Law: Income Tax Act, 1961

Section: 11,13,13(1)(b)

Income tax -- Charitable trust Trust for construction of a Shadi Mahal and establishing other institutions for educational, social and economic advancement of Muslims General body meeting clarifying that the income and the Mahal shall be made available to all communities -Clarification clause of trust deed enabling trustees to decide meaning and scope of clauses of trust deed Amendment by general body not permissible Benefit tinder trust available to all Muslims Not limited to Muslims of Kerala who alone are of backward classes Trust not covered by Expln. 2 to S.13 Trust not exempt from tax Indian Income Tax Act, 1961, Ss.11, 13(1)(b) & Expln.2. [CIT v. Palghat Shadi Mahal Trust (1999) 236 ITR 722 reversed]. The assessee, a public charitable trust, was constituted under a trust deed dated April 14, 1975, by certain settlers who were Muslims residents, of Kerala. The trust was constituted for the purpose of constructing and establishing a Shadi Mahal and other institutions "for the educational, social and economic advancement of the Muslims and for religious and charitable objects recognized by Muslim law... "within a few days of the creation of the trust, on April 20, 1975, a special general body meeting was held, in which it was resolved that it was decided to clarify the clause in the deed regarding, the object of the trust, to the effect that "the income of the trust as well as the Shadi Mahal shall be made available to all communities irrespective of religion, caste or creed." The trust claimed exemption from tax under section 11 of the Income Tax Act, 1961. The Appellate Tribunal held that the trust was entitled to exemption by virtue of Explanation 2 to section 13, since the Muslim community was a backward class in Kerala, and therefore, section 13(1)(6) did not apply to it. On a reference, the High Court affirmed the decision of the Appellate Tribunal. On appeal to the Supreme Court: Held, reversing the decision of the High Court, (i) that the resolution, dated April 20, 1975, did not decide the meaning and scope of a clause of the trust deed but had the effect of altering the object of the trust deed, which could be done only by means of an…

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