Director of Wealth Tax (Exemption) vs Estate R.P. Kayam Trust

On an application u/s 27(3) of the Wealth Tax Act, 1957, this court has directed the Tribunal to refer the following questions set out at page 2 of the paper book :

"1. Whether, the finding of the Tribunal that the trust as a whole was a public religious trust is based on any relevant materials or is perverse ?

Whether the finding of the Tribunal that the assessee did entertain a bona fide belief that it was not liable to wealth-tax is based on any relevant materials or is perverse ?

Whether the Tribunal is justified in law in holding that the trust was a public religious trust exempt from wealth-tax u/s 5(1)(i) of the Wealth Tax Act, 1957 ?"

The assessee, Estate R. P. Kayam Trust, filed wealth-tax returns in response to the notice issued u/s 17 of the Wealth Tax Act, 1957, for the assessment years 1965-66 to 1973-74 on 26-7-1974, and for the assessment year 1974-75 on 25-8-1975. In each of the years the assessee declared a net wealth of Rs. 5,11,500 and mentioned in Part III of the return that the net wealth was exempt u/s 5(1)(i) of the Wealth Tax Act.

The Income Tax Officer did not accept the claim. He assessed the wealth for wealth-tax purpose on completion of the assessment u/s 16(3) of the said Act. The Wealth Tax Officer has also initiated penalty proceedings u/s 18(1)(a) for the delay in filing the returns. In appeal before the Commissioner of Wealth Tax (Appeals), the Commissioner of Wealth Tax (Appeals) has also dismissed the appeal.

In appeal before the Tribunal, the Tribunal has taken the view that the assessee is a public religious trust it is not liable to pay the wealth-tax and when the assessee is not liable to pay the wealth-tax, there is no question of imposing the penalty u/s 18(1)(a) of the Wealth Tax Act, nor the penalty can be levied u/s 18(1)(c) of the Wealth Tax Act.

None appeared for the assessee.

Mr. Mullick, learned counsel for the revenue, brought to our notice the decision of this court in the case of Commissioner of Income Tax Vs. Estate of B.P. Kayan Trust, , which covers the issue before us in the case in hand. However, he submits that the objects of the trust have been given by the Wealth Tax Commissioner (Appeals) and one of them is 20 per cent of the balance net income to be spent on the trustee shebait''s family. That is not for charitable purpose. Therefore, the assessee is not entitled to exemption u/s 5(1)(i) of the Wealth Tax Act.

The objects which are referred to by the Commissioner of Income Tax in his order read as under :

"(i) 10 per cent of the net income to be spent or reserved for the repairs of the dedicated properties;

(ii) 60 per cent of the balance net income to be spent for sheba and puja of the deities which includes amongst others providing of Jal Chhatras for cattle, land for feeding the poor;

(iii) 20 per cent of the balance net income to be spent on the shebait''s family; and

(iv) the remaining 20 per cent to be reserved for constructing Dharmashala at Laharu, Sanskrit Patshala and other maintenance."

In CIT v. Estate of B. P. Kayan Trust (supra), after giving the objects this court has considered the objects and held that both are charitable objects. The relevant portion at page 62 reads as under :

. "The first purpose is establishment and maintenance of a dharamsala for providing food and other amenities to pilgrims and adequate staff for such purposes. The second is for establishment of a Sanskrit chatuspati, for paying salaries of the necessary pandits, for providing scholarships to students and for their lodging and boarding expenses. Both are charitable objects."

It is true that all the objects of the trust are not referred to in the case of CIT v. Estate of B. P. Kayan Trust (supra) but a plain reading of the objects 1, 2 and 4 left no doubt in our mind that 80 per cent income has been for charitable purpose, so far 20 per cent of the balance net income to be spent on the trustee shebait''s family that strictly cannot be said for charitable purpose but it is not also unreasonable to take the view that when the members of the trustee shebait''s family render some services in the temple, the 20 per cent. income if goes to that family, that view of the matter it cannot be taken out from the public religious trust.

In the result, we find no infirmity in the order of the Tribunal.

In view of the aforesaid facts, we answer questions Nos. 1 and 3 in the affirmative, i.e., the finding of the Tribunal is based on the material on record and the finding is not perverse, i.e., in favour of the assessee and against the revenue.

We answer question No. 3 also in the affirmative, i.e., in favour of the assessee and against the revenue.

The reference so made stands disposed of accordingly.