MANOHAR LALL, AG. C.J. - All these Miscellaneous Judicial Cases were heard together as they involve the construction of the same documents by which certain properties have been dedicated to certain deities. The common question of law which arises in all these cases has been formulated by the Appellate Tribunal as follows :-

"In the circumstances of the case is the income of the trust properties in question in the hands of the trustee liable to be assessed at the maximum rate under the first proviso to Section 41(1) of the Income Tax Act "

And in Miscellaneous Judicial Case No. 41 of 1944 which relates to three applications by the Commissioner and numbered 66 R.A. Nos. 18, 19 and 2 of 1943-44 the additional question which has been referred to us is :-

"Whether the sums spent by trustees on charitable purposes though the purposes are not specifically mentioned in the trust deed, are rightly excluded u/s 4(3)(i) of the Income Tax Act for the purposes of determining the income liable to be taxed."

It is convenient to state the admitted facts.

The Maharajadhiraj Sri Jyoti Prosad Singh Deo Bahadur of Panchkote - hereinafter to be called the trustee - created a trust by two deeds bearing the same date 11th of September, 1933, in favour of certain family deities which are shown in three groups :-

(a) Jyotishwari Baglamata, Jyotishwari Shiva, Lachminarain Jee.

(b) Jyotishwari Kalimata, Jyotishwari Shiva, Lachminarain Jee.

(c) Rajrajeshwari Mata, Shyamchand Jee, Raghubar Jee, Lachminarain Jee.

By one of these deeds dated the 11th September, 1933, one set of properties was dedicated in favour of group (a) as described in Schedule A of the deed and another set of properties in favour of group (b) as described in Schedule B of the same deed. By another deed of the same date an other set of properties was dedicated in favour of the deities of group (c).

The assessment was made by the Income Tax Officer in the name of the each group of deities through the trustee. Before the Appellate Assistant Commissioner one of the contentions raised was that the trustee holds the property for the benefit of the several idols in each group and since the benefit goes to each of them, separate assessments should have been made by the Income Tax Officer on the income of each of these thakurs and the joint assessment was illegal. The Appellate Assistant Commissioner Mr. Misra examined the contention at great length in an able and careful order and came to the conclusion that "as the beneficiaries had nothing to do with the income or the properties, and the trustee virtually was made the owner, disponer and custodian of the properties and their income, the joint assessment was valid by treating the deities as an association of persons." He further took the view that the Income Tax Officer should have levied the tax at the maximum rate by virtue of the proviso to Section 41, sub-clause (1), of the Income Tax Act. The Assistant Commissioner in agreement with the Income Tax Officer refused to give a deduction with regard to certain expenses which were claimed as being spent for charitable purposes for the benefit of the public.

The assessee then moved the Appellate Tribunal who came to this conclusion : "The idols are in law juristic persons and the income therefore received by the trustee is received on behalf of such juristic persons... We have pointed out above that the trust is in favour of named deities and though their shares are not defined by the trust deed the law attributes to them equal shares and makes them tenants-in-common and not joint tenants. The case reported in Jogeswar Narain Deo v. Ram Chandra Dutt is a clear authority for this proposition and in Gopi v. Musammat Jaldhara the same view was taken, following the Privy Council case reported in Jogeswar Narain Deo v. Ram Chandra Dutt.

We therefore hold that each idol should be assessed on that deitys income and the tax should be based upon and recovered from the trustee. The measure of the trustees liability is the liability of the beneficiary (Section 41) as discussed above. There is no uncertainty as to the shares of the idols. We therefore consider that there should be a separate assessment of the trustee as regards the income of each of the deities of which he is the trustee."

It is argued by the learned standing counsel that upon a true interpretation of the deeds of trust the idols in each group should have been assessed as an "association of individuals." He draws attention to the term in the deeds which directs that the trustee shall in the first place out of the income received by him meet the public charges, cost of litigation and for the preservation and improvement of the trust properties and in the next place pay to the shebait or trustee for the time being as his commission or remuneration and then he is directed to apply and expend the balance of the rents, issues and profits towards the performance of the daily worship of the idol and other usual observances. He also draws attention to the other terms in these deeds which give full discretion to the trustee as to the manner and extent in which he will spend the whole or part of the income of a particular year. He, therefore, submitted that the trustee was the owner of the income as a whole of the properties in each group. The learned standing counsel also suggested in the course of his argument that the property described in the various schedules of the deeds did not vest in the deities but in the trustee.

In our opinion, the terms of the deeds are clear and it must be held that the property is vested in the various deities and not in the trustee even though in the very nature of things the shebait or the trustee must have full control over the income and expenditure - always subject to the directions in the deeds of trust.

