Bombay H.C : Whether, on the facts and in the circumstances of the case, the dividend income was not assessable in the hands of the assessee on the ground that it did not constitute its real income?

Sections 4, 2(15), 11, 215, 217

Asst. Year 1965-66, 1966-67, 1967-68, 1968-69, 1969-70

Counsel Appeared

G.S. Jetly with Mrs. Manjula Singh & C.K. Krishnan, for the Revenue : S.E. Dastur with N.A. Dalvi & Chaudhari, i/b Crawford Bayley & Co., for the Assessee.

SUGLA, J.:

In this reference under s. 256(1) of the IT Act, 1961, at the instance of the Revenue, the questions of law referred to this Court for opinion are :

” (1) Whether, on the facts and in the circumstances of the case, the dividend income was not assessable in the hands of the assessee on the ground that it did not constitute its real income?

(2) Whether, on the facts and in the circumstances of the case, the dividend income was not liable to assessment in the hands of the assessee, as it was diverted by an overriding statutory charge and application created by s. 74 of the ED Act, 1953, before it accrued and reached the assessee ?

(3) Whether, on the facts and in the circumstances of the case, the whole of the dividend income was exempt from assessment under s. 11(1)(a) of the IT Act, 1961 ?

(4) Whether, on the facts and in the circumstances of the case, 25per cent of the dividend income was exempt from assessment under s. 11(1)(a) of the IT Act, 1961 ?

(5) Whether, on the facts and in the circumstances of the case, the assessee, had a right of appeal against the levy of interest under s. 215 of the IT Act, 1961 ? (6) Whether, on the facts and in the circumstances of the case, the assessee had a right of appeal against the levy of interest under s. 217 of the IT Act, 1961 ? “

2. Relevant facts in brief are that Apostolos Raptakos was a Greek, who later on became a naturalised Indian and adopted India as his place of domicile. He owned 69,000 shares out of a total 78,000 issued shares of a company named ” Raptakos Brett & Co. Ltd. ” which he had himself floated. He settled 59,500 shares out of his holding on trust under three different trust deeds. We are concerned herein with two out of three deeds executed by him, being trust deeds Nos. 217 and 307. He settled 6,000 ordinary shares on trust under a trust deed dated June 11, 1947 (for short “Trust No. 217 “). The Imperial Bank was appointed as the sole trustee. The shares were transferred in its name, and thereafter, the Imperial Bank held them on trust for the purposes set out in cl. 3 of the trust deed. He executed another deed of trust on June 12, 1958, settling 6,000 ordinary shares of that very company on trust. By then, the Imperial Bank had become the State Bank of India which was appointed as trustee. Shares were transferred in its name and thereafter, the State Bank held these shares on trust for the purposes mentioned in cl. 3 of the trust deed.

3. Clause 5 in both trust deeds authorised the settlor to revoke the trust after six years and two months. Irrespective of the purposes for which the shares were held on trust during the lifetime of the settlor, the trust deeds contained clauses which provided that from and after the death of the settlor, the trust properties were to be held by the sole trustee for such charitable objects as the settlor may, by will or codicil made before or subsequent to the deeds of trust, direct. The deeds of trust also provided for variation of the clauses by the settlor from time to time. Deeds of variation were, in fact, executed more than once. However, it is common ground that the deeds of variation so executed are not relevant for the purpose of this reference.

4. The settlor had executed a will on August 9, 1939, and a codicil thereto on August 22, 1946. He executed another will dated February 28, 1952, which was his last will for all practical purposes. In this will, the settlor had directed the executors of his will to pay 55per cent of the income of the two trusts, that is, Nos. 217 and 307, to (i) board of trustees to be named ” Raptakos Foundation ” to establish a research laboratory in Bombay or its suburbs to be called ” Raptakos Medical Research Institute ” (in short ” RMRI “) and to pay the remaining 45 per cent of the income to (ii) the University of Athens for the purposes of, inter alia, establishing in Athens or its suburbs a pharmaceutical institute to be named ” Raptakeion Pharmakeftikon Institution ” (in short ” RPI” for the purpose of teaching pharmaceutical chemistry, etc. In terms of the trust deeds and the will, the trustees were bound to apply the income of the trust fund for the aforesaid two purposes, though it was within their absolute discretion to apply the whole or part of the income to one or the other purpose.

