COMMISSIONER_ OF INCOME TAX, KANPUR versus KAMLA TOWN TRUST

Citation: [1995] SUPP. 5 S.C.R. 300 · Decided: 16-11-1995 · Supreme Court of India · Bench: B.P. JEEVAN REDDY, S.B. MAJMUDAR · Disposal: Disposed off

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Judgment (excerpt)

A 
B 
c 
COMMISSIONER_ OF INCOME TAX, KANPUR 
v. 
KAMLA TOWN TRUST 
NOVEMBER 16, 1995 
[B.P. JEEVAN REDDY AND S.B. MAJMUDAR, JJ.] 
Income Tax Act, 1961-Section 11 r/ws 2(15)-Public Cha1itable 
Trust-Creation of-Basic requirements-Provision for construction of houses 
for 'workmen in general'-Whether constitutes a charitable object. 
Indian Evidence Act, 1872-Sections 43 and 11-0rder granting rec-
tification of instrnment of trust-Judgment in personam-Binding on parties 
to rectified instrnment-Order relevant in income tax proceedings. 
Specific Relief Act, 1963-Section 26-Trnst Deed-Not a contract-It 
D would be covered by expression 'other instrnment in writing-Proceedings for 
rectification of instrument of trnst-Jwisdiction of Civil Court. 
E 
F 
G 
Interpretation of Statutes-Trnst Deed-For finding out real intention 
of settle,-One has to go by express words of Deed. 
The assessee was a trust created by a trust deed dated 27-10-1941 
executed between a company and the trustee. The trust was created with a 
view to construct a settlement or colony for their workmen together with 
amenities in the shape of hospitals, schools, temples, mosques etc. The 
company made an application to the Improvement Trust for demising to 
it two tracts of land at concessional rates. Both these plots were demised 
to the company at concessional rates for the welfare of workmen. The 
company transferred both the plots by the said trust to the trustee for 
effectuating its object of settling these plots upon the charitable trust. 
Later on the settler company filed a suit u/s 31 of the Specific Relief Act, 
1877 for rectification of the Trust Deed so as to bring it in conformity with 
its real intention to create a public charitable trust. The company alleged 
that the operative part of the Trust Deed was found to be less comprehen-
sive than what was intended by the parties thereto; that through a 
misunderstanding on the part of the draftsman and through a mutual 
mistake the Deed of Trust did not truly express their intention and it was 
H 
doubtful whether the Trust Deed on a strict construction thereof might not 
300 
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COMMNR. OF INCOME TAX v. KAMLA TOWN TRUST 
301 
exclude from its benefits the rest of the public apart from the employees 
of the company and residents of the said settlement. The Civil Judge by 
his judgment dated 18.8.1945 ordered the Deed of Trust to be rectified as 
prayed for in the plaint. The Deed of Trust of 1941 as rectified in 1945 
became a subject matter of interpretation by the Appellate Income Tax 
Tribunal and High Court. The High Court held the rectification decree 
passed by Civil Court to be valid and further held that it was not possible 
for the Income Tax Officer to question the validity of the rectification on 
the ground that conditions for grant of rectification did not in fact exist 
and that the objects of the Trust Deed as rectified in 1945 did not create 
a public charitable trust and it being mixture of charitable and non-
charitable objects, could not be treated to be creating a public charitable 
Trust. 
A 
B 
c 
The Settler Company filed another suit in the year 1954 for further 
rectification of the Trust Deed while pleading that the real intention of the 
Settler Company was to create a public charitable trust for the benefit of D 
the public in the city of Kanpur and the surrounding areas particularly, 
the members of the working class including the workmen employed in the 
plaintiff company; that the trustees had, in fact, been giving the benefit of 
the trust to the members of the public and no part of the trust moneys 
had, at any time, been used for a non- charitable or non-religious object 
or purpose; that Deed of Trust even as rectified was less comprehensive 
than what was intended by the parties thereto at the time when instructions 
were given and, therefore, the rectification sought for be allowed so as to 
bring it in conformity with the real intention of the parties. The Civil Judge 
in 1955 decreed the suit. By the second rectification decree certain rec-
tification were made in the Preamble of the Trust Deed. 
The Income Tax Officer issued notices u/s 34 of the Income Tax Act, 
E 
F 
1922 and section 148 of the Income Tax Act, 1961, for the relevant assess-
ment years 1949-50 to 1965-66 to the assessee- trust alleging that the 
income had escaped assessment for the relevant years. The assessee filed 
'NIL' returns of the assessment years 1949-50 to 1965-66 all

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