Income Tax Appellate Tribunal - Bangalore
K. Narayana Setty Ramarathanamma Trust vs Assistant Commissioner Of Income Tax on 18 August, 1997
Equivalent citations: (1998)61TTJ(BANG)269
ORDER
S. Bandyopadhyay, A.M. The appeal has been filed by the assessee-trust against the order of the Commissioner (Appeals) undisputedly, the assessee is a charitable trust. During this year, the assessee received donations to the extent of Rs. 11,31,846 from various persons. Out of the same, all the amounts excepting an amount of Rs. 8,85,846 were considered to be towards the corpus of the trust. So far as, however, this amount of Rs. 8,85,846 is concerned the donation was given to the assessee-trust through the executor of the will of late K. Narayana Setty, the founder and one of the ex-trustees of the trust. The executor was Sri K.N. Jayaprakash, another trustee of the assessee-trust.
2. In the assessment order, the assessing officer has quoted from para 7 at p. 3 of the will of late Narayana Setty. The said will stated as below :
"I hereby devise and bequeath my balances standing to the credit of my capital account and current account in the books of the firm Mahalakshmi Flour Mills arrived at after paying off all the debts and liabilities on the date of death owing from me to any other person and after bequeath the amounts as mentioned in para 6, in favour of K. Narayana Setty Ramarathnamma Trust."
3. The assessing officer has been of the view that nowhere in the will of K. Narayana Setty, it is mentioned that the donation of the amount under consideration should be towards the corpus of the trust. Although a letter from the executor, viz., Sri K.N. Jayaprakash, stating that the donation was made by him towards the corpus of the trust, was produced before the assessing officer, he took the view that the executor of the will is merely an intermediary and not the donor. He, furthermore stated that the executor stands in a fiduciary capacity and cannot arrogate into himself any role; other than what is envisaged by the testator. On that view, the assessing officer held the amount of Rs. 8,85,846 as having been received by the assessee-trust by way of mere voluntary contributions not forming part of the corpus of the trust.
4. In the first appeal, the Commissioner (Appeals) referred to the judgment of the Bombay High Court in the case of CWT v. Keshab Mahindra (1983) 139 ITR 22 (Bom) and detailed out the nature of interest of the executor in the trust property. The Commissioner (Appeals) also stated that late Narayana Setty was himself a trustee of the trust and hence, he must be considered to have been aware of the requirements of sections 11(1)(d) and 12 which require specific direction to be given in respect of corpus donations. He lastly held that the executor does not have any right to add or to delete anything to the intention of the testator as specified in the will. In that view, he upheld the order of the assessing officer.
5. Before us, the learned counsel for the assessee has pointed out that the trust issued a receipt in respect of the amount having been donated to it towards its corpus by the executor of the will of late Narayana Setty. It is also pointed out that the entire donation amount received by the trust during this year was towards its corpus. It is argued by the learned counsel for the assessee that the will takes effect after the death and hence, the deceased himself cannot be the donor of the amounts bequeathed under the will. It has also been pointed out that the executor, in making the donation towards the corpus of the trust, did not violate the provisions of the will. Referring to the purpose for which the trust has been created, it has been stated that the entire corpus money of the trust was utilised by it towards construction of a choultry in the name of the deceased. It is thus argued that the donation should be considered as having been made towards the corpus of the trust only.
An alternative argument has been taken by the learned counsel for the assessee that even if the donation be not considered as towards the corpus of the trust, then in that case, it was necessary on the part of the assessing officer to allow the assessee an opportunity for declaring accumulation of the trust fund under section 11(2). It is stated that there is no time-limit to make a declaration under that section before the assessing officer and even if there be some such time-limit, the assessing officer has the power to condone the delay. It is also stated that in noway, violation of the provisions of section 13 of the Income Tax Act was made.
6. Examining carefully the will of late Narayana Setty, we find the recital in the said will of making a bequest of the amount represented by the deceased persons balances in the capital and current account of the firm as mentioned above, in favour of the assessee-trust. The will neither states that the amount should be given to the trust towards its corpus, nor does it say at the same time that the donation should not be made towards the corpus but should be utilised for the purpose of day-to-day work of the trust. The executor of the will complied with the direction of the testator as mentioned in the will by making the donation of the amount under consideration to the trust. While making the said donation, he added that the donation should be treated as towards the corpus of the trust. In doing so, it cannot be said that he violated the wishes or the directions of the testator in anyway. The will had given powers to him in an implied manner, to make the donation to the trust in any manner he liked. By making the donation towards the corpus of the trust, he exercises his powers in particular manner only, which was not at all repugnant to the provisions of the will. Hence, we are not in a position to agree with the Departmental contention that by making the donation to the corpus of the trust, the executor violated the provisions of the will. The executor also acted merely in his fiduciary capacity in making the donation. Neither did he utilise some portion of the bequest amount for his own personal purposes nor against the clear direction of the will to make the donation to the trust. It is not possible to agree with the contention of the Commissioner (Appeals) that where the will is silent as to the manner in which the donation is to be made, the executor cannot ecercise his discretion which, however, at the same time should not be completely repugnant with the provisions of the will.
7. The matter may be looked at from the other angle also. It was the intention of the testator to make donation of the huge amount of more than Rs. 8 lakh to the trust, which had been created by him along with others for the purpose of construction of a choultry. This is not a case of a very big charitable trust having enormous amount of funds. For this trust of a very moderate nature, the sum of Rs. 8 lakh and odd must be considered to be rather a very high amount. It cannot be considered that it was the intention of the testator to allow the trustees to expend such huge amount towards purposes other than fulfilling the main object of the trust, viz., construction of a choultry. The assessee stated before the assessing officer that the executor specified the donation to be towards the corpus of the trust for the purpose of maintaining the name of the testator in the choultry to be constructed. Such an explanation is not only reasonable but acceptable from all accounts. From the nature of the trust, its purpose and the subsequent behaviour of the executor of the will as well as the trustees of the trust, it would appear that the intention of the testator, though not clearly expressed in the will must have been towards donating the amount towards the corpus of the trust. In any case, so far as the trust is concerned, the donation was received by it from the executor, who clearly specified the donation to be towards the corpus of the trust. Taking into consideration all these facts and factors, we are of the opinion that no objection can be taken to the claim of the assessee that the donation was actually made towards the corpus of the trust alone. We, therefore, reverse the decisions of the lower authorities and direct the assessing officer to treat the amount under consideration as having been received by the assessee-trust by way of voluntary contribution solely towards its corpus. The assessment may be modified accordingly.
8. In the result, the appeal filed by the assessee is allowed.