Law: Income Tax Act, 1961

Section: 11,13

Income-tax--- ----Charitable purpose---Charitable trust---Trust for educational purposes--¬Provision that if at any time objects of trust become impossible of fulfilment trustees to utilise funds for charitable purposes---Donations made by trust to ten family trusts---Donations placed by family trusts in deposit with private company---No finding that objects of assessee trust impossible of fulfilment---No power in trustees to make donations ---No transfer in law in favour of family trusts---Interest on deposits to be treated as income of assessee trust---Whether family trusts charitable and exempt not relevant--¬Indian Income Tax Act, 1961, Ss. 11 & 13, The assessee, the TNKV Educational Trust, was a charitable trust constituted under a declaration of trust, dated December 15, 1960. The author of the trust was one TNK, the trustees being himself and five others, who were his relations. The object of the trust was particularly to establish and maintain educational institutions and hospitals for the public. Clause 12 of this declaration of trust provided that if at any time the objects of the trust should become impossible of fulfilment, the properties and funds belonging to the trust shall be utilised for such charitable purposes as the trustees in office at that time may determine. On August 1, 1969, ten family trusts were constituted, the authors of each of them being related to one or the other of the trustees of the TNKV trust. On August 13, 1969, the TNKV trust, out of its fund, parted with Rs.12,80,000, representing the sum total of ten cheques of Rs.1,28,000 each in favour of each of the ten family trusts. The said sums were, thus, paid by cheques drawn in favour of the family trusts. But endorsed by the trustees of the family trusts in favour of a company D, with which company, the sums in question remained deposited in their respective names. D was to pay interest -on such deposits. In the company D, out of the 17 shareholders, five were the trustees of the TNKV trust. Alongwith the said cheques, the TNKV trust wrote ten identical letters, addressed to each of the family trusts stating, in effect, that the said contribution and any accumulations…

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