5. Raptakos died on April 2, 1964, leaving behind his last will executed on February 28, 1952. The assessments herein relate to the assessments on the sole trustee in respect of income of the trusts Nos. 217 and 307 for the asst. yrs. 1965-66 to 1969-70 covering the period from April 1, 1964, to March 31, 1969, that is, the period practically after the death of the settlor.

6. On September 20, 1964, the State Bank as the sole trustee of the aforesaid two trusts filed estate duty returns at the instance of the Asstt. Controller of Estate Duty. The value of the estate held by it as trustee was disclosed at Rs. 45,78,000 and exemption was claimed from estate duty in respect of the estate, perhaps, on the ground that the estate was held by the trustee for charitable purposes. By his letter dated December 6, 1965, the Asstt. Controller, however, informed the State Bank that the estate left by the deceased was not exempt from estate duty and called upon it to pay Rs. 29,24,157, being the estate duty payable on the basis of the principal value of the estate shown in the return. It appears that the executors of the will and the State Bank as the sole trustee sought legal opinion from an expert in or about June, 1965, as to whether the estate was liable for estate duty and were advised not to spend or apply the income of the trusts until the question as to whether or not the estate is liable for estate duty was finally settled. Estate duty assessment was completed on June 10, 1969, in which the principal value of the estate was determined at Rs. 81,16,093, out of which Rs. 71,40,294 formed trust properties and the balance of Rs. 9,75,799 formed a free estate. The estate duty payable was determined at Rs. 68,28,679 and after taking into account the payment of Rs. 52,688 already made, a demand notice for Rs. 57,76,091 was issued. An amount of Rs. 10,46,791 accumulated as liquid fund in the hands of three trusts, namely, Nos. 207, 217 and 307, was paid towards estate duty in March, 1970, by the State Bank and the remaining estate duty due appears to have been paid in the year 1972 after selling shares forming part of the free estate as well as of the three trusts to the extent necessary.

7. It may not be out of place to mention here that the shares could not be sold earlier as one Amichand Pyarelal had filed a suit against the estate for specific performance of the agreement, contending that the late Raptakos had agreed to sell a particular number of shares to them at a specific rate and had obtained an injunction. The said suit was settled in March, 1972, on payment of Rs. 5,50,000 to them and it was only thereafter that the interim injunction was vacated and the State Bank as the sole trustee and executors of the will could sell the shares to Bombay Oxygen Co.

8. In response, to notice, issued under s. 148 of the IT Act, 1961, the State Bank as the sole trustee filed returns for the asst. yrs. 1965-66 and 1966-67 in respect of both the trusts, namely, Nos. 217 and 307, on August 14, 1967. Returns for the asst. yrs. 1967-68, 1968-69 and 1969-70 were subsequently filed, perhaps voluntarily. The main source of income of both the trusts had been dividend income, though in the case of trust No. 217, some income by way of interest had also been earned.

9. Income was claimed to be exempt under s. 11(1)(a) of the IT Act, 1961, on the ground that it was derived from property held under trust wholly for charitable purposes. For non-application of income for charitable purposes during the relevant previous years, the explanation given was that in view of the huge estate duty liability on the estate, it was not possible to apply the income for charitable purposes as envisaged in the two trust deeds.

10. The claim was rejected by the ITO who completed all the five assessments in March, 1970, holding the assessee-trusts to be liable for income-tax. He also charged interest under ss. 215 and 217 of the IT Act, 1961. The AAC dismissed the appeals. However, by its impugned order dated December 8, 1970, the Tribunal (in short ” the Tribunal “) held that the dividend income did not constitute the real income of the assessee-trusts, that in any event, s. 74 of the ED Act created a charge on the property passing on the death of the late Raptakos and, therefore, the dividend income was not liable to assessment in the hands of the assessee, as it was diverted by an overriding statutory charge. According to the Tribunal, the income of the assessee-trusts was also exempt from income-tax under s. 1l(1)(a) of the IT Act, 1961. However, the Tribunal disallowed the assessee’s alternative claim that at least to the extent of 25 per cent, the income was exempt under s. 11 (1)(a) in any view of the matter. Rejection of the alternative contention raised on behalf of the assessee- trusts did not adversely affect the assessee inasmuch as the income from the trusts was held to be not taxable in its entirety on three other grounds. The Tribunal also held that the appeals against the levy of interest under ss. 215 and 217 were competent.

