S.K Chander, A.M:— These appeals by the Revenue are directed against the orders of the AAC tor the asst. yrs. 1975–76, 1978–79 and 1981–82. All these orders are made by the learned AAC on 5th Sept., 1984. However, the main speaking order is made for the year 1975–76. From both the sides, the parties agreed that arguments for the asst. yr. 1975–76 shall apply mutatis mutandis to other years and our decision, in this case, for this year, will cover the wealth-tax assessments for the asst. yrs. 1974–75 and 1975–76. We have, therefore, heard the parties, in this case and proceed to decide the issues brought in appeal before us.

2. The assessee before us is a trust known as Mrs. Dwarika Prasad Trust, 56 Civil Lines, Bareilly. This trust was created by late Shri Girish Prasad by Will dated 15th Aug., 1972, registered on 3rd April, 1973. After making the will, but before registration, the settler died on 22nd Jan., 1973. But the Trust was to take effect from the date of his death. The Trust was for charitable purposes. There is no dispute that but for cl. (d) in the will, the other provisions were considered by the ITO as charitable in character. However, with regard to cl. (d) in the will which provided that ¼th of the property shall be utilised for the help of the deserving members of the family and for their studies and shall also be utilized for the marriages of the girls of the family, was interpreted by the ITO as the powers reserved by the settler for the trustees for application of the Trust money for non-charitable purposes'. On 8th Sept., 1980, the beneficiaries of the Trust had executed a deed of renunciation whereby they relinquished all their beneficial rights, title and interest in the will and it was provided that such interest of the beneficiaries could also be utilized by the trustees for charitable purposes mentioned in the will.

3. The ITO observed that the amendment in the deed was without any authority provided in the original will and as such, not applicable, in view of the judgm?nts cited by him including that of Madras High Court in the case of CIT v. Ramaswamy Iyer, 1977 CTR (Mad) 21 : (1977) 110 ITR 364 (Mad). According to him, if any change was to be made in the original objects of the Trust, the provisions of, CPC, in this regard should have been availed of His other objection was that the renunciation deed having been made on 8th Sept., 1980 could not be made retrospective in operation and applied for the asst. yr. 1975–76 and according to him, the matter must be decided upon the deed and the position, which existed during the relevant year.

4. The Trust had applied for registration with the Commissioner on 12th Spt., 1980 and the Commissioner had registered the Trust as charitable, vide certificate dated 17th Sept., 1983. The ITO, however, noted that the application for registration and the renunciation deed to be considered in the context as of no avail. According to him, if the position of the deed was, thus, taken, the trustees were entitled to certain benefits forbidden under s. 13(1)(c) of the Act and hence, the exemption under s. 11 cannot be granted.

5. The ITO also took into consideration while examining the claim for exemption by the assessee certain other circumstances. According to him, Form No. 10, which was in the form of a notice for accumulation of income to be applied should be filed with the ITO within the time prescribed for filing the return but it was inordinately delayed as it was filed on 24th Nov., 1979. Similarly, a Resolution by the Board of Trustees, which was to be attached with Form No. 10 had not been attached and was filed only on 24th Nov., 1979. Thus, according to him, the mandatory conditions laid down in the Act and the rules regarding permissibility of accumulation of funds of the Trust had not strictly been followed. Since, the specified percentage of income, according to him, had not been applied for charitable purposes and the conditions for accumulation of funds, had not been fulfilled, the Trust was not entitled to exemption, he held so. Thereafter the ITO took the status of the Trust as Association of Persons and computed the total income at Rs. 55,290. According, to him, the shares of the beneficiaries were indeterminate and, therefore, the tax had to be charged on that income at the maximum marginal rate as per provisions of s. 164 of the Act. This assessment was made on 31st Jan., 1984.

6. When the matter came up in appeal before the learned AAC, he heard the parties, considered the order of the ITO and came to the conclusion with the detailed reasons given in his order that the Trust was entitled to exemption as a charitable institution and the other conditions regarding accumulation and application of income had also been fulfilled. The appeal of the assessee was, therefore, allowed by treating the entire income of the Trust as exempt. Hence, the grievance of the Revenue.

