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17. The further argument on behalf of the revenue is that the trust is void ab initio, as it has been created for an unlawful purpose, as could be seen from the objects specified in Clause 6 of the trust deed. We quote below Clause 6 of the trust deed, for facility of reference :-

6. The objects of the Trust include
(a) To finance dealers/stockists in case of financial difficulties at interest-free or at concessional rate of interest;

(b) to organise seminars, get-togethers of the dealers at a convenient place;

** ** ** (ff) to appoint any person or persons (whether incorporated or not) to accept and hold in trust for the Company, any property belonging to the Company or in which it is interested or for any other purpose and to execute and do all such deeds and other things as may be requisite in relation to any such trust and to provide for the remuneration of such trustee or trustees.

The learned counsel submitted that P. Obul Reddy is one of the promoter-directors, though he is not the Managing Director of the appellant-company and that all the directors carried on the company's affairs as a Board of Directors. He submitted that in the light of the object Clause in the Memorandum of Association as well as the directors' powers under the Articles of Association relied on by him, the creation of the trust by the appellant-company was not ultra-vires, as it was not beyond the objects Clause of the company. If there was any irregularity in the initial stages of the formation of the trust, such as the absence of signature of the Director of the company on behalf of the company, as settlor or the omission to affix the seal of the company, would all get cured by the subsequent ratification of these acts by the annual general meeting of the company when they passed and approved the annual accounts of the appellant-company. The learned counsel therefore argued that there was no violation or contravention of any of the provisions of the Companies Act, which would render the Trust, invalid or void ab initio.

26. The learned counsel for the appellant next argued that it was not correct to contend that when the original trust is void, the subsequent trust is also void, ignoring the conduct of parties in the present case. In this connection, the learned counsel relied on the accounts of the trust as well as the assessments made on the trust, copies of which were filed before us, to point out that a genuine and valid trust had come into existence and that it was being carried on by the trustees as was unequivocally established by the conduct of parties. He submitted that the materials placed by the appellant-company conclusively proved that the amount of Rs. 50 lakhs was paid by the company to the trust to be held in trust on the various objects set out in Clause 6 of the Trust Deed dated 27-11-1984 and that the trustees were also holding the said property in trust and carrying out the objects of the trust, as specified in the said trust deed. In support of this submission, the learned counsel relied on the decision of the Bombay High Court in (Fazlhussein Sharafally v. Mahomedally Abdullally Sassoor AIR 1943 Bom. 366, wherein it, has been held : "Where the original Trust is void, the conduct of the Trustee in subsequently admitting that he holds the property on specified trust to which there is no valid objection establishes a valid trust on those terms." The learned counsel pointed out that the accounts of the DDW Trust were produced before the Asstt. Commissioner in pursuance of the directions of the CIT(Appeals). The learned counsel further submitted that in the Indian market set up, the role played by the stockists/dealers cannot be over-emphasised and that dealers or stockists are important in promoting the sales of the company, just as employees are important for the successful running of the company. He argued that as the appellant-company was a manufacturer of television sets, it was essential for it to retain the existing dealers and stockists and that it was possible only by providing certain welfare measures for their benefit and that the creation of a trust for their welfare would definitely serve the purpose. He argued that it was wrong to say that the appellant-company had no dealers or stockists, ignoring the entire distribution net-work of the appellant-company. He submitted that such an argument ignored the factual position and that it was wrong to say that the appellant could not ascertain the dealers and stockists at any point of time, as they are always ascertainable from the records of the company as well as the records of the distributors of the appellant-company.