11. From the facts stated above, one thing is reasonably clear, that is, that the shares held by the sole trustee under the two trust deeds Nos. 217 and 307 are held by it from and after the death of the deceased, Raptakos, on April 2, 1964, for the purposes of the two institutions, RMRI and RPI, and that the trustee had discretion to spend the income of the trusts on either of them. This position, it may be further stated, has not been seriously disputed by Mr. Jetly, learned counsel for the Revenue. It is a different thing, Mr. Jetly contended, that this fact by itself would not advance the assessee’s case further, as, before an income can be held to be exempt under s. 1l(1)(a), there are a number of other conditions which have to be satisfied.

12. The two conclusions, namely, (i) the dividend and other income ostensibly received by the assessee-trusts do not represent the assessee’s real income, and (ii) in any event the said income was diverted at source by an overriding title, are arrived at by the Tribunal primarily for the reason that s. 74(2) of the ED Act, 1953 (in short ” the Act “), creates a charge on the corpus of the trusts. The charge extends to the accretion thereto as well as income arising from the corpus. Therefore, the trustees have no real dominion and control over the income. They are not free agents. To the extent it was necessary to make payments in discharge of the estate duty liability, income cannot be said to have accrued to the assessee.

13. Mr. Jetley, learned counsel for the Revenue, submitted that there was no charge even on the corpus. In any event, the so- called charge did not extend to the income and, therefore, there was no question of diversion of income, far less by an overriding title. He laid great emphasis on the fact that unlike cases relied upon on behalf of the assessee, not a single penny was actually paid towards estate duty liability in favour of which a charge was said to have been created. Mr. Dastur, learned counsel for the assessee, on the other hand, reiterated what was urged before the Tribunal. In support, he strongly relied on this Court’s decision in CIT vs. C. N. Patuck (1969) 71 ITR 713(Bom) and the Gujarat High Court decision in the case of Udayan Chinubhai vs. CIT (1978) 111 ITR 584(Guj).

14. On carefully going through the above decisions as well as other decisions cited at the Bar, we find that the principle of law in this regard is now well settled. The Supreme Court has, in the case of CIT vs. Sitaldas Tirathdas (1961) 41 ITR 367(SC), observed at page 374 : ” In our opinion, the true test is whether the amount sought to be deducted, in truth, never reached the assessee as his income. Obligations, no doubt, there are in every case, but it is the nature of the obligation which is the decisive fact. There is a difference between an amount which a person is obliged to apply out of his income and an amount which by the nature of the obligation cannot be said to be a part of the income of the assessee. Where, by the obligation, income is diverted before it reaches the assessee, it is deductible ; but, where the income is required to be applied to discharge an obligation after such income reaches the assessee, the same consequence, in law, does not follow. It is the first kind of payment which can truly be excused and not the second. The second payment is merely an obligation to pay another a portion of one’s own income which has been received and is since applied. The first is a case in which the income never reaches the assessee, who even if he were to collect it, does so, not as part of his income, but for and on behalf of the person to whom it is payable.”

15. The above principle is applied both by this Court and the Gujarat High Court in the decisions in C. N. Patuck’s case (supra) and Udayan Chinubhai’s case (supra), for the purpose of holding that certain payments in those cases amounted to diversion of income by overriding title and, to that extent, the receipt of income did not represent the real income of the assessee. In CIT vs. C. N. Patuck (supra), as a result of compromise in a suit for dissolution of marriage between the assessee and his first wife, the assessee was under a legally enforceable obligation to pay monthly allowances to his unmarried daughters through that wife until they were married. In order to secure payments regularly, another agreement was entered into between him, the daughters and the partnership firm in which he was a partner. In terms of the second agreement, the firm was to pay the monthly allowances to the daughters directly out of remuneration and profits accruing and/or arising to the assessee from the firm. Reading the two agreements together, this Court held that there was a charge created for payment of the monthly allowances out of remuneration and share of the assessee’s profits arising from the firm in favour of the daughters. In the above circumstances, it was held that the payments amounted to diversion of income by an overriding title. Unlike the case before us, the legally enforceable obligation in this case was for periodical payments and that too out of the income of the assessee and payments had in fact been made. In Udayan Chinubhai vs. CIT (supra), the properties belonged to an HUF comprised in a Baronetcy Trust and so could not be touched. For that reason, on partition amongst the members, the assessees were allotted properties along with certain liabilities. Interest had to be paid by the assessees in respect of the amounts due to unsecured creditors. The assessees claimed that to the extent of the interest paid, they were entitled to deduction. The Gujarat High Court rejected the claim for deduction in respect of interest under s. 57 of the ED Act, but accepted the alternative contention that the income received by the assessees from the properties received on partition did not represent their real income as to the extent of interest paid on amounts due to the creditors, income was diverted at source by an overriding title. In this context, it is desirable to refer to certain observations made by the Court : ” As, pointed out earlier, ordinarily, provision has to be made for the creditors to discharge the liabilities of the HUF and for the pre-partition debts of the father at the time when a partition takes place, but, if for some reason or other, provision for discharging the liabilities has not been made or could not be made, the persons who get the properties on partition keep the properties in their hands subject to the liability to satisfy the just demands of the creditors. In this sense, the sons and the mother, the assessees before us, hold the property for the benefit of the creditors and they were holding the assets which they received on partition for the benefit of the creditors to the extent necessary to satisfy the just demands of the creditors. Even from this point of view therefore, it is clear that there was an overriding right in favour of the creditors to have their liabilities paid from the assets which came to the hands of the assessees before us by virtue of the consent decree and the awards of the arbitrator. This position clearly emerges both under the provisions of the Hindu law as well as under the provisions of the Indian Trusts Act.”