7. We find after careful consideration of the rival submissions and the orders of the authorities below alongwith the authorities cited that the ITO did not appreciate the provisions of the Will, the deed of renunciation and other relevant provisions of law in the proper perspective. In the case of Ramaswamy Iyer, the, Madras High Court was deciding a case where a Trust was created under a deed whollly for charitable purposes and, there was a supplemental deed providing for expenditure in favour of poor relations of the founder. There was no provision in the original deed providing for alteration of terms and the High Court held that supplemental-deed was not valid. In the case before us it is clear that the deed of renunciation was by the beneficiaries giving up their rights endowed upon them by the original deed and thus, something more was being added to the corpus or income of the Trust for charitable purposes rather than being taken away. This was, therefore, not to be viewed with the type of suspicion that the ITO entertained for the purpose of the deed of renunciation. From pages 22 to 26 in the assessee's paper book containing income and expenditure accounts and balance-sheets for the years under appeal, it can been seen that there is factually no application of income or usages of assets in any manner contravening the provisions' of s. 13(1)(c) of the IT Act, 1961. Thus, even if in the original Will that formed the document creating the Trust there was reservation for family members in cl. (d) that never became operative, in fact and in view of the judgment of the Supreme Court in the case of Cit, Kerala v. Dharmodayam & Co., Kerala, 1977 CTR (SC) 341 : (1977) 109 ITR 527 (SC), it will not be fatal to the claim of exemption by the assessee.

8. We also find that the inordinate delay in filing Form No. 10, which is a notice of accumulation to be filed with the ITO cannot rob the assessee from claim of exemption because of the judgments mentioned in the impugned order of the AAC; such as the case of CIT v. Shri Padma Nabhaswami Temple Trust, (1979) 12 CTR (Ker) 282. : (1979) 120 ITR 42 (Ker) and ITO Second v. M.C.T Trust, 1976 CTR (Mad) 69 : (1976) 102 ITR 138 (Mad), etc. Since the section does not lay down any time limit for application of income, the delay in filing Form No. 10 prescribed in the rules cannot over-ride the main provisions in the section. This was, therefore, inconsequential in determining the claim of exemption. The AAC, therefore, rightly allowed the exemption despite the delay.

9. Since the assessee is a charitable trust or charitable institution, as its objects are of charitable purposes as defined in s. 2(15) of the Act, it would be covered by the provi sions of s. 11, ibid. In the case of a charitable institution even the capital expenditure can be allowed as a deduction in view of the ratio of the Gujarat High Court judgment in the case of Satya Vijay Patel Hindu Dharamsala Trust v. CIT, (1972) 86 ITR 683 (Guj). Hence computation of the income in the impugned order of the learned AAC also does not call for an interference by which he determined total income as ‘nil’. The appeal for the asst. yr. 1975–76 is, therefore, dismissed.

10. For the reasons assigned supra, which we apply with necessary changes to the asst. yr. 1978–79 and 1980–81, the appeals of the revenue are dismissed.

M.C Agarwal, J.M25th July, 1986

I have read, with advantage, the order proposed by my learned brother Shri S.K Chander and since I have not been able to agree with the findings, I record my view as below:

2. This is a case of a Trust that claims to be one for charitable purposes. The trust therefore claims that its income is exempt from tax.

3. The trust in question charistened as ‘Mrs. Dwarik Prasad Trust’ was created under a Will dated 15th Aug., 1972 executed by late Shri. Girish Prasad, who died on 22nd Jan., 1973. By the Will the testator Girish Prasad bequeathed all his property to the seven trustees to be utilised as under:

(i) ¼th of the income from the property to be utilised by giving financial aid to medical students.

(ii) ¼th of the income to be spent on providing medical aid to poor persons,

(iii) ¼th of the income to be used for helping deserving members of the family of the testator/settler in their studies or for any other purpose and “shall be utilised for the marriage of the girls of my family members.”

(iv) ¼th of the income to be utilised for maintenance and further development of settler's property.

(v) A sum of Rs. 1,000 p.m has to be paid to one Tapan Chakravorty. This has been made an overriding charge as the settler provided that only the remaining income shall be trust property.

4. The other important provisions in the will/trust deed are (i) the trustee shall have no right to transfer, sell or mortgage the property in any circumstance; and (ii) a Kothi at Nainital and a residential flat at Bareilly “shall only be used by the trustees and their families for their use and they will not be let out to any third person”.

