Income-tax. Mr. Joshi sought to distinguish the decision in this case with the present case on the basis of the difference in the language used in the relevant clause (a) in that case with clause 6 in the present case. In the clause which was being considered by their Lordships, reference to the poor and indigent persons is made first, and the direction for giving preference to the poor and indigent members of the family of the settlor is given by way of a proviso to the said clause; while in clause 6 reference to the relations comes first and reference to the indigent persons comes next, and both these persons have been clubbed together in the main clause itself. But this variation in language, in our opinion, in substance makes no difference in the provisions contained in clause (a) in the deed which was being considered by their Lordships of the Supreme Court, and clause 6 which we have to construe. At page 520 of the report, it has been observed:
“The circumstance that in selecting the beneficiaries under sub-clause (a) preference has to be given, under the provisos, to the relations or members of the family of Sir Sassoon David, Bart., cannot affect that public charitable trust.”
8. In this view of the matter, their Lordships held that the income of the said properties held on trust was excluded from computation of the total income of the assessee under section 4(3)(i) of the Income-tax Act. The ratio of the decision of their Lordships could equally apply to the facts of the present case. In our opinion, therefore, the Tribunal was not in error in holding that the properties held by the trustees were held by them on trust for public purpose of a charitable and religious nature. The said properties were, therefore, not liable to be included in the net wealth of the assessee, and, consequently, no wealth-tax was leviable on the assessee in respect of the trust property. In the result, our answer to the question referred to us is in the affirmative. The Commissioner shall pay the costs of the assessee.
9. Question answered in the affirmative.
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