COMMISSIONER OF INCOME TAX, AMRITSAR vs. TATTAN TRUST AMRITSAR ETC.

CIVIL APPEAL No. 2328/1983Supreme Court1997 INSC 53808 July 1997Bench: 2 JudgesAuthor: S.C. AGRAWAL, D.P. WADHWA OF10 pages
AI SummaryAllowed

What were the facts?

The assessee, Tattan Trust, was created by a Deed of Trust dated March 28, 1942. Clause 41 of the deed allowed trustees to amend provisions related to the trust's conduct and management. In 1971, the trustees amended Clause 39 to mandate that funds not immediately required be kept with M/s. Gokal Chand Rattan Chand Woollen Mills Private Limited, a concern in which the trustees were interested. The assessee claimed exemption for interest income under Section 11 of the Income Tax Act, 1961. The Income Tax Officer and Appellate Assistant Commissioner rejected this, citing violations of Section 13(2)(a) and (h). The Appellate Tribunal, however, ruled the amendment valid and thus no violation of Section 13. The High Court affirmed the Tribunal's view. The Revenue appealed to the Supreme Court.

What did the Supreme Court hold?

The Supreme Court held that the requirements of the proviso to Section 13(1)(c)(ii) of the Income Tax Act, 1961, and the proviso to Section 21-A of the Wealth Tax Act, 1957, are twofold: (1) the trust must have been created before April 1, 1962, and (2) there must have been a mandatory provision in the Trust Deed, existing *before* April 1, 1962, requiring trustees to invest trust funds in a concern in which they are interested. The Court found that while the trust was created before April 1, 1962, the original Clause 39 did not contain such a mandatory provision. The amendment made in 1971, after the crucial date, could not retroactively satisfy this condition. Allowing such subsequent amendments would defeat the purpose of the proviso. Therefore, the Court answered the questions in the negative, in favor of the Revenue. The appeals were allowed, and the High Court's judgments were set aside.

What were the issues?

1. Whether, in light of Clause 41 of the Trust Deed, Clause 39 could be legally amended, and if so, whether such an amendment created a legally enforceable mandate as contemplated by the first proviso to Section 13(1)(c)(ii) of the Income Tax Act, 1961? (Question of law and fact, concerning Section 13(1)(c)(ii) of the Income Tax Act, 1961 and Section 21-A of the Wealth Tax Act, 1957). 2. Whether, on the facts and circumstances, the Tribunal was correct in law in holding that the interest income of the assessee Trust was exempt from tax under Section 11 read with the first proviso to Section 13(1) of the Income Tax Act, 1961? (Question of law and fact, concerning Section 11 and Section 13(1) of the Income Tax Act, 1961). Assessee's contention: In cases of doubt or two possible interpretations of a fiscal statute, the interpretation favoring the assessee should be preferred. (Relied on general principles of statutory interpretation). Revenue's contention: Not recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 13(1)(c)(ii),Section 11,Section 21-A,Section 13(2)(a),Section 13(2)(h),Section 13(3)

AI-generated summary — verify with the full judgment below

COMMISSIONER OF INCOME TAX, AMRITSAR A • v. TATTAN TRUST AMRI!.SAR ETC. JULY 8, 1977 B [S.C. AGRAWAL AND D.P. WADHWA, JJ.] Income TaxAct, 1961-Section 13(1) (c) (ii), first proviso-Wealth Tax Act, 1957-Section 21-A, first proviso-Interpretation & applicability of-Held, Trust should have been created before commencement of Income Tax Act, C 1961-Proviso would apply only in case Trust created before 1-4-1962 man- dated at that time that trustees could invest funds of trust in a concern in which they were interested.

Assessee was a trust created by Deed of Trust dated 26-3-1942. Clause 41 of the Trust Deed provided for amendment to the provisions of the Trust D Deed with regard to the conduct and the management of the trust and in pursuance of such powers the trustees passed a resolution in 1971 amend- ing clause 39 by incorporating that the funds of the trust not required for immediate need of the trust shall be kept with a concern 'G' in which they were interested and by virtue of this amendment, Trust funds were invested E in that concern in shares and deposits. The assessee claimed exemption in respect of the interest income u/s 11 of the Income Tax Act. This c

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 13(1)(c)(ii)

All 74 judgments and leading authorities on Section 13(1)(c)(ii) →

Recent GST High Court judgments

Search GST case law →