16. We are in full agreement as far as the above-mentioned observations are concerned. In the following sentence, the Gujarat High Court has concluded: ” Therefore, it was by virtue of an overriding title in favour of the creditors that the total income which the assessees received did not represent their ‘ real income ‘. By virtue of the overriding title in favour of the creditors, the income of the family had to be diverted to pay off the interest amounts on the outstanding liabilities and the case, would fall within the principle in Bejoy Singh Dudhuria’s case (1933) 1 ITR 135 (PC) rather than under the principle in P. C. Mullick’s case (1938) 6 ITR 206 (PC).” With respect, we find it difficult to appreciate how the conclusion arrived at follows from the earlier observations. That apart, the claim in the Gujarat case was with regard to interest only and not the principal amount of loan and interest was in fact paid. It was certainly not a case of a mere claim in respect of an apprehended liability as in the case before us. In Raja Bejoy Singh Dudhuria vs. CIT (1933) 1 ITR 135 (PC), Raja Bejoy Singh Dudhuria had succeeded to an ancestral estate of the family on the death of his father. His step-mother had a right of maintenance over the family estate. However, she filed a suit for maintenance and a consent decree was passed in the suit in terms of which the Raja was directed to pay a monthly payment of Rs. 1,100 to his step-mother with a declaration that such a payment was to be a charge on the family estate. In his assessments, the Raja claimed the amounts paid as deduction. The Privy Council rejected the claim for deduction but nevertheless held that the sum paid by the Raja to his step-mother was not his income at all as, to that extent, income was diverted at source. Apart from the fact that both the Raja and his step-mother had some kind of rights in the family estate and the assessment was being made on the Raja, the payments made were periodical and in fact were made.

In the other decisions also, namely, IRC vs. Wemyss (1924) 8 TC 551 and CIT vs. Travancore Sugars & Chemicals Ltd.1973 CTR (SC) 49: (1973) 88 ITR 1 (SC), referred to by Mr. Dastur in the course of his submission, the facts are materially different. While in the former case, income by way of dividend in excess of 12-1/2per cent free of tax was transferred to a firm in discharge of the assessee’s obligation under an ante-nuptial agreement, in the latter case, a percentage of profits was given to the State Government in lieu of certain business units taken over by the assesseecompany over and above the payment of cash consideration.

