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C.I.T. v. M/S Sherwani Charitable - WEALTH TAX REFERENCE No. 95 of 1991  RD-AH 8124 (1 May 2007)
IN THE HIGH COURT OF JUDICATURE AT ALLAHABAD
W.T.R. No.95 of 1991
Commissioner of Income Tax (C), Kanpur
Sherwani Charitable Trust, Allahabad
CORAM: Hon'ble H.L. Gokhale, CJ.
Hon'ble R.K. Agrawal, J.
Mr. Sambhu Chopra, Standing Counsel, appearing for the Revenue.
Mr. V.B. Upadhyay, Sr. Advocate with Mr. Abhinav Upadhyay,
appearing for the respondent/assessee.
Oral Judgement (Per: R.K. Agrawal, J.)
1. The Income Tax Appellate Tribunal, Allahabad has referred the following question of law under Section 27 (1) of the Wealth Tax Act, 1957 (hereinafter referred to as the 'Act') for opinion of this Court:-
"Whether in law and circumstances of the case, the Tribunal was justified in upholding the order of the C.W.T. (Appeals) and holding the assessee to be entirely charitable trust so as to claim exemption under Section 5 (1) (i) of the W.T. Act, 1957?"
2. The Reference relates to the assessment years 1971-72 & 1974-75. Briefly stated facts giving rise to the present case are as follows. The assessee is a Public Charitable Trust. It claimed exemption u/s 11 of the I.T. Act, 1961 and section 5 (1) (i) of the W.T. Act, 1957 in respect of its income and wealth respectively. The present reference application has arisen out of wealth tax appeal. The W.T.O. did not accept the assessee's claim. In appeal the learned C.W.T. (Appeals) following the order of the Tribunal in assessee's own earlier cases had accepted the claim of the assessee. In second appeal the order of the learned C.W.T. (Appeals) was confirmed by the Tribunal relying on its own order in assessee's own case for earlier years.
3. We have heard Sri Sambhu Chopra, learned Standing Counsel, for the Revenue and Sri V.B. Upadhyay, Sr. Advocate, assisted by Sri Abhinav Upadhyay, appearing on behalf of the respondent/assessee.
4. We find that in respect of the assessment years 1971-72 & 1974-75, which are two years involved in the present reference, the matter was taken up by the assessee before the Settlement Commission, and the Settlement Commission, vide order dated 28.9.1982 has held the assessee to be a Public Charitable Trust in view of the rectification deed. The Special Leave Petition, filed against the order dated 28.9.1982, has been dismissed by the Apex Court, vide order dated 18.7.1996, passed in Civil Appeal No.15726 of 1983 and other connected appeals. The Apex Court has held that there is no dispute that it is a Public Charitable Trust in view of the decree of the Civil Court passed in the year 1980 amending the original trust deed. In another Civil Appeal No.6874 of 2000, decided on 9th of October, 2001 between the same parties, the Apex Court has held that a fraud was played by the rectification of the Trust Deed by altering the very object of the Trust, and the Trust Deed must be read as it originally stood and that is the manner in which the appellant Trust should now be assessed. However, the Apex Court has further observed that the observations made in the order shall not affect the assessment proceedings that have already become final.
5. It may be mentioned here that for the assessment year 1971-72, the Settlement Commission had held that only 1/3rd of the income of the Trust is exempted from tax under Section 11 (1) (b) of the Income Tax Act, 1961, and the remaining 2/3rd income spent under Clauses 2 (B) and 2 (C) of the Trust Deed was not entitled for exemption, and for the assessment year 1974-75, the draft order prepared by the Assessing Officer under Section 144-B of the Income Tax Act has been quashed and the income for these years would be exempt from income tax.
6. As the two assessment years under reference is squarely covered by the order of the Settlement Commission and against which, the Special Leave Petition has already been dismissed, it is to be taken that the assessee Trust was treated as a Public Charitable Trust in these two years. Section 5 (1) (i) of the Act provides that wealth tax shall not be payable by an assessee in respect of any property held by him under trust for any public purpose of a charitable or religious nature and such assets are also excluded from the net wealth of that assessee. Therefore, the Tribunal was justified in upholding the order of the CWT (Appeals) that the assessee was entirely charitable trust entitled to exemption under Section 5 (1) (i) of the Act. The question referred is, therefore, answered in favour of the assessee and against the Revenue. However, in the facts and circumstances of the case, there shall be no order as to costs.
RKK/ (R.K. Agrawal, J.) (H.L. Gokhale, CJ.)
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