SARDAR BAHADUR S. INDRA SINGH TRUST versus COMMISSIONER OF INCOME TAX, BENGAL

Citation: [1972] 1 S.C.R. 392 · Decided: 25-08-1971 · Supreme Court of India · Bench: K.S. HEGDE · Disposal: Case Partly allowed

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Judgment (excerpt)

392 
SARDAR BAHADUR S. INDRA SINGH TRUST 
v. 
COMMISSIONER OF INCOME TAX, BENGAL 
August 25, 1971 
[K. S. HEGDE AND A. N. GROYER, JJ.J 
Gift made to charitable trust-If valid. 
Income-tax Act, s. 4(.3) (i)-1/ the income of charitable trust arising 
from a gift will C<ugment the assessee -trust. 
The assessee is a charitable trust created under two trusts deeds. One 
of the trustees, gifted certain fully paid up equity shares to the trust. On 
the said share~ dividend accrued on w.hich tax was deducted at source. The 
trustees claimed that the said income of the assessee was exempt from pay-
ment of Income-tax in view of s. 4(3) (i) of the Act and hence they 
claimed refund of the tax deducted at source. The Income-tax Officer 
refused to grant the refund on the ground that the trust deed did nllt con-
tain any provision for recei~ts of gifts from outsiders and so the gift in 
<JUestion was not a valid gift. 
Th" Appellate Assistant Commissioner and the Tribunal held the gift 
valid and decided against the revenue. 
On reference, High Court held 
that the gift was a valid gift, but it d"d not have the effect of augmenting 
the assessee trust and the assessee was not entitled to get the refund of 
the tax. 
HELD : 
(i)That the gift was a valid gift. The trustees had accepted 
the gift. The trust ·deed does not prohibit the trustees from 
accepting a 
new gift. 
The trustees can accept gift from third parties for the purpose 
of furthering the objectives of the trust. 
So long as the trust deed did not 
prohibit from receiving such gifts and so long as the gift made did not in 
any manner impinge on the objects intended to be achieved by the Trust. 
In the present case, the shares gifted are vested in the appellant trust and 
therefore, the trust is entitled to the dividends received in respect of the 
gifted shares. Since the dividend is exempt from tax under s. 4(3) (i) the 
appellant is entitled to the refuncl claimed. [39'7 A-DJ 
CIVIL APPELLATE JURISDICTION :. Civil Appeals Nos. 1885 of 
1968 and 1084 of 1971. 
Appeals from the judgment and order dated November 7, 1967 
of the Calcutta High Coun in Income-tax Reference No. 21 of 
1964. 
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D 
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S. R. Banerjee, P. C. Bhartari, for the appellant (in both the 
G 
appeals). 
V. S. Desai, P. L. luneja, R. N. Sachthey and B. D. Sharma, 
for the respondemt (in both the appeals). 
The Judgment of the Court was delivered by 
Begde, J. 
Both these appeals arise from the decision of the 
Calcutta High Court in a Reference under s. 66( 1) of the Indian 
Income-tax Act; 1922 (to be hereinafter referred to as 'the Act'). 
H 
A 
B 
c 
D 
E 
F 
G 
H 
, 
INDRA SINGH TRUST v. C.I.T. (Hegde, J.) 
39a 
The first of these two appeals was brought by the appellant Trust 
on '!he strength of a certificate granted by the High Court under 
s. 66(A)(2) of the Act. 
In that certificate all that we find is a 
bald statement by the High Court that the case is a fit one for 
appeal to this Court. 
This Court !las ruled that such a certificate 
is an invalid one and an appeal brought on the strength of such a 
certificate is not maintainbale. It is for that reason, the appellant 
filed the Special Leave application No. 2214 of 1971 
seeking 
special leave from this Court to appeal against the very judgment 
which was the subject matter of the appeal in Civil Appeal No. 
1885 of 1