5. A copy of the aforesaid will forms part of the paper book. The provisions in the will clearly indicate that it is a trust partly for charitable purposes and partly for private purposes i.e for the benefit of family members and friends of the testator/settler. This is a trust created after the commencement of IT Act, 1961 and under s. 111(1)(a) of the Act, only income from property “held under trust wholly for charitable or religious purposes”, can be exempt. The terms of the trust as cited above indicate that it is not a trust “wholly for charitable or religious purposes” and therefore the income of this trust could not be exempt.

6. Probably to overcome the above difficulty, the trustees executed a document called “Relinquishment Deed” on the 8th of Sept, 1980. On the basis of this document it was argued on behalf of the assessee that now it is a trust wholly for charitable purposes as the beneficiaries have given up and relinquished their beneficial interest in favour of charity. The relinquishment is only by a few persons out of the entire body of beneficiaries. The document is executed only by the beneficiaries who are the trustees as well. The remaining beneficiaries who are members of the family of the testator/settler have not relinquished their beneficial interest. A list of such existing beneficiaries is given at pages 14 and 15 of the paper book. Tapan Chakravorty was a special beneficiary under the trust and the settlor had created an overriding title in him over the income of the trust by providing that a sum of Rs. 1,000 per month shall be paid to him and the income remaining after the payment shall be applied to the other purposes specified in the trust. This beneficiary is not at all a partly to the relinquishment deed. This relinquishment not extinquish the private or non-charitable character of the trust. The learned AAC has not looked into this aspect of the matter and has wrongly accepted the argument that all the private beneficiaries have given up their interest. The perfunctory manner in which he has looked at the documents is also evident from the observation that “the seven trustees are non-relative”. The fact is that out of the seven trustees five are close relatives of the settlor being his mother, brother and three nephews. The relinquishment deed having not been executed by the entire body of beneficiaries, I hold that the trust in question continues to be a trust partly for private purposes and partly for charitable purposes. I further hold that income of such a trust is not exempt under s. 11 of IT Act.

7. The learned AAC has observed that since the CIT has registered the trust in question under s. 12-A of the IT Act as a charitable institution it was not proper for the ITO to have different findings. The learned AAC does not appear to have read s. 12A carefully. It merely provides that s. 11 and 12 will not apply to a trust unless the trustee's have made an application for registration of the trust within a certain time. There are no provisions specifically how the Commissioner shall deal with the application. Therefore, s. 12A merely prescribes one of the various other formalities which a trust has to fulfil before being entitled to claim exemption. There is no warrant for the view that if a trust is registered by the Commissioner under s. 12A as a charitable institution, the ITO is debarred from enquiring into the nature the institution and its eligibility for exemption. The learned AAC has also laid stress on the fact that no money has been spent on non-charitable purposes. This is only one view of the matter and is my view not a very proper one. What is important is that not a single shell has been spent for carrying out the purposes specified in the Will-cum-trust deed. All the money is being accumulated. Even Tapan Chakravorty, for whom the settlor had special concern, has not been paid anything. The fact therefore, that no money has been spent on non-charitable purposes does not do any favour to the assessee in the circumstances of the case.

8. For the above reasons, I hold that the trust in question is not one “wholly for charitable or religious purposes” and was therefore not entitled to exemption under s. 11 of the IT Act.

9. However, I find that so far as Tapan Chakravorty is concerned, there is a specific trust in his favour and therefore with regard to Rs. 12,000 per annum payable to him, the assessment could be under s. 161 of the Act and not under s. 164. Therefore from the income assessed by the ITO in each of the three years in question, a sum of Rs. 12,000 shall be excluded. The ITO may take steps permissible under the law for assessment of that income.

10. In the result, I would allow the revenue's appeal, set aside the orders passed by the AAC and confirm the orders passed by the ITO with the modification that a sum of Rs. 12,000 shall be excluded from the assessed income of each of the years under consideration.

1st August, 1986

Order under s. 255(4) of the IT Act, 1961

In the above mentioned appeals filed by the revenue against the order of the AAC dated 5th Sept., 1984, the grievance projected by the revenue is that he erred in law and on facts in holding that the income of the Trust is exempt. We have heard the appeals but have a difference of opinion on the following point;

“Whether, on the facts and in the circumstances of the case, the assessee Trust is entitled to exemption under the IT Act, 1961 or not?”

2. Therefore, under s. 255(4), we refer the above point of difference to the President of the Income-tax Appellate Tribunal for action trader s. 255(4) of the Act, as the Hon'ble President may deem fit.

