Commissioner Of Income Tax, Amritsar v. Tattan Trust Amritsar Etc

COMMISSIONER OF INCOME TAX, AMRITSAR • v. TATTAN TRUST AMRI!.SAR ETC. JULY 8, 1977 [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 claim was rejected by Income Tax Officer and the Appellate Assistant Commissioner of Income Tax and it was held that the assessee had violated clauses (a) and (h) of sub-section (2) of Section 13 of the Act and that the deposit made in 'G' concern carried interest at a much lower rate. However, the Appellate F Tribunal allowing the appeal held that the amendment made to clause 39 of the Trust Deed was valid and that as this clause mandated that funds of the Trust which were not required for immediate need of the Trust shall be kept with a concern 'G', there was no violation of the provisions of Section 13 of the Act. On references, the High Court affirmed the view taken by the G Appellate Tribunal, deciding the questions in favour of the assessee and against the Revenue. Hence this appeal. The assessee contended that in case there was doubt as to interpreta-tion of any provision of fiscal statute or if there could be two views possible the one which favours the assessee should be preferred. A Allowing the appeals and answering the reference in favour of the • Revenue, this Court. HELD : 1.1. The requirements of the proviso to clause (c) (ii) to sub-section (1) to Section 13 of the Income Tax Act, 1961 are that (1) Trust should have been created before April 1, 1962 and (2) the trustees apply B the funds of the Trust in a concern in which they themselves are interested if there was a mandatory provision in the Trust Deed for such purpose. Such a mandate in the Trust Deed should have existed before April 1, 1962 and could not have been stated after that crucial date even if the Trust Deed so authorized the trustees to amend the Trust Deed to bring in c [mandatory condition ][or ][requirement for them to invest funds of the ][trust ]in a concern in which they might be interested. [563-8-E] 1.2. The purport of the proviso is in no way obscure and the proviso would apply only if the Trust created before April 1, 1962 mandated at that time that trustees could invest the funds of the Trust in a concern in which D they were interested being the persons referred to in clause (c) (ii) of sub -section (1) and sub-section (2) by virtue of sub-section (3) of Section 13 of the Act. [563-H; 564-A] CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 6328-33 E [of ][1983 ][Etc. ] From the Judgment and Order dated 18.1.80 of the Punjab & Haryana High Court in l.T.R. Nos. 38-40n7, 18n8 and W.T.R. Nos. 13 and 14of1978. J. Ramamurthi, B.K. Prasad, Dhruv Mehta and C. Radha Krishna F for the Appellant. M.L. Verma and R.K. Maheswari for the Respondent. The Judgment of the Court was delivered by D.P. WADHWA, J. Leave granted in Special Leave Petition. S-1997 (1) SCR 555-564 (