Law: Wealth Tax Act, 1957

Section: 5(1)(i)

Wealth tax---Exemption-Charitable and religious trust having one of objects to spend income outside taxable territories-- Trustees later deciding not to spend income outside taxable territories-Held, such decision having not been exercised irrevokably, income not entitled to exemption-­Indian Wealth Tax Act, 1957, S. 5 (1)(i). C. I. T. v. Kasturbai Walchand (Smt.) Trust (1967) 63 I T R 656 (S C); East India Industries (Madras) P. Ltd. v. C. I. T. (1967) 65 I T R 611 (S C); Muhammad Ibrahim Riza v. 'C. L T. A I R 1930 P C 226; Nizam's Religious Endowment Trust v. C. I. T. (1966) 59 I T R 582 (S C) and Oxford Group v. L R. C. (l 949) 2 All E R 537 (C A) ref. JUDGMENT CHINNAPPA REDDY, J.-Late Nawab Sir Mir Osman Ali Khan Bahadur, Nizam of Hyderabad, by a deed dated September 14, 1950, created a trust known as "Nizam's Religious Endowment Trust". He settled securities of the value of Rs. 40 lakhs for carrying out the objects set out in the deed of trust. During the lifetime of the settlor the trustees were directed merely to accumulate the income from the trust fund (after meeting the expenses relating to the administration of the fund) and add the same to the corpus of the trust fund. On and after the death of the settlor the trustees were to hold the accumulated corpus of the trust fund upon trust to spend the, income, in such shares and proportions and in such manner s the trustees deemed fit in their absolute discretion, for any one or more of certain specified religious and charitable objects. Two out of the four specified purposes required the application of the income outside the taxable territories and the other two purposes required the application of the income within the taxable territories. Though the settlor expressed a desire that, as far as possible, the income should be spent equally for the four specified objects, he did not oblige them to do so. Instead he gave them absolute discretion to spend the income "in such shares and proportions and in such manner" as they deemed fit. The settlor died in February, 1967, and the trust became effective. Soon thereafter the trustees resolved that the income from the trust would be utilised for the two…

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