2nd June, 1989

Ch. G. Krishnamurthy, President:— In these” appeals filed by the Revenue, the question for consideration before the Tribunal was whether the AAC had erred in law and on facts in holding that the income of the trust was exempt from tax alleging at the same time that the AAC was silent on numerous contentions, which he has not referred to in his appellate order.

2. The relevant facts are that the assessee was a charitable trust registered with the CIT vide certificate dated 17th Sept., 1983 and as such its income should be exempt from tax under the provisions of ss. II to 13 of the IT Act, 1961. One late Shri Girish Prasad was the owner of properties at 56, Civil Lines, Bareilly and a Kothi at Nainital. He executed a Will, under which he bequeathed certain properties to the trustees named in the Will, the income of which was to be spent in the manner provided in the Will. He executed the Will on 15th Aug., 1972 but before the Will could be registered, he died on 22nd Jan., 1973. After his death the will was submitted for registration before the District Judge and it was duly registered on 3rd April, 1973, after giving the necessary partiulars required by the District Judge particularly on properties he settled on trust. The Will provided among others that ¼th of the income of the trust property shall be utilised for the help of the deserving members of the family of the trustees either for their studies or for any other purposes and shall be utilised for the marriage of the girls of the testator's family members excluding certain members of his brother's family, who predeceased the testator. When the ITO examined this question of exemption, he found that in addition to this clause providing for the utilisation of ¼th of the income of the trust property for the help of the deserving members of the family of the trustees, there was another provision under which a sum of Rs. 1,000 was to be paid to one Shri Tapan Chakarverty a close friend of the Settlor, for whom the Settlor had expressed so much of concern in the Will. Subsequently on 8th Sept., 1980 the beneficiaries of the trust, who happened to be the trustees in this case executed a relinquishment deed relinquishing their beneficial rights, title and interest, that accrued to them under the will making a specific provision in the renunciation deed that the beneficial interest of the beneficiaries could be utilised by the trustees for charitable purposes mentioned in the Will. Thus the beneficiaries surrendered their beneficial interest in the corpus as well as in the income under the renunciation deed. The ITO observed that since the trust provided for the benefit of the Settler's family and his friend, the trust was not wholly and exclusively for charitable purpose and even though a deed of renunciation was executed by the trustee, i.e the beneficiaries renouncing their beneficial interest in the trust, it could not have any effect because under the provisions of the Will, there was no authority given to the trustees to amend the original instrument of Will. Placing reliance upon a judgment of the Madras High Court in the case of CIT v. Ramaswamy Iyer (supra) the ITO more or less ignored the effect of the renunciation deed. The ITO was also of the opinion that even if the renunciation deed was held to be valid, still it could not have any retrospective operation because that was registered on 12th Sept., 1980 and that could not have covered the period under assessment, namely, asst. yr. 1975–76, for which relevant previous year ended on 31st March, 1975. For this proposition, he relied upon a decision of the Calcutta High Court in the case of Smt. Charusila Dassi, In re, (1946) 14 ITR 362 (Cal). Alongwith the return of income, the assessee claimed that it proposes to accumulate certain income for the purpose of the trust. Under s. 11(2) of the IT Act, the assessee has to give a notice to the ITO about the accumulation. That notice has to be given within the time prescribed for filing the return originally fixed or the extended period from time to time. While the return in this case was due to be filed on 30th June, 1975, it was filed on 24th Nov., 1979 alongwith Form No. 10 but the ITO held that the Form No. 10 filed in 24th Nov., 1979 was unduly belated. As a consequence, the mandatory provisions laid down in the Act regarding conditions for accumulation of funds were not satisfied. For these reasons and for the additional reason that the income and expenditure account filed alongwith the return of income showed that there was no income, which could be held to have been applied for charitable purpose because the expenditure incurred was on various items of establishment such as travelling, postage, telephones, etc. The claim for exemption was rejected and the income was computed at Rs. 55,290 and treating the status of the assessee as AOP, tax was levied at the maximum marginal rate as per the provisions of s. 164 of the IT Act. This section was invoked on the ground that the shares of the beneficiaries were indeterminate. This is how the ITO completed the assessment for the asst. yr. 1975–76.

