Holding

Exemption under Section 5(1)(i) is unavailable because the charitable purpose must be in India, and the Section 34 order does not alter the trust's objects nor invoke cy pres.

Summary

The Nizam created a trust to fund his Haj pilgrimage and related religious activities abroad; after his death the trust became a public charitable and religious trust. Government restrictions prevented sending money overseas, so the trustees resolved to spend the trust's income within India and obtained an order under Section 34 of the Indian Trusts Act permitting this. The trustees claimed wealth‑tax exemption under Section 5(1)(i) of the Wealth Tax Act, arguing that the trust property was situated in India. The Revenue contended that the charitable purpose was to be performed outside India, and the High Court upheld the Revenue. The Supreme Court affirmed, holding that for exemption the charitable or religious purpose must be "in India" and that the order under Section 34 does not alter the trust's objects nor invoke the cy pres doctrine. Consequently, the appeals were dismissed.

Issues considered

The meaning of 'public purpose of a charitable or religious nature in India' under Section 5(1)(i) of the Wealth Tax Act, 1957.
Whether an order under Section 34 of the Indian Trusts Act can change the objects of a public charitable trust or be treated as a suit under Section 92 of the CPC.
Whether the doctrine of cy pres is applicable to the present trust.
Whether the Indian Trusts Act applies to public charitable trusts.

Legislation cited

Subjects

Wealth tax exemptionPublic charitable trustSection 5(1)(i)Indian Trusts ActSection 34Cy pres doctrineSitus of propertyCharitable purpose in India

Judgment

TRUSTEES OF H.E.H. THE NIZAM' S PILGRIMAGE MONEY TRUST, A
HYDERABAD
V.

COMMISSIONER OF INCOME TAX, ANDHRAPRADESH,
HYDERABAD

APRIL 20, 2000 B

[D.P. WADHWAAND SYED SHAH MOHAMMED QUADRI, JJ.]

Wealth Tax Act, 1957: Section 5( l)(i).

Wealth Tax-Exemption of-Conditionsfor-AYs 1974-75 to 1977-78- c
Held : In order to obtain exemption the public purpose of a charitable or
religious nature should be in India-The place of location of the trust property
is irrelevant.

Trusts Act, 1882 :
D
Sections 9 and 34-Applicability of-Private trust-Creation of-With a
corpus fund-Objects of-{i) To meet expenses ofpilgrimage of the settlor, (ii)
for making religious offerings at certain holy places abroad and (iii) after death
+ of the settlor for certain specified religious or charitable purposes at the same
holy places-After death of the sett/or trustees could not incur expenditure due E
to restrictions in sending monies outside India-Therefore, trustees.filed appli-
cation under S. 34 seeking permission to utilise trust fund within India for
purposes specified in trust deed, which was allowed-Validity of-Held: Trusts
Act applies only to private trusts-After death of the sett/or in view of the tenns
of the deed, trust became a public trust and, therefore, the provisions of Trust
F
Act not applicable-Hence, Court's permission does not alter objects of Trust.

Section 34-Trust-Objects of-Application to alter-Held : Such an
application cannot be treated as a suit und.er S. 92 CPC.
>
Code of Civil Procedure; 1908 : Section 92.
G
Doctrine of Cy pres-Invoking of-Held : In the circumstances of the
case, the q·uestion of invoking the doctrine of Cy pres does not arise. t
Doctrines:

Doctrine of Cy pres-applicability of H
179
180 SUPREME COURT REPORTS [2000] 3 S.C.R.
A The appellant-assessee created a trust with a corpus fund of a certain x
amount. The objects of the Trust were to meet the expenses of Haj pilgrim-
age of the appellant during his lifetime and those of the members of his
family accompanying in him on such pilgrimage outside India and also for
making religious offerings at sucb places. After the death of the appellant
th.e net income and the unspent accumulations of income, if any, were to be
B
spent or utilised by the trustees for all or any of the religious or charitable
purposes specified in the trust deed. After the death of the appellant the
trust became a Public Charitable and Religious Trust. But the trustees
could not spend the income in view of the restrictions imposed by the
Government of India on sending monies outside India. Therefore, the
c trustees passed a resolution to spend the income of the Trust property
including the accumulations thereof only on objects and purposes specified
in the trust deed within the territory of India.

