1960 PLP 1116 (PTD)

O'SULLIVAN, J.‑This is a reference by the Commissioner of Income‑tax, Bombay, Sind and Baluchistan, under section 66 (1), Income‑tax (Amendment) Act, 1939, raising the question as to whether a sum of Rs. 1,405 shown as interest in the assessee‑firm's books .in a certain account headed : "Udharam Virumal Dharamada Account": should be exempted from taxation on the ground that it was income derived from property held under trust, or other legal obligation wholly for religious or charitable purposes within the meaning of section 4 (3) (i), Income‑tax Act. It would appear that shortly before his death in the year 1928, one Undharam Virumal, a Karachi merchant, opened an account in his books under the heading set out above crediting to this account the sum of Rs. 30,000 and debiting himself per sonally with a like amount. The respondent assessees who continued the business of Udharam Virumal credited interest in the said account, from year to year. For the first time in the assessment year 1940‑41, the Income tax authorities decided to include the sum of Rs. 1,405 being the interest shown in the account for that year, in the total income of the assessee‑firm. On appeal to the Appellate Assistant Commissioner this amount of Rs. 1,405 was excluded from the total income of the assessee‑firm. The Income‑tax Commissioner then appealed to the Appellate Tribunal who upheld the decision of the Appellate Assistant Commissioner. Being dissatisfied with the Tribunal's decision, the Commis sioner of Income‑tax has had this reference made to this Court, under section 66 (1) of the Act. Paragraph 6 of the statement of the case by the Tribunal summarises the point at issue as follows: "The only point in contest before us was whether setting apart and placing the fund in the "Udharam Virumal Charity Account" under the circumstances stated before constituted 'a valid trust for religious or charitable purposes, so as to exempt the income from taxation under section 4 (3) (i) of the Act. On a consideration of the question, we held that a valid trust had been declared. We have recorded our reasons in paragraph 5 of our judgment." The grounds upon which the Tribunal held that there had been a valid trust for charitable or religious purposes by Udharam Virumal are set out in paragraph 5 of their judgment as follows: "The question then is whether there is valid trust for a charitable or religious purpose in this case. It may be conceded that the mere placing of an amount in an account and apply ing the interest earned by it towards charitable purpose will not amount to a trust. The facts in the present case, however, are entirely different. Late Udharam Virumal opened an account which is expressly described as a charity account, and transferred an amount of Rs. 30,000 from his personal account to it. This act clearly reflects his intention to divest himself of the (sic) settle the amount upon trust for those purposes. We think that it laws an error to suppose that it continues to be a party (sic) of the deceased's estate, since it is admitted that his three sons who succeeded to it and those that have succeeded to the latter have not only not (sic) claimed any interest in the funds but have been faithfully applying the annual interest towards the charitable and religious objects. In other words, the sons and grandsons of deceased Udharam are holding the fund as trust fund, as trustees. Further, after the Appellate Assistant Commissioner's decision in this case the income‑tax Officer asked the assassee to file a sworn declaration that they had no interest in the fund or the income. It is difficult to under stand the Income‑tax Officer's requiring such a declaration after the matter had passed his hands. But that is not to the purpose. In compliance with the order, Mr. Motiram who is the surviving son of the late Udharam and partner of the assessee‑firm filed a sworn declaration in which he has stated that none of the heirs of the deceased claim any interest in the fund. Lastly we have the admitted fact that the income tax authorities continuously excluded the interest from being assessed to tax until the present assessment." We are of opinion that the view of the Appellate Tribunal is not justified. As the Tribunal have themselves pointed out, the mere placing of an amount in an account and applying the accruing interest towards a charitable purpose, does not amount to a trust. The situation is not altered merely by describing the account is for "dharam" or "dharmada". The Tribunal appears to have overlooked the necessary incidents of a valid trust. A "trust" is defined in' the Trusts Act as follows: "A `trust' is an obligation annexed to the ownership of property, and arising out of a confidence reposed in and accepted by the owner, or declared and accepted by him, for the benefit of another, or of another and the owner; the person who reposes or declares the confidence is called the author of the `trust'; the person who accepts the confidence is called the `trustee' the person for whose benefit the confidence is accepted is called the `beneficiary': the subject‑matter of the trust is called `trust property' or trust money : the beneficial interest or `interest' of the beneficiary is his right against the trustee as owner of the trust property ; and the instrument, if any, by which the trust is declared is called the instrument of trust." Section 5 requires that in order to create a valid trust of movable property, the trust shall be declared by a non‑testamentary instrument in writing signed by the author of the trust and re gistered or by will, unless the ownership of the property is trans ferred to the trustee. Section 6 which relates to the creation of a trust is as follows: "Subject the provisions of section 5, a trust is created when the author of the trust indicates with reasonable certainty by any words or acts (a) an intention on his part to create there by a trust, (b) the purpose of the trust; (c) the beneficiary, and (d) the trust property and (unless the trust is declared by will or the author of the trust is himself to be the trustee) transfers the trust property to the trustee." Assuming in this case that Udharam Virumal intended to create a trust in respect of a sum of Rs. 30,000 no trustee was appointed, much less was there any transfer of the trust property to a trustee or an acceptance of this trust by the trustee. Moreover, neither the purpose of the trust nor the beneficiary have been indicated with reasonable certainty. A gift or trust in favour of "dharam" is void for vagueness and uncertainty. This point is dealt with in Mulla's Hindu Law, p. 472, paragraph 405 under the heading "gift to dharam void." After specifically stating that a gift or bequest to dharam is void for vagueness and un certainty, the learned commentator goes on to discuss various cases including decisions of the Judicial Committee of the Privy Council in support of his proposition. He says: "It is a maxim of equity, that the execution of a trust shall be under the control of a Court. The trust therefore must be of such a nature that it can be under that control. For that purpose it is necessary that the subject or object can be ascertained by the Court. If the subject or object cannot be ascertained, the trust cannot be enforced by the Court, and it is void. In the case of a gift to dharam, the Judicial Committee observed in Runchordas v. Parvatibai [7 Sar. 543 (P C)] that the objects which can be considered to be meant by that word are vague and uncertain. In Wilson's dictionary the word "dharam" is defined to be law, virtue, legal or moral duty. Relying upon this definition of dharam, the Judicial Committee held that the word `dharam' was as vague as the words `purposes charitable or philanthropic' which on account of their vagueness, render a trust for those purposes void in the English law. Gifts for `charitable or other purposes' or gift expressed in other alternative terms are not charitable; for they may be executed without any part of the property being applied to charitable purposes." This aspect of the matter appears to have been overlooked by the Tribunal. It is obvious that the so‑called trust in this case cannot be controlled or enforced by the Court. The questions as drafted and referred to us by the Tribunal covering the point at issue are: (1) Whether there was evidence before the Tribunal on which it could be held that the sum of Rs. 30,000 was held under trust or other legal obligation wholly for religious or charit able purposes within the meaning of section 4 (3) (i), Income tax Act: (2) Whether in the circumstances of the case the amount of Rs. 30,000 placed in the "Udharam Virumal Dharmada Account" was rightly considered to be property held under trust or other legal obligation wholly for religious and charitable purposes within the meaning of section 4 (3) (i) of the Act. For the reasons given above, our answers to these questions are both in the negative. We allow the Commissioner's costs. Reference answered in the negative.