17. Having regard to the facts and the ratio of the decisions indicated by us above, we hold that none of the decisions relied upon by Mr. Dastur really supports his submissions. Further, on analysing the nature and content of the ” charge ” created under s. 74(2) of the ED Act, the position becomes all the more clear and against the assessee. Sec. 74(2) reads thus: ” 74. (2) A rateable part of the estate duty on an estate, in proportion to the value of any beneficial interest in possession in movable property which passes to any person (other than the legal representative of the deceased) on the death of the deceased shall be a first charge on such interest : Provided that the property shall not be so chargeable as against a bona fide purchaser thereof for valuable consideration without notice.” The section admittedly creates a ” charge ” in favour of ” estate duty payable ” which, in turn, may mean and include a ” charge ” in favour of estate duty payable as and when determined. The section is clear as to its contents. The ” charge ” is in respect of properties passing on the death. Income from those properties accruing and arising after the death does not certainly fall within that kind of property. We also do not find anything in s. 53 of the Act to suggest that the estate duty liability extends to the income from the estate. Accordingly, we do not agree with Mr. Dastur that the charge created under s. 74(2) of the ED Act extends to the income from the estate. Moreover, the question will still be whether a “charge” in favour of “estate duty payable” without determination in pursuance of an order under the ED Act can be legally enforced. In this context, reference may usefully be made to the facts stated by us earlier. The sole trustee and the executors of the will had, no doubt, filed the estate duty return. But they had claimed the estate to be exempt from estate duty. Provisional assessment under s. 57, if made, would have meant determination of liability at ” nil “. That is why the Estate Duty Officer resorted to writing a letter dated December 6, 1965, to the accountable person, informing them that the estate was not exempt from estate duty and that on the basis of the principal value of the estate declared in the estate duty return, the estate duty liability would come to Rs. 29,24,157. Estate duty assessment under s. 58 of the ED Act was admittedly completed on June 10, 1969. In the circumstances, the conclusion is inevitable that despite a ” charge ” on the estate, no amount by way of estate duty was in fact payable during the previous year ending March 31, 1969. In this view of the matter, particularly when no amount or funds by way of estate duty was in fact paid, we find it extremely difficult to accept that there was any diversion of income, far less a diversion by an overriding title. The first two questions are, therefore, answered in the negative and in favour of the Revenue.

18. Before concluding this part of the judgment, it may be desirable to observe that the Tribunal has referred to the concept of real income in the context of the Supreme Court decisions in : (i) CIT vs. Shoorji Vallabhdas & Co. (1962) 46 ITR 144 (SC), (ii) CIT vs. Kalooram Govindram (1965) 57 ITR 630 (SC), and (iii) Murlidhar Himatsinghka vs. CIT (1966) 62 ITR 323 (SC) and this Court’s decision in H.M Kashi Parekh & Co. vs. CIT (1960) 39 ITR 706(Bom), in para. 13 of its order. However, so far as its conclusion that the ostensible income is not the real income of the assessee trusts is concerned, the only reason given by the Tribunal is that to the extent of estate duty payable, the income was diverted by overriding title because of the statutory charge created by s. 74(1) of the ED Act. In the circumstances, it is not necessary to refer to these decisions in detail.

19. Now, we come to the third question of law. In order to appreciate the rival contentions in this regard, it is desirable first to refer to the provisions of s. 1l(1)(a) of the IT Act, 1961, as they stood during the material period : ” 11. (1) Subject to the provisions of ss. 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt of the income: (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of twenty-five per cent. of the income from such property…”

20. This clause lays down three conditions. The first condition is that the property from which income is derived and is claimed to be exempt must be held under trust wholly for charitable or religious purposes. In terms of the second condition which is adjunctive and not alternative, exemption is available to the extent such income is applied for such purposes in India. The third condition has two limbs, namely, (i) where such income is accumulated for such purpose in India, and (ii) the exemption will be available to the extent the income so accumulated does not exceed 25 per cent of such income or Rs. 10,000, whichever is higher. It is true that there is no material on record to indicate the objects and/or the constitution of the proposed two institutions for which the properties are admittedly held under the two trusts herein from and after the death of the deceased. However, the case has all through proceeded on the assumption that both the institutions would qualify for charitable purposes within the meaning of s. 11(1)(a) of the IT Act. The only objection was that because one of the institutions is outside India, the first condition itself is not satisfied. Since the expression “wholly for charitable or religious purposes” in the first condition is not followed by the words “in India” unlike the second condition, we are of the view that it is not possible to accept the Revenue’s contention that since both the institutions for which the trust properties are held are not in India, the first condition is not satisfied. Moreover, the manner in which the third question of law referred to us for opinion is framed leaves no scope for doubt that the first condition was satisfied and the question of law referred to us is with regard to the second condition only. The second condition for exemption is the application of such income for such purposes in India. The exemption is available to the extent such income is applied. There is no dispute that factually no part of the income is applied for charitable purposes, that is, for either of the institutions nor for any other purpose, including making payment towards estate duty payable. On the face, of it, therefore, such income cannot be said to be exempt from tax. The arguments advanced and accepted by the Tribunal in this behalf are : (i) if no income is available for application, this condition does not come in the way of granting exemption. It was stated that in the face of the huge estate duty liability outstanding and the legal opinion of the expert obtained in June, 1965, advising the assessee not to fritter away the income until the question of estate duty liability is finally decided, no prudent person would touch the trust income. In support, reliance was placed on the well-known decision of the Supreme Court in CIT vs. Gangadhar Banerjee (1965) 57 ITR 176 (SC). In this connection, Mr. Dastur also referred to the Madras High Court decision in CIT vs. Rao Bahadur Calavala Cunnan Chetty Charities (1982) 135 ITR 485(Mad), and to the Calcutta High Court decision in CIT vs. Jayashree Charity Trust (1986) 159 ITR 280(Cal). It was stated that the Calcutta High Court has referred to a Departmental circular in this regard. The second limb of his argument is that payment of estate duty or even accumulation of income for that purpose would be application of income for charitable purpose in India as held by the Madras High Court in CIT vs. Janaki Ammal Ayya Nadar Trust (1987)61 CTR (Mad) 324:(1985) 153 ITR 159(Mad).