Therefore, the trustees filed an application before the Chief Judge,
City Civil Court seeking relief under Section 34 of the Indian Trusts Act,
D 1882, which was allowed. For the Assessment Years 1974-75 to 1977-78 the
trustees claimed exemption under Section 5(1)(i) of the Wealth Tax Act,
1957 on the ground that the properties/assets were held in Trust for public
purposes of charitable and religious nature in India in view of the said
order of the Chief Judge. However, the High Court disallowed the claim of +
E the appellant. Hence this appeal.

On behalf of the appellant-assessee it was contended that as situs of
the Trust property was in India, therefore, the property was exempted
under Section 5(1)(i) of the Act irrespective of where the income thereof
was utilised; that after the approval of the resolution of the Board of
F Trustees by the Chief Judge, City Civil Court the property must be deemed
to be held for charitable or religious purposes in India; and that Section 34
of the Trusts Act might be taken as wrongly mentioned and the order
passed by the Court be treated as on a suit/petition under Section 92 of the
Code of Civil Procedure, 1908 for change of the objects of the Trust by
G applying the doctrine of Cy pres to save the Trust from failing.

Dismissing the appeal, this Court -+.

HELD : 1. On a plain reading of Section 5(1)(i) of the Wealth Tax Act,
1957 it is evident that the situs of the property held in Trust is irrelevant;
H what is relevant for granting exemption is that the public purpose of
TRUSTEES OF H.E.H. THE NIZAM' S PILGRIMAGE MONEY TRUST v. C.l.T., A.P. 181
',.#. charitable or religious nature should be in India. The words 'in India' are A
used in clause (i) not after the words 'any property' but after the words 'for
. any public purpose of a charitable or religious nature'. This leaves no room
that the appellant's first contention, is untenable. [186-B-C]

2. A perusal of the judgment of the Chief Judge, City Civil Court
shows that it is passed under Section 34 of the Indian Trusts Act, 1882. B
There is no gainsaying that the Trusts Act applies only to private trusts and
admittedly after the death of the settlor the Trust became a public charita-
hie and religious Trust. Therefore, the judgment of the Chief Judge does
not have the effect of altering the object of the Trust. [186-D-E; 187-D]
c
3. The principle laid down in Sheikh Abdul Kayum's case and Bansi
Dhar's case is that the general principles of trust adumbrated in the
provisions of the Trusts Act can be applied by invoking the universal rules
~ of equity and good conscience even though provisions of the Trusts Act
proprio vigore do not apply to public charitable trusts. A caveat is added
therein that care must certainly be exercised not to import by analogy wha:t D
is not germane to the general law of trust. In the instant case, no general
principle of the law of trusts is embodied in Section 34 of the Trusts Act
which is a special provision conferring jurisdiction on the courts to pass
+ appropriate order in the management of the Trust. Further the application
under Section 34 of the Trusts Act cannot be treated as a suit under Section E
92 of the Code of Civil Procedure, 1908 for reasons more than one. Suffice
it to say that the application purported to be under Section 34 of the Trust
Act does not satisfy requirements of Section 92 CPC. [186-F-H; 187-A-B]

Trustees of HEH the Nizam 's Pilgrimage Money Trust v. CWT, 171 ITR
323 (AP), approved. F

Sheikh Abdul Kayum v. Mulla Alibha4 [1963] 3 SCR 623 and State of
U.P. v. Bansi Dhar, [1974] 1SCC446, held inapplicable.

4. It cannot be disputed that when to give effect to a charitable and
G
religious trust is impossible or impracticable initially or becomes so subse-
; .... quently, the court will save the trust from failing by invoking the cy pres
doctrine and utilise the Trust property for some other charitable and
religious purpose as near as possible to the object of the trust mentioned by
the settlor. But having regard to the nature of the present proceedings the
question of invoking the doctrine of cy pres does not arise. [187-C] H
182 SUPREME COURT REPORTS (2000] 3 S.C.R.
A CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2328 (NT) of X
1995.

