Commissioner of Wealth Tax, Central, Kanpur vs Sadiram Ganga Prasad (HUF)

The Income Tax Appellate Tribunal, Allahabad has referred the following question of law u/s 27(1) of the Wealth Tax Act, 1957 (hereinafter referred to as the Act) for opinion of this Court. Whether, on the facts and in the circumstances of the case, the ITAT was justified in holding that a Public Charitable Trust could be created orally and no writing was necessary for creating such trust?

The reference relates to the assessment years 1976-77.

Briefly stated the facts giving rise to the present reference arc as follows:

The assessee is an H.U.F. and the assessment year involved is 1976-77 for which the relevant valuation date was 3 rd November, 1975. The assessee had claimed that on 31st October, 1975, a public charitable trust, under the name and style of Sadiram Ganga Prasad Charitable Trust was created by it. The trust was created orally inasmuch as, no document was executed on the said date. It was further claimed that on 31st October, 1975, the assessee had settled six immovable properties, on the trust without executing any document on the said date. Accordingly, the assessee had claimed that these properties stood vested in the trust on the date the said trust, was created. Subsequent to the valuation date, the deed of appointment of trustees was executed on 24th November, 1975 evidencing that the trust was actually created on 31st October, 1975. Thus during the assessment proceedings, it was claimed that the assessee was not the owner of these properties on the relevant valuation date, and that the value of these properties should be excluded, while computing the net wealth of the assessee. The Wealth-tax Officer declined to accept this claim of the assessee and assessed the value of these properties in the hands of the assessee H.U.F. Me had held that/mere & no material on record to suggest that the trust actually came into existence on 31st October, 1975 and there also no evidence from which It could be; established that there wire any trustees of the alleged trust on the said date. He also observed that the continuing trustees, who have been named in the deed dated 24th November, 1975, are none other than the settlers of the trust. Therefore, it was held by him that no transfer of the property took place on 31st October, 1975. Aggrieved by the said order of the Wealth-tax Officer the assessee preferred an appeal before the Commissioner of Wealth Tax (Appeals), who confirmed the division of the Wealth-tax Officer on this issue. Aggrieved again by the order of the Commissioner of Wealth Tax (Appeals), the assessee carried the matter in further appeal before the Tribunal. It was contended on behalf of the assessee that the trust was created orally on 31st October, 1975 and the properties in question were dedicated the same day and the dedication was irrevocable. It was also submitted that on that very date, the trustees had come into possession of the properties, and since then the assessee no more continues to be the owner of these properties. It was, also the case of the assessee that oral dedication of the properties is permissible in law. Evidence in the shape of certain documents was brought on record to suggest that the trust has actually come into existence. On the other hand, the revenue''s contention was that the trust could be created only by an instrument in writing. It was also submitted that it has not been established by any evidence that the trust had actually come into existence during the assessment year under consideration. The Tribunal agreed with the contention of the assessee that a public charitable trust can be created orally, and no writing is necessary for creating such trust. In that connection, reliance was placed on section 407(2) of the Principles of Hindu Law by Dinshah Mulla. Since no writing was executed on 31st October, 1975, the date on which creation of the trust was claimed, the Tribunal was of the view that it is relevant to find out as to how the properties were dealt with after the dedication, as claimed by the assessee. It appears from the records that all the six properties are let out properties. The authorities below had made no attempt to find out as to how the properties in question were dealt with, after the alleged dedication and who had received the rent, alter the said date. Therefore, the order of the authorities below on the point was set aside and the matter was restored to the file of the Wealth-tax officer for rehearing and disposal so that he may examine the matter afresh.

We have heard Sri A.N. Mahajan, learned standing counsel appearing for the Revenue and Sri R.S. Agarwal, learned counsel appearing for the assessee.

We find that this Court in the case of Commissioner of Income Tax Vs. Dr. Miss Chandrakanta Rohatgi, has held that a trust can be created orally also. Respectfully following the aforesaid decision we answer the question referred to us in affirmative, i.e., in favour of the assessee and against the Revenue. There will be no order as to costs.