3. But on appeal the assessment made by the ITO was not approved of by the AAC. He held that even though there was some benefit originally conferred upon the trustees i.e the family members of the Settlor, the trustees, i.e the beneficiaries having given up their beneficial interest in the trust and permitted that to be accumulated alongwith other income of the trust, it could not any more be said that the trust was enuring for the benefit of the family members of the settlor. Though he did not discuss about the payment of Rs. 1,000 to Shri Tapan Chakarvarty, he held that as per the income and expenditure account filed on record, no amount was paid to Shri Tapan Chakravarty at any time nor was any amount spent for the benefit of the trustees. Therefore this provision could not have the effect of rendering the trust as one made for the benefit of the family members of the settlor. For this purpose reliance was placed on a decision of the Supreme Court in the case of CIT v. Dharmadayam Co., 1977 CTR (SC) 341 : (1977) 109 ITR 527 (SC) whereunder the Supreme Court pointed out that if there is a provision for the application of the money for non-charitable purpose and if in fact no amount was spent for non-charitable purpose, the trust should not fall and the mere provision of that nature would not vitiate the charitable character of the trust. As regards the filing of Form No. 10 belatedly, the AAC found that r. 17 was amended w.e.f 1st April, 1971 providing for time limits for the filing of the said form and according to that Rule, Form No. 10 has to be filed before the return was due originally or before the extended time and since the return in this case was filed on 24th Nov., 1979 and was accepted by the ITO as valid and processed for assessment, it must be held that the time for the filing of the return was extended and therefore there was no delay in the filing of the Form No. 10. Therefore the accumulation was proper and legal. An argument was taken up before him that the income of the trust was not spent for charitable purposes as the expenditure included amounts spent on capital expenditure. Placing reliance upon two judgments of the High Courts, one in the case of Satya Vijay Patel Dharamshala Trust v. CIT (supra) and Dayal Bagh Medical Relief Society v. ITO, 1973 TLR 1082 (All), he held that amounts spent on capital expenditure could be regarded as an expenditure and the application of the income for the purpose of the trust. Thus he revised the computation of income and found that the expenditure incurred was more than the income and therefore the question of levying tax on the income of the trust did not arise. He also placed strong reliance upon the fact that when the trust was registered by the CIT under s. 12A of the IT Act, the trust must be deemed to have complied with all the formalities and the requirements of s. 11 and no further investigation was permissible by the ITO and therefore the income of the trust was exempt from tax even otherwise.

4. Against this order of the AAC, the department filed a further appeal before the Tribunal raising the questions noted above.

5. The learned Accountant Member agreed with the view expressed by the AAC. He held that the ITO did not appreciate the provisions of the Will, the deed of renunciation and other relevant provisions of law in the proper perspective. He distinguished the decision of the Madras High Court in the case of Ramaswamy Iyer (supra) by pointing out that where a trust was created under a deed only for charitable purposes and if a supplemental deed was executed providing for expenditure in favour of poor relations of the settler and if there was no provision in the original deed providing for the alteration of the terms, the supplemental deed could not be said to be vaild unlike in a case where by a deed of renuniciation executed by the beneficiaries under the trust, the beneficiaries give up their rights endowed upon them irrespective of the fact whether there was a provision in the original deed for making alterations or not, the renunciation deed executed by the trustees would be valid and binding and that would not take away the character of the charitable nature of the trust. He also agreed that when the accounts showed no payments either to the beneficiaries or to Shri Tapan Chakarvarty in any manner, the mere provision for payment to them in the trust deed did not rob the trust of its character of charitable nature as held by the judgment of the Supreme Court in the case of Dharmodaya Co. (supra). Since all the objects were admittedly found to be charitable, the assessee's case was covered by the provisions of s. 11 of the IT Act.

