Commissioner of Income Tax vs Sadi Ram Ganga Prasad (HUF)

The Tribunal has referred the following three questions or law u/s 256(1) of the Income Tax Act, 1961 for opinion of this Court:

Whether in law and circumstances of the case, the Income Tax Appellate Tribunal was justified in setting aside the case to the file of the Income Tax Officer directing him to examine as to how the properties in question were dealt with after the date of dedication?

Whether in law and circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that a Public Charitable Trust could be created orally and no writing was necessary for creating such trust?

Whether in law and in these circumstances of the present case, the Income Tax Appellate Tribunal was justified in totally ignoring the mandatory provisions of Transfer of Property Act and Indian Registration Act due to which no transfer and divesting of immovable property can legally take place, unless evidenced by a duly executed, stamped and registered deed, in writing and these conditions being absent in the present case, the Income Tax Appellate Tribunal should have confirmed the order of the Income Tax Officer?

The reference relates to the years 1976-77 and 1977-78.

Briefly stated the facts giving rise to the present reference are as follows:

The assessee created a verbally Public Charitable Trust under the name and style of M/s. Sadiram Ganga Prasad Charitable Trust on 31-10-1975.

As a settlor, the assessee settled six immovable properties on the Trust on 31-10-1975, without executing any document on the said date. The assessee accordingly claimed that these properties stood vested in the Trust on the date, the said Trust was created. The accounting year of the assessee relevant to the assessment years 1976-77and 1977-78 ended on 3-11-1975 and 22-10-1976. Subsequently, after the end of the accounting period, a deed of appointment of trustees was executed on 24-11-1975 evidencing that the trust was actually created on 31-10-1975. Accordingly, it was claimed that the assessee was not the owner of these properties in question on the relevant date, on which the accounting period ended, and that the income of these properties should not be assessed in the hands of the assessee, HUF.

Being not satisfied with the said order of the assessing officer, the assessee preferred appeal before the Commissioner (Appeals). The Commissioner (Appeals) confirmed the decision of the assessing officer for the assessment year 1976-77. In 1977-78 on this issue the assessing officer was directed to assess the income from these properties for eight months and not for entire period of twelve months.

Feeling aggrieved, both the assessee and the department came up in further appeal before the Tribunal. The Tribunal by its order set aside the case, restoring the matter to the file of the assessing officer for re-hearing and disposal afresh, with the direction that the assessing officer will find out how the properties were dealt with and who had actually received the rent after dedication of these properties on 31-10-1975 and by whom rental income was appropriated. The Tribunal also held that a Public Charitable Trust can be created orally and no writing is necessary for creating such trust, relying upon its earlier order dated 28-4-1988 in WTA No. 190 (All.)/1983 for the assessment year 1976-77.

We find that this court in the case of CIT v. Shadiram Ganga Prasad Charitable Trust IT Reference No. 127 of 1989 decided on 19-9-2006 which is inter parties after following the decision in the case of Commissioner of Income Tax Vs. Dr. Miss Chandrakanta Rohatgi, has held that a Hindu is entitled to dedicate his property for religious and charitable purposes and for this no instrument in writing is necessary nor is its registration compulsory. An endowment for a public charitable purpose can be created orally. There was no need to execute registered instrument for dedication of the property for public religious and charitable trust.

Respectfully following the aforesaid decisions we answer all the three questions referred to us, in the affirmative, i.e., in favour of the assessee and against the revenue.