High Court Of Kerala
Kizhakke Kovilakam Trust vs. Assistant Commissioner Of Income Tax
Sections 11, 13(1)(a)
Asst. Year 1988-89
S. Sankarasubban & C.N. Ramachandran Nair, JJ.
IT Appeal No. 1 of 1999
15th February, 2002
Counsel Appeared
P.G.K. Warrier, P. Balakrishnan & K.S. Menon, for the Appellant : P.K.R. Menon & George K. George, for the Respondent
JUDGMENT
S. SANKARASUBBAN, J. :
This appeal is filed under s. 260A of the IT Act, 1961 against the order dt. 23rd Nov., 1998, in ITA No. 165 of 1997 on the files of the Tribunal, Cochin Bench. The relevant assessment year is 198889. The facts of the case are as follows : Kizhakke Kovilakam trust is a trust created under an interim award of the arbitrator appointed in a partition suit, O.S. No. 7 of 1951 on the file of the sub-Court, Ottapalam. That was a suit filed by some members of the Kizhakke Kovilakam branch of the royal family of the Zamorin or Calicut for partition of the properties of their branch. An arbitrator was appointed for setting all disputes between the parties. The assets of the Kovilakam included seven temples and one High School called Raja’s High School. The members of the Kovilakam decided to preserve the same. The members of the Kovilakam had unanimously taken a decision to preserve the seven temples and the High School by creating a private family trust and a scheme was framed for the proper administration of the temples and the High School. This was put into action by the award of the arbitrator dt. 27th June, 1960. Thus, the trust was created by the above such award. The award was accepted by the Court and was incorporated as part of the final decree, which followed later in the suit. Under the terms of the scheme, only the members of the Kovilakam could become trustees and the trustees are to appoint one amongst them as manager. It was also provided in the scheme that if the Kovilakam lost the High School by compulsory acquisition or otherwise, the income from the compensation or price received should be used only for the purpose of the seven temples. By an award dt. 24th Jan., 1987, the State Government acquired the High School building and its site fixing the compensation payable therefor at Rs. 5,09,976. Later, in the accounting year relevant to the asst. yr. 1988-89, the other properties attached to the school were also compulsorily acquired by the State, fixing a compensation of Rs. 14,17,788. The civil Courts to which these acquisition awards were referred under s. 34 of the
Land Acquisition Act, ordered that the compensation amount deposited in Court is not to be handed over to the trust, but should be deposited in scheduled banks and securities as directed by the Court. The Court, however, permitted the disbursement of the interest generated by such deposits to the trust for use for its purpose. Taking the view that the amount awarded in respect of the school properties compulsorily acquired attracted capital gains tax and that the interest earned on deposits of the compensation was assessable income in the hands of the appellant, the assessing authority initiated proceedings against the appellant and issued notices under s. 148 of the IT Act.
The appellant filed returns showing fully and correctly the receipts of the various periods from the accounting years relevant to the asst. yrs. 1985-86 to 1995-96, both inclusive and claimed exemption under s. 11 of the Act on the basis that the appellant was a public religious trust engaged in the activities of maintenance and management of the seven public temples enuring for the benefit of the public. The assessing authority, however, rejected the appellant’s claim for exemption, holding that the appellant is only a private family trust outside s. 11 by reason of the provision contained in s. 13(1) of the IT Act. The first appellant authority concurred with the above view. The matter was taken in second appeal before the Tribunal for all the years and by a consolidated common order, the Tribunal confirmed the order of the lower authorities. Even though before the Tribunal there were five appeals relevant for the five asst. yrs. 1988-89 to 1991-92 and 1993-94, the appellant has preferred appeal only against ITA No. 165/Coch/1997, viz., for the asst. yr. 1988-89. The substantial questions of law raised in the appeal are as follows :
“1. Whether, on the facts and circumstances of the case and on a legal construction of the interim award dt. 27th June, 1960, and the scheme framed therein, adopted and accepted in the final decree passed in O.S. 70 of 1951 on the file of the Subordinate Judge of Ottapalam, the property held by the assessee-trust, created and founded by that award is not wholly for charitable or religious purposes to attract s. 11 of the IT Act, 1961 ?
2. Whether the seven temples of the trust are private temples for the expenses incurred thereon to be treated as for private purposes which does not enure for the benefit of the public ?” Learned counsel Sri. P.G.K. Wariyar appeared for the assessee and Sri. P.K. Raveendranathan Menon, learned senior counsel, appeared for the Department. Sri. P.G.K. Wariyar took us through the various provisions of the interim award and contended that the temples and High School were for public benefit. He contended that the temples are very old and the public are particplating in the functions of the temples. He also invited us to the fact that the temples are not to be usually small temples, but are very big in size, which reflect the public nature of the temple. He also cited before us certain decisions of the Supreme Court, which differentiated between the private temples and public temples. It was the further contention that amount from the trust properties are not used for any other purpose, but only for the purpose of the temples. Sri P.K. Raveendranathan Menon submitted that a reading of the award will show that it is a private property of the Kovilakam. He contended that the members of the Kovilakam wanted to retain permanent character of the temples and permanent supervision of the temples and it is for this purpose that the trust was created. It was only for the benefit of the members of the family that the trust was created. He contended that the mere fact that the public are allowed to enter into the temple or participate in the functions of the temples does not change the character of the temple. In that view of the matter, he contended that there is nothing illegal to inferfere with the order.
We went through the records of the case, especially, the interim award. From the preamble of the interim award, it can be seen that the award is for the purpose of making a permanent arrangement for the temples of the Kovilakam and the High School. It is specifically stated that these temples and the High School absolutely belonged to the Kovilakam. It is further stated that the private family trust is created for the purpose of carrying on these temples and the High School as they were being carried on till that date. Clause (2) of the interim award states that the temples absolutely belonged to the Kovilakam. Clause (4) deals with assets of the institution of the trust. It is stated that the properties mentioned in Schs. 1 to 7 are dedicated for the private temples. Then sub-cl. (2) of cl. (4) says that the property described in 8th Schedule is set apart for the school. Clause (5) mentions of trustees. The trustees are members of the family. Clause (7) says that the trust will be governed in accordance with the scheme. Clause (8) deals with trustees’ representatives. It clearly states that the representatives should be only from the members of the Kovilakam. In cl. (15)(2), it is stated that if for any reason, the school is stopped or is acquired by the Government, the entire income from the school property shall be made use of for the purpose of the temples. Thus, on going through the trust, we are satisfied that it is only a private family trust that is created. It is not a public religious trust that is created. Learned counsel for the appellant tried to argue that in some of the temples, thepublic are allowed to participate. That only shows that the members of the public also get an entry into the temples. But that does not change the character of the temples. It cannot be said that these temples can be governed except in accordance with the scheme. Learned counsel made mention of the fact that one of the temples has been declared to be a public temple under the Madras Hindu Religious Endowment Act, that is, on the application of themembers of the Kovilakam itself. According to us, that fact alone cannot lead to the conclusion that the trust is a public one. Further, the Tribunal has clearly stated that even for the conduct of festivals, the members of the Kovilakam should participate. On going through the trust as a whole, we are satisfied that it is a private trust and not a public trust. In the above view of the matter, we don’t find any merit in the appeal. Learned counsel for the appellant brought to our notice the Supreme Court decisions where a distinction is made between the public trust and private trust. In the light of the express provisions in the trust, we don’t think, those decisions will be applicable here. Hence, we don’t find any merit in the appeal. Appeal is dismissed.
[Citation : 256 ITR 238]