In our judgment, the second condition is not satisfied in this case. As held by us in earlier paragraphs, the income represents the real income of the assessee and it was not diverted by any overriding title. Both the Madras and Calcutta High Court decisions (CIT vs. Rao Bahadur Calavala Cunnan Chetty Charities (supra) and CIT vs. Jayashree Charity Trust (supra)) refer to the concept of real income in the sense of commercial income, that is, that which is physically available for application as distinct from notional income or assessed income. The circular issued by the CBDT also refers to this aspect of the matter only. We fail to understand how these cases help the assessee. As regards the Supreme Court decision in CIT vs. Gangadhar Banerjee (supra), we have only to say that the decision was given in the context of s. 23A of the Indian IT Act, 1922, the purpose and scope of which was entirely different from that of section II. As against s. 23A of the Indian IT Act, 1922, which was penal in nature, s. 1l(1)(a) of the IT Act, 1961, grants exemption. Moreover, different phraseology is used in the two provisions. We do not think that the said decision has any bearing on the issue before us. As regards the second limb of Mr. Dastur’s argument, firstly, even if payment of taxes in a given case may in a way preserve the corpus of the trust so that the income of the trust in future may remain intact and continue to be available for charitable purposes, to say that, therefore, payment of taxes is application of income for charitable purposes appears to us to be a far- fetched argument. There is no direct nexus. In any event, in the Madras case reported in CIT vs. Janaki Ammal Ayya Nadar Trust (supra), income-tax was not only payable in the theoretical sense, but statutory demand was raised and the assessee had actually paid the taxes and the income was not in fact available for application. As against that case, in the case before us, there was no legally enforceable demand outstanding in respect of ” estate duty payable ” and no payment was in fact ever made. Income thus continued to be factually available for application. The Madras decision in CIT vs. Janaki Ammal Ayya Nadar Trust (supra) does not, therefore, support the assessee’s contentions. Moreover, the second condition implies that such income is applied for charitable or religious purposes in India. Even assuming that the payment of estate duty could be treated as application of income for such purposes, namely, for the two institutions for which the corpus is held by the assessee-trusts, it is difficult to accept particularly, when one institution is in India and the other is outside India, that this condition is satisfied. Mr. Dastur had contended that the will executed by the deceased on February 28, 1952, contemplated application of 45 per cent of income of the trust for one institution and 55 per cent of income for the other, institution and, therefore, there should be no difficulty in accepting the claim, at least, to the extent the income is required to be applied for the institution in India. Since, however, there is no dispute that in terms of the deeds of trust and the will, the trustees had discretion to utilise the trust income for either of the two institutions, and, consequently, the trust property was held for either of the institutions, it is not possible to accept even this part of Mr.Dastur’s argument. Question No. 3 is, therefore, answered in the negative and in favour of the Revenue.

This takes us to the fourth question of law which is referred to us at the instance of the assessee. If the first three questions were answered in favour of the assessee and against the Revenue, it would not have been necessary to answer the fourth question. Since, however, for the reasons stated earlier, we are answering the first three questions in favour of the Revenue and against the assessee, it has become necessary to deal with the fourth question. It is the contention of Mr. Dastur that 25per cent of the income derived from property held under trust wholly for charitable or religious purposes would always qualify for exemption. On the other hand, Mr. Jetly has for this purpose relied on paragraph 20 of the Tribunal’s order. According to us, the submissions made on behalf of the assessee are without any merit. This question pertains to the third condition in the clause which, as stated by us earlier, has two limbs.

[Citation : 169 ITR 298]