6. But the learned Judicial Member held differently. He held that the trust was partly for charitable purpose and partly for private purpose i.e for the benefit of the family members and friends of the settlor. According to him the renunciation deed executed by the beneficiaries on 8th Sept., 1980 did not provide for the renunciation of the benefit under the Will by all the beneficiaries. According to him only the trustees were parties to the renunciation deed and not the members of the family of the trustees and since the members of the family of the trustees did not join as parties to the renunciation deed, they could not be held to have renounced their interest in the trust and in the absence of a special mention regarding Shri Tapan Chakarvarty, it must be held that he continued to have interest in the trust. Thus a relinquishment of beneficial interest only by a few of the beneficiaries did not extinguish the private or non-chari-table character o??? the trust and this aspect of the matter was not looked into by the AAC. This is the main reason advanced by the learned Judicial Member for his view that the trust in question continued to be a trust partly for private purposes and partly for charitable purposes. Regarding the registration granted by the CIT to the trust under s. 12A, the learned Judicial Member held that the registration of the trust with the CIT was only a procedural formality and the completion of those formalities namely grant of certificate did not mean that either an examination was made or ought to be made by the CIT under s. 11 and the certificate given in those circumstances could not mean that it was recognised under the Act that the trust was a charitable institution and in any case the ITO was not debarred from enquiring into the nature of the institution and its eligibility for exemption. He did not agree with the view that the fact that no money was spent on non-charitable purpose, did not vitiate the charitable character of the trust. For these reasons, he came to the conclusion that the trust was liable to income-tax but in regard to the income that has to be spent on Shri Tapan Chakravarty, the assessment should be made not under s. 164 but under s. 161 and therefore that amount must be excluded from the total income computed by the ITO.

7. On account of these different opinions, the matter was referred to a three Member by the learned Members formulating their difference of opinion in the following words:

“Whether, on the facts and in the circumstances of the case, the assessee Trust is entitled to exemption under the IT Act, 1961 or not?”

As the matter was of considerable importance, the President has constituted a third Member Bench to hear this difference of opinion. That was how the matter came before us.

8. After carefully considering the arguments advanced by both the sides and the relevant documents and the law bearing on the subject, we are of the view that the trust is entitled to exemption and therefore we are in agreement with the view expressed by the learned Accountant Member. We shall first take up the effect of grant of certificate under s. 12A of the IT Act.

9. Sec. 12A of the IT Act, 1961 provides:

“12A. The provisions of ss. 11 and 12 shall not apply in relation to the income of any trust or institution unless the following conditions are fulfilled, namely: (a) the person in receipt of the income has made an application for registration of the trust or institution in the prescribed form and in the prescribed manner to the Commissioner before the 1st day of July, 1973, or before the expiry of a period of one year from the date of the creation of the trust or the establishment of the institution whichever is later:

Provided that the Commissioner may, in his discretion, admit an application for the registration of any trust or institution after the expiry of the period aforesaid.

(Sub-clause(b) is not quoted here as it is not relevant for our present purpose).

Rule 17A prescribed the procedures for making an application. It provides:

“17A. An application under cl. (a) of s. 12A for registration of a charitable or religious trust or institution shall be made in duplicate in Form No. 10A and shall be accompanied by the following documents, namely:

(a) where the trust is created, or the institution is established, under an instrument, the instrument in original, together with one copy thereof;

and where the trust is created, or the institution is established, otherwise than under an instrument, the document evidencing the creation of the trust or the establishment of the institution, together with one copy thereof; Provided that if the instrument or document in original cannot conveniently be produced, it shall be open to the Commissioner to accept a certified copy in lieu of the original;

(b) where the trust or institution has been in existence during any year or years, prior to the financial year in which the application for registration is made, two copies of the accounts of the trust or institution relating to such prior year or years (not being more than three years-immediately preceding the year in which the said application is made) for which such accounts have been made up.

It is under this rule that Form No. 10A was prescribed, which provides for furnishing such information, namely, the name of the trust, the address, date of creation of the trust or establishment of the institution and names and addresses of the trustees and the documents to be enclosed alongwith it are two copies of the trust accounts for the last one, two or three years. The prescription by r. 17A to furnish the deed of trust and the copies of the accounts and prescribing the time limits for furnishing of this information and a provision made empowering the Commissioner to accept certified copies in lieu of the originals, does convey that the intention of the Legislature is that this procedure was prescribed not to mechanically grant the registration but to grant registration only after making an enquiry into the charitable or religious nature of the trust or the institution. Had it not been the purpose of the Rule, to confer a duty upon the CIT to grant a certificate of registration of the trust only after due enquiry, we do not think that the Rule had provided for such elaborate procedure and time limits just as idle formalities. It is not as if every trust, whether charitable or not, that applies to the CIT will be granted a certificate of registration. When the grant o??? exemption was made dependant upon the fulfilment of the conditions provided in s. 12A, namely, the registration, that condition could not be said to be an idle formality without investing the Commissioner with a duty to enquire into the genuineness of the trust and the applicability of the provisions of s. 11. The grant of a certificate under s. 12A is a power conferred upon the Commissioner and it is ???mpl???ed that evey power granted under a statute carr???es a duty to do all such things, which would effectuate that power. It is therefore, in our opinion, wrong to think that s. 12A merely prescribed a mere formality to be complied with in a routine way without investigation and the grant of certificate did not mean that the trust was not otherwise entitled to exemption under s. 11 and that it would still confer upon the ITO a power to enquire into the character of the institution and deny exemption under s. 11. We find ourselves unable to agree with this broad proposition. We are therefore of the opinion that the grant of certificate of registration by the Commissioner under S. 12A has some pertinent significance and legal sanction behind it for the purposes of grant of exemption under s. 11 and it could not be bye-passed as mere idle formality. We cannot attribute idleness to the provisions made by the Legislature. This is also a fundamental rule of interpretation. The grant of certificate by the CIT under s. 12A has therefore the significance of conferring upon the trust the right to claim that its income was entitled to exemption. In this aspect of the matter, the learned Accountant Member and the AAC seem to us to be right in attaching importance to the grant of the certificate.

