THE TRUSTEES OF GORDHANDAS GOVINDRAM FAMILY TRUST, BOMBAY vs. THE C.L.T. BOMBAY

CIVIL APPEAL No. 2382/1969Supreme Court[1973] 2 S.C.R. 105028 November 1972Bench: 3 JudgesAuthor: K.S. HEGDE, P. JAGANMOHAN REDDY, HANS RAJ KHANNA7 pages
AI SummaryDismissed

What did the Supreme Court hold?

The Supreme Court held that joint trustees can be taxed as individuals under the Wealth Tax Act, 1957. The Court reasoned that Section 3 of the Act, which charges tax on an 'individual', includes individuals unless the context indicates otherwise. Unlike the Indian Income-tax Act, which provides for 'association of persons', the context in Section 3 of the Wealth Tax Act, particularly when considering trustees, clearly shows that 'individual' includes them. The Court referred to previous decisions like Commissioner of Income-tax, Madhya Pradesh and Bhopal v. Sodra Devi and V. Venugopala Ravi Varma Rajah v. Union of India, and also approved the views of the Calcutta and Bombay High Courts in Subashini Karuri and Another v. Wealth-tax Officer and Abhay L. Khatau and Others v. Commissioner of Wealth-tax, Bombay City II, respectively. Therefore, the trustees of the trust in question constitute an assessable unit. Regarding the second issue, the Court found that the trust was primarily created for the benefit of the members of the Seksaria family, as indicated by its title and various provisions of the trust deed. Consequently, it was not possible to hold that the trust was for any public purpose; it was clearly a private trust. The Court agreed with the Bombay High Court's earlier finding in Trustees of Gordhandas Govindram Family Charity Trust v. Commissioner of Income-tax (Central), Bombay, that the primary purpose was to benefit the family. The appeals were dismissed.

What were the facts?

The Trustees of Gordhandas Govindram Family Trust appealed against the High Court's decision concerning their Wealth Tax assessments for the assessment years 1957-58 and 1958-59. The Trust was constituted on June 11, 1941, by four individuals. The High Court had answered two questions referred to it under Section 27(1) of the Wealth Tax Act, 1957, against the assessees. The first question concerned whether the trustees constituted an assessable unit under the Act, and the second whether the property held by them was for a public purpose of a charitable or religious nature. The assessees contended that the charging section did not expressly mention 'association of persons' as a chargeable entity, thus precluding taxation of trustees.

What were the issues?

1. Whether, on a true construction of the indenture of trust dated 11-6-1941, the trustees of the Trust constitute an assessable unit under the provisions of the Wealth-Tax Act, 1957, particularly in light of the charging section (Section 3) not expressly mentioning 'association of persons' as a chargeable entity. Assessee's contention: The charging section of the Act does not expressly mention 'association of persons' as a chargeable entity, and therefore, the trustees, who could only be taxed as an association of persons, cannot be taxed under the Act. They conceded that Sections 5(1)(i) and 21 proceed on the basis that trust property is taxable. Revenue's contention: Not explicitly recorded, but implicitly, that trustees are assessable as individuals under the Act. 2. Whether the property held by the trustees under the indenture of trust dated 11-6-1941 is held for any public purpose of a charitable or religious nature in India within the meaning of Section 5(1)(i) of the Wealth-Tax Act, 1957. Assessee's contention: Not explicitly recorded, but implicitly, that the trust is for a public charitable purpose. Revenue's contention: Not explicitly recorded, but implicitly, that the trust is not for a public charitable purpose.

Which sections of the Income-tax Act were involved?

Section 3,Section 5(1)(i),Section 27(1)

AI-generated summary — verify with the full judgment below

1050 THE TRUSTEES OF GORDHANDAS GOVJNDRAM FAMILY A TRUST, BOMBAY v. THE C.l.T. BOMBAY November 28, 1972 [K. S. HBGDE, P. JAGANMOHAN REDDY AND H. R. KHANNA, JJ.] Wealth Tax Act, 1957, Ss. 3 and 5(1)(i)-Charging section not ex- pressly mentioning association of persans as a chargeable entity-Trustees of a "''" whether can be charged as individuals-Construction of deed- Trust whether a charitable trust within meaning of S. 5(1) (i) of Act.

Four persons constituted on June 11, 1941 a Trust known as 'Gordhan- das Govindram Family Trust'. In respect of the assessment years 1957-58 and 1958-59 the following two questions were referred to the High C-Ourt under S. 27(1) of the Wealth Taix Act 1957; (a) Whether on a true construction of the indenture of trust dated 11-6-1941 the trustees of the Trust constitute an assessable unit under the provisions of the Wealth- Tax Act; (b) Whether the property held by the trustees under the inden- ture of trust dated 11-6-1941 is held for any public purpose of a chari · table or religious nature in India within the meaning of Sec. 5(1) (iJ di the Wealth-Tax Act? The High C-Ourt a.nswered both the questions against the assessees. In appe

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