We have already referred to the factual position as to how a genuine and valid trust had been created by the appellant on 26-12-1984. Clause 26 of the "objects incidental or ancillary to the attainment of the main objects" in the objects Clause of the memorandum of association of the company and articles 198 and 200 (ff) of the Articles of Association, which we have quoted in paragraph 24 supra, show that the creation of the trust as well as the contribution made by the appellant-company to the said trust are within its powers and that there was no contravention of Section 293(e) or of Section 46 of the Companies Act, 1956, ascontended by the revenue. The letter dated 26-12-1984 shows that this amount of Rs. 50 lakhs is to be held in trust as per the terms of the trust deed dated 27-11-1984. According to the revenue, the objects specified in Clause 6 of the trust deed dated 27-11-1984, except one, were not lawful. We have quoted the entire objects of the trust as contained in Clause 6 of the trust deed dated 27-11-1984 in para 17supra. Weare unable to find any thing unlawful in any of the objects specified in Clause 6 of the trust deed. On the contrary, the various objects are normal activities in the ordinary course of business of a manufacturing concern, which is interested in promoting the sales of its products through its dealers and stockists and there is nothing unlawful or illegal in any of these objects to hold that the trust is void ab in it to, as contended on behalf of the revenue. The further contention of the revenue is that these objects seek to defeat the provisions contained in Section 37(3 A) of the Income-tax Act and therefore the trust is for an unlawful purpose and is hence void. This argument of the revenue overlooks that there is no prohibition in Section 37(3A) against incurring of any expenditure on advertisement, publicity and sales promotion or payments made to hotels or on entertainment expenditure. It fixes a ceiling on the expenditure that would be allowable as a deduction for purposes of computing the income of an assessee under Section 37(1) of the Act and also indicates what percentage of the excess amount should be disallowed under the said provision of law. We are also unable to agree with the revenue that the trust is void on account of the fact that it provided for the entertainment of the dealers and their relatives and their employees and also on the ground of uncertainty as regards the beneficiaries. There is nothing unlawful in any of the objects mentioned in Clause 6 of the trust deed and the beneficiaries under the trust deed are also ascertainable, as could be seen from the list of dealers and stockists filed by the assessee's learned counsel. In fact, the papers filed by the assessee's learned counsel in paper book II clearly establish that the beneficiaries of the trust are ascertainable and there is no uncertainty about them, as their full names and address are given. We are, therefore, unable to accept the contention of the revenue that the appellant-company has no dealers except three distributors. On the other hand, the materials placed by theappellant before us conclusively establish that apart from the three distributors, the appellant-company had a net work of dealers and stockists appointed by these three distributors and that the appellant-company sells its products through this net work of distributors, dealers and stockists. The further argument on behalf of the revenue is that the trustees have unfettered discretion regarding the execution of the trust and therefore they may spend the entire amount on entertainment of the dealers. This argument again does not take note of the factual position established by the materials on record and contained in paper book No. II filed by the appellant. These materials show that the expenses have been incurred by the trust on the various objects about which we will discuss at a later stage in this order and not exclusively on entertainment, as contended for the revenue. The trustees are bound to deal with the trust property as carefully as a man of ordinary prudence and to be impartial and prevent waste and are bound to keep clear and accurate account of the trust property. The appellant's further argument is that the appellant-company has authority to question the manner of spending the trust money by the trustees inasmuch as under Section 11 of the Trusts Act, the trustee is bound to fulfil the purpose of the trust and to obey the directions of the author of the trust given at the time of creation of the trust. It is also contended that the various statements contained in paper book No. II would show that the trust had incurred expenditure on the various objects of the trust and not merely on entertainment, as assumed by the revenue in the course of the arguments. We find force in these submissions urged on behalf of the assessee, as the comparative statement at page 3 of the paper book No. II show the various items of expenditure incurred by the trust under the various heads, such as dealers' conference expenses, dealers' welfare expenses, dealers' tie-up advertisement and incentives to the dealers during the previous years ended 31-10-1985,31-10-1986 and 31-10-1987. The statements of income and expenditure account and balance-sheets contained in the paper book support the contention of the appellant. In our view, the contentions of the revenue, as set out by us in para 19 supra, proceed on an erroneous appreciation of the facts of the case and it is, therefore, not necessary for us to deal with them any further. We are also of the view that the decisions relied on by the revenue in the said para are not applicable to the facts of the present case and, therefore, we do not propose to discuss them.