10. We have not extracted in our order the full copy of the Will and we have extracted above only the relevant portion, which had become controversial. When though on 8th Sept., 1980 the beneficiaries entitled to the benefits under the trust gave up their beneficial interest by executing a valid document, it could not any more be said that the beneficiaries were still entitled to the benefits under the trust created by the Will. For the beneficiraries to give up his or her or their interest in the corpus or income of the trust, there need not be a provision in the Will authorising the beneficiaries to give up their beneficial interest. The power to renounce the interest under the trust is available to the beneficiaries under the general law and under the Indian Trusts Act and it was recognised under the Indian Trusts Act by s. 58 and the only condition imposed is that the beneficiaries must be competent to contract. It is an inherent right of a beneficiary under the trust to accept or not to accept the beneficial interest. In case he accepts, the trustees have to act according to the provisions in the trust deed. In case the interest is renounced and the renunciation is valid according to law, then no trustee can enforce the beneficial interest and the interest thus released would enure to the benefit of the trust. A beneficiary under the trust possesses the same power of alienation or disposition with respect to estate or interest thereunder as a legal owner has over his legal estate or interest in property and he can exercise it by similar instruments and similar formalities. It is therefore incorrect to state that the renunciation was not valid, and the reference to the Madras High Court decision in Ramaswamy Iyer's case is ill founded. The learned Accountant Member is therefore right in distinguishing that case as inapplicable to the facts of this case. It is also very relevant at this point to note that in the relinquishment deed executed on 8th Sept., 1980, which was a duly registered document on a properly stamped paper, that the trustees had confirmed that they had irrevocably surrendered, released, quit and assigned unto the Trustees all their rights, title and interest as from the date of the Will from the trust funds or investments for the time being representing the same including their liberty to occupy and enjoy the rent free quarters at Nainital and residential flat at Bareilly as described in the Will and that the beneficial interest would thereafter vest in the trustees and that the trustees should utilise the same for charitable purposes mentioned in the said Will. This shows that the relinquishment took effect right from the date the will was executed, namely, 15th August, 1972. In view of this unequivocal surrender of their right and interest under the Will it cannot any more be said, in our opinion, that this relinquishment deed had no retrospective effect. As a consequence of the execution of the relinquishment deed, we think it is even open to the trustees to demand from the beneficiaries restitution of the benefits they derived under the trust right from the time the trust was executed even by instituting a suir for its recovery. Such being the position, it is in our opinion idle to say that the relinquishment had no retrospective operation.

11. The trust deed provided in cl. (d), which is the controversial clause, as under:

“That ¼th income of my property shall be utilised for the help of the deserving members of the family of the above Trustee either for their studies or for any other purpose and shall be utilised for the marriage of the girls of my family members' excluding that of Sri Vishnu Prasad and his family.”