Paragraph 7 of the deeds clearly states that the trustee or shebait will make an account of the income and expenditure of the trust properties at the end of the Bangalee month of Chaitra, and if there is balance out of the income after meeting the expenses described then this balance shall be held by him in trust for use and benefit of the deities or thakurs and shall form a part of the corpus of the trust properties respectively dedicated to the deities or thakurs as aforesaid. It will be observed that the words are "respectively dedicated" and these make it clear that the excess of the income over the expenditure belongs to that deity from whose income the balance is derived and is in the hands of the trustee. Again, the trustee also is empowered to utilise the balance in improving or increasing such trust properties by purchase of other immovable properties, and that the property that is thus acquired shall be deemed to form a part of the corpus of the trust property respectively dedicated to the deities or thakurs as aforesaid. These express words support the view taken by the Tribunal that the deities are the owners of the properties.

The Tribunal have also correctly applied the principle of law laid down in Jogeshwar Narain Deo v. Ram Chandra Dutt. It must, therefore, be held that the deities in each separate group, should have been assessed separately as their shares are well defined in law.

The facts as regards the second question must now be stated. It is provided in the first part of paragraph 7 of the deeds that "the trustee or shebait shall have full power and authority to apply the additional income derived therefrom to increase the scale of the expenditure or of any one or more of the items of expenditure for such thakurs or deities respectively or by making one or more additional items in such manner as he may think proper." It was contended by the assessee before the Income Tax authorities that deduction should be made out of the assessable income of that amount which was spent in the previous year for some items of public charity. The Appellate Assistant Commissioner came to the conclusion that the trust created by the two deeds was a private religious trust and did not enure for the benefit of the public. The Appellate Tribunal, however, took the view that part of a private religious trust which enures for the benefit of the public should be exempted and an enquiry should, therefore, be directed to find out whether any part of these religious private trusts enures for the benefit of the public. On considering the admitted facts and circumstances they came to the conclusion that those expenses which had been made in the previous year for the benefit of the public such as High School at Kasipur, M.E. Girls School, stipend to poor students, charitable dispensary, Sanskrit College etc., should be exempted from taxation.

The learned standing counsel contends that this view of the Tribunal is wrong. He points out that it is nowhere provided in the trust deeds that the trustee must spend part of the income on objects of or for public charity so that it cannot be held in law that this part of the income enures for the benefit of the public. This argument is correct and must be accepted. The terms of the deeds themselves should indicate whether any portion of the trust income enures for the benefit of the public within the meaning of Section 4, sub-clause (3), of the Income Tax Act. The only provision in the deeds to which our attention is drawn on behalf of the assessee is to be found in paragraph 7 which I have quoted above. These provisions are not only vague and indefinite but do not contain any direction that any part of the income should or may be spent on specific public heritable purposes. Even though the trustee in a particular year may rightly spend part of the income on public charitable objects, that would amount merely to an application of a part of the income but would not entitle the assessee to claim that that part of the income should be exempt from taxation. Mr. S.N. Dutta further draws attention to these words in the trust deeds : "Any property if thus acquired shall be deemed to form a part of the corpus of the trust property respectively dedicated to the deities or thakurs as aforesaid and the trustee or shebait shall have full power and authority to apply the additional income derived therefrom to increase the scale of the expenditure or of any one or more of the items of expenditure for such thakurs or deities respectively or by making one or more additional items in such manner as he may think proper" and submits that in this case there is no finding that the amount of expenditure which is sought to be exempted came out of the additional income within the meaning of these terms of the trust deeds. If we had taken a different view as to the first part of the question raised, Mr. Dutta would certainly have been entitled to succeed on this part of the argument.

For these reasons the answers to the two questions are as follows :-

(1) In the circumstances of the case, the income of the trust property in question in the hands of the trustee is not liable to be assessed at the maximum rate under the first proviso to Section 41(1) of the Income Tax Act but should have been assessed at the rate applicable for the individual income of each of the deities in each group.

(2) Sums spent by the trustees on charitable purposes, though the purposes are not specifically mentioned in the trust deed, were wrongly excluded u/s 4(3)(i) of the Income Tax Act for the purposes of determining the income liable to be taxed.

As the Commissioner of Income Tax has failed substantially in all these references, he must pay cost of the assessees. But as these references were heard together we fix the hearing fee in six cases at Rs. 100, i.e., 54-59 of 1944.

RAY, J. - I agree and have nothing to add.

Reference answered accordingly.