From the Judgment and Order dated 24.3.87 of the Andlua Pradesh
High Court in C.R. No. 192 of 1980.

B WITH

Civil Appeal Nos. 9269-70 of 1995.

From the Judgment and Order dated 19.11.87 of the Andhra Pradesh
High Court in RC. No. 292 of 1982.
c Devi Prasad Pal, M.L. Venna, K.N. Shukla, Ms. A.K. Verma, P.D.
Tyagi, B.A. Ranganathan, Shravan K. Sharma, Anil Shrivastav, Arvind Kumar '
Sharma, P. Murli Krishnan, Ms. Smriti Madan and Ms. Sushma Suri for the
appearing parties.

D The Judgment of the Court was delivered by

SYED SHAH MOHAMMED QUADRI, J. These appeals arise out of
two reference cases under Section 27(1) of the Wealth-tax Act, 1957 decided
by the High Court of Andhra Pradesh, give rise to a common question of law.
The appellants are the assessees. Civil Appeal No.2328 of 1995 is against the
E order of the Division Bench of the High Court in RC. No. 192 of 1980 dated
March 24, 1987 (reported in 171ITR323] pertaining to the Assessment Years
1974- 75 and 1975-76. Following the said order, the High Court disposed of
RC. No. 292 of 1982 for the Assessment Years 1976-77 and 1977-78 which
gave rise to Civil Appeal Nos. 9269-9270 of 1995.
F
H.E.H. the Nizam of Hyderabad created a trust with a corpus fund of
Rs. 22,20,000, named "H.E.H. the Nizam' s Pilgrimage Money Trust" on
November 2, 1950. The objects of the Trust, inter alia, are that during lifetime
of H.E.H. the Nizam to meet expenses of Haj Pilgrimage of himself and
members of his family accompanying him on such pilgrimage and expenses
G on visits to holy places of Hedjaz and Iraq and also for making religious
offerings at such places as the settlor in his absolute discretion might think fit;
that after the death of the Nizam the net income and the unspent accumulations
of income, if any, shall be spent or utilised by the trustees for all or any of
the religious or charitable purposes specified in clause 3(e) of the said trust
deed. H.E.H. the Nizam died on February 24, 1967. During his lifetime, he
H
-~

TRUSTEES OF H.E.H. THE NIZAM' S PILGRIMAGE MONEY TRUST v. C.l.T., A.P. [QUADRI, J.) 183

did not go either for Haj or on any other pilgrimage. After his death, the said A
Trust became a Public Charitable and Religious Trust and the trustees held the
corpus and accumulations of income of the Trust thereunder. But the trustees
could not have spent the income of the Trust property in Hedjaz or Iraq under
clause 3(e) in view of the restriction imposed by the Government of India on
sending monies outside India. After obtaining legal opinion, the trustees
B
passed a resolution dated May 22, 1968 to spend the income of the Trust
property including accumulations thereof only on objects and purposes
specified in sub-clauses (v), (vi) and (viii) of clause 3(e) within the territory
of India. They read as under:·

"3. The Trustees shall hold and stand possessed of the Trust Fund C
UPON TRUST:

(a) to (d) *** *** ***
(e) On and after the death of the Settlor to hold the Trust Fund or
the balance thereof then remaining and the unspent accumula-
D
tions (If any) of the income of the Trust Fund and the investment
thereof upon trust to expend or utilise the net income of the
Trust Fund as well as the accumulations (if any) of the income
thereof made during the Settlor' s lifetime and the investments
+ thereof for all or any one or more of the following religious or
charitable objects and purposes at Hedjaz and/or Iraq in such E
manner as the Trustees may in their absolute discretion think
proper:

(i) to (iv) *** ***
(v) for constructing, establishing and maintaining dispensaries or F
hospitals or wards in hospitals and otherwise for medical aid and
relief;

(vi) for constructing, establishing, maintaining and running schools,
madressas and other educational institutions and otherwise for
advancement of education; G
(vii) *** ***
(viii) for such other religious or charitable purposes as the Trustees
may in their absolute discretion think fit in such manner and to
such extent as they may think fit H
184 SUPREME COURT REPORTS [2000] 3 S.C.R.
A Thereafter, they filed an application before the Chief Judge, City Civil
Court, Hyderabad seeking relief under Section 34 of the Indian Trusts Act (for
short, 'the Trusts Act'). On September 29, 1973, the Chief Judge, City Civil
Court, Hyderabad allowed the application and directed the trustees to utilise
the income of the Trust fund including the accumulated income for the objects
and purposes specified in aforementioned sub-clauses of clause 3(e) within the
B
territory of India.