It will be seen from the above that ¼th of the income of the property has to be utilised (before relinquishment) for the help of the deserving members of the family of the above trustees either for their studies or for any other purpose and therefore the members of the family derived their right to get the benefit under the trust only through the trustees. When the right of the members of the family of the trustees is referable and traceable to the trustees and not de hors them, we do not think it is proper to say that all the members of the family of the trustees should also join together as a body relinquishing their rights, which may be contingent right or which may be right in expectation. When the trustees through whom the rights has to be passed on to the members of their family had relinquished their right, we think it would put a stop on flow of the right to the members of the family of the trustees to claim any benefit under cl.(d). Their rights to claim any benefit under cl. (d) came to a close with the execution of the renunciation deed. The effect of executing the renunciation deed is therefore that the entire interest goes to the trustees for being utilised for other charitable purposes, which are enumerated in cls.(a), (b) and (c), which were undisputedly for charitable purpose. The further effect of the renunciation deed is to efface the effect of cl. (d) permanently from the will as if it never existed. It cannot therefore be said, in our opinion, that the trust still enures for the benefit of the family members of the trustees and therefore the trust is partly for private purposes.

11. As regards the amount payable to Shri Tapan Chakarvarty, the fact that nothing was paid to him is a relevant factor to consider whether by such a provision the trust could be said to be a trust executed for a private purpose. If Shri Tapan Chakravarty is considered as an employee or a friend, the benefit given to him cannot be said to be a personal benefit to the settlor. Even otherwise as laid down by the Supreme Court in Dharmodayam & Co. case (supra), if no money was spent for that purpose, even if it is considered to be non-charitable, that does hot vitiate the character of the charitable nature of the trust. The trust does not therefore fail to seek exemption. In that case one of the objects of the company, which claimed exemption under s. 11 of the IT Act, 1961 read with s. 2(15) of the IT Act provided that the company could do the needful for the promotion of industries. The argument was that since the objects provided for the promotion of industries, the trust cannot be said to be wholly for charitable purpose and therefore was not entitled to exemption under s. 11 of the IT Act. The Supreme Court found that although the objects clause provided for doing the needful for the promotion of industries, nothing was spent on industry or the company never engaged itself in any industry or in any other activity and therefore no importance could be attached to its objects relating to this particular object. Dealing with the effect of the presence of this object in the Memorandum of Association on the charitable nature, the Supreme Court pointed out at page 537:

“The second question presents no difficulty. The apprehension that in exercise of the power conferred by Art. 39 of the Articles of Association, the general meeting may set apart the entire profit or a substantive part of it for reserves is unfounded. If and when the affairs of the respondent take that shape, the department will have ample powers and opportunity to deny the exemption to the respondent. For the time being it is enough to state that the High Court has found that the respondent has spent the income for charitable purposes. The answer to the second question, must, therefore, be that the power to set apart reserves under Art. 39 will not, without more, vitiate the charitable nature of the institution.”

The second question posed for consideration before the Supreme Court was;

“2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that setting apart reserves under Art. 39 of the assessee's memorandum did not vitiate the charitable purpose of the institution.?”

Thus to a direct question posed for decision before the Supreme Court, as to whether the presence of an object of a non-charitable nature would vitiate the charitable purpose of the institution, the ruling of the Supreme Court was that it would not vitiate the charitablenatureoftheinstitutionifnofundswerespentforthatpurpose. It therefore means that even in this case also one must see as to whether any amount was spent in payment of any sum to Shri Tapan Chakravorty. The finding of fact recorded by both the Members as well as by the AAC, perhaps even by the ITO, was that no money was spent on payment to Shri Tapan Chakravorty. Therefore the presence of this provision will not vitiate the charitable nature of the trust. As has been rightly held by the learned Accountant Member that the application in Form No. 10A was filed within time i.e alongwith the return of income and it could not be said that there was any delay in filing Form No. 10A before the ITO giving notice of accumulation. The learned Judicial Member did not express any view on this aspect. We therefore take it that he agreed with the view expressed by the learned Accountant Member or for that matter the view expressed by the AAC.

12. Thus on all the points raised by the Revenue to deny exemption to the assessee, we find that their understanding of the law and the provisions of the Will, according to us, was not in a proper prospective. The learned Judicial Member, in our opinion, is not right in taking the view that the trust still enures partly for personal purposes and not existing wholly for charitable or religious purposes. We do not wish to express any opinion on the question of treating the sum paid to Shri Tapan Chakravorty as falling for assessment under s. 161 of the IT Act, 1961 because that was not a point of difference of opinion referred to us, in any case not covered by the reference made to us.

13. For the above reasons, we are of the view that the assessee trust is entitled to exemption under the IT Act, 1961 and denial of exemption is hot proper.

14. The matter will now go before the regular Bench for deciding the appeals according to the opinion of the majority.