In assessment proceedings, under the Wealth Tax Act, 1957 (for short
'the Act') for the Assessment Years 1974-75 and 1975-76, the tmstees claimed
exemption under Section 5(1)(i) thereof on the ground that the properties/
c assets were held in Trust for public purposes of charitable and religious nature
in India in view of the said order of learned Chief Judge, City Civil Court,
Hyderabad. The Wealth Tax Officer rejected the claim. The Appellate Assist-
ant Com.missioner, however, took the view that by virtue of the order of the
Chief Judge, City Civil Court, the properties of the Trust were entitled to
exemption under Section 5(1)(i) of the Act from the date of the order. The
D· Revenue carried the matt.er in appeal before the Income-tax Appellate Tribu-
nal. Holding that the assessee was not entitled to exemptions under Section
· 5(l)(i) of the Act, the Tribunal set aside the order of the Appellate Assistant
Commissioner and allowed the appeal of the Revenue. At the instance of the
assessee, the Tribunal referred the following question of law to the High Court
E for its opinion:
"Whether on the facts and in the circumstances of the case and on
a proper construction of the scope and effect of the judgment of the
Chief Judge of the City Civil Court, Hyderbad in the proceedings
under section 34 of the Indian Trust Act, the Tribunal is correct in
F holding that as on the relevant valuation dates corresponding to the
assessment years 1974-75 and 1975-76 the corpus of the Trust Fund
cannot be said to have been held in trust for charitable or religious
purposes in India and the assessee- Trust is, therefore, not entitled to
exemption under Section 5(l)(i) of the Wealth-tax Act, 1957 in
G respect of the corpus of the Trust Fund?"

The High Court on construction of the trust deed and Section 5(l)(i) of the
Act held that all the objects and purposes of the Trust were intended to be
performed outside India and neither the resolution of the lrustees nor the order
of the Chief Judge, City Civil Court, alter that position. In that view of the
H matter, the High Court answered the question in the affirmative, i.e., in favour
TRUSTEES OF H.E.H. THE NIZAM'S PILGRIMAGE MONEY TRUST v. C.LT., A.P. [QUADRI, J.] 185

of the Revenue and against the assessee by the impugned order. A

The contention of Mr. P. Murli Krishnan, learned counsel for the
appellant-assessees, is that as the situs of the Trust property is in India, so the
property is exempted under Section S(l)(i) of the Act irrespective of where the
income thereof is utilised; therefore, the High Court was in error in answering
B
the question in favour of the Revenue.

Mr. M.L.Verma, learned senior counsel appearing for the Revenue,
argued that the exemption under the said provision was rightly denied to the
assessee as the income of the Trust was required to be spent for religious and
charitable purposes outside India. c
The question whether the Trust property enjoys exemption, under
Section S(l)(i) of the Act, depends on its true interpretation. The provision is
in the following terms :
D
"5(1). Subject to the provisions of sub-section (lA) wealth tax shall
not be payable by an assessee in respect of the following assets, and
such assets shall not be included in the net wealth of the assessee :

+ (i) any property held by him under trust or other legal obligation
for any public purpose of a charitable or religious nature in E
India;

Provided that nothing contained in this clause shall apply
to any property forming part of any business not being a
business referred to in clause (a) or clause (b) of sub-section p
4(A) of Section 11 of the Income Tax Act in ~espect of which
separate books of account are maintained or a business carried
on by an institution, fund or trust referred to in clause (22) or
clause (22A) or clause (23B) or clause (23C) of Section 10 of
that Act."
G
A perusal of the provision shows that wealth tax is not payable in
respect of any property held by the assessee under the Trust or other legal
obligation for any public purpose of a charitable or religious nature in India.
There is no controversy that to claim exemption under this provision : (i) the
property must be held under a trust or legal obligation and that (ii) it must be H
186 SUPREME COURT REPORTS [2000] 3 S.C.R.
A for a public purpose of charitable or religious nature. What is, however,
contended by Mr. Murli Krishnan is that it is enough if the situs of the Trust
property is in India and that the public purpose of a charitable or religious
nature need not be performed in India. On a plain reading of the provision,
it is evident that the situs of the property held in Trust is irrelevant; what is
relevant for granting exemption is that the public purpose of charitable or
B
religious nature should be in India. It may be pointed out that the words 'in
India' are used in clause (i) not after the words 'any property' but after the
words 'for any public purpose of a charitable or religious nature.' This leaves
no room to contend that exemption is available to a property situated in India
even if it is held for any public purpose of a charitable or religious nature
c ·outside India. This being the position, the contention of the leanied counsel
is devoid of any substance and it is rejected.

It is next contended that after the resolution of the Board of Trustees
dated 22.5.1968 which has the approval of the Chief Judge, City Civil Court,
the property must be deemed to be held for charitable or religious purposes
D
in India. A perusal of the judgment shows that it is passed under Section 34
of the Trusts Act. There is no gainsaying that the Trusts Act applies only to
private trusts and admittedly after the death of the settlor on February 24,
1967, the Trust became a public charitable and religious Trust.

E However, the learned counsel submitted that Section 34 of the Trusts
Act might be taken as wrongly mentioned and the order passed by the court
be treated as on a suit/petition for change of the objects of the Trust by
applying the doctrine of Cy pres to save the Trust from failing. He relied on
the decisions of this Court in Sheikh Abdul Kayum v. Mulla Alibhai, [1963]
F 3 SCR 623 and State of Uttar Pradesh v. Bansi Dhar and Ors. [1974] I SCC
446. The principle laid down in those cases is that the general principles of
trust adumbrated in the provisions of the Trusts Act can be applied by invoking
the universal rules of equity and good conscience even though provisions of
the Trusts Act proprio vigore do not apply to public charitable trusts. A caveat
is added therein that care must certainly be exercised not to import by analogy
G what is not germane to the general law of trust. In the case first-mentioned,
fiduciary relationship of a trustee and in the case second-mentioned, the
principle of resultant trust in favour of the settlor were involved. In the instant
case, no general principle of law of trusts is embodied in Section 34 of the
Trusts Act which is a special provision conferring jurisdiction on the courts
H to pass appropriate order in the management of the Trust. We cannot also
TRUSTEES OF H.E.H. THE NizAM' S PILGRIMAGE MONEY TRUST v. C.l.T., A.P. [QUADRI, J.] 187

accept the contention of the learned counsel that the application under Section A
~ 34 of the Trusts Act be treated as a suit under Section 92 of the Code of Civil
•
Procedure for reasons more than one. Suffice it to say that the application
purported to be under Section 34 of the Trusts Act does not satisfy require-
ments of Section 92 of the Code of Civil Procedure.

Mr. Verma has relied on the judgment of this Court in State of Uttar B
Pradesh v. Bansi Dhar & Ors. (supra) to support his contention that applica-
tion of the doctrine of cy pres would not arise in this case. It cannot be disputed
that when to give effect to a charitable and religious trust is impossible or
impracticable initially or becomes so subsequently, the court will save the trust
from failing by invoking the cy pres doctrine and utilise the Trust property for c
some other charitable and religious purpose as near as possible to the object
of the Trust mentioned by the settlor. But having regard to the nature of the
present proceedings the question of invoking doctrine of cy pres does not arise,
therefore, we do not propose to deal with that aspect.

From the above discussion, it follows that the judgment of the Chief D
Judge, City Civil Court, Hyderabad does not have the effect of altering the
object of the Trust. Therefore, the second contention of the learned counsel
for the appellant also fails.

+- For the foregoing reasons we hold that the High Court has rightly
answered the question, in favour of the Revenue. The Judgments and orders E
under appeal do not suffer from any illegality. The appeals are without any

- merits and. they are accordingly dismissed with costs.

V.S.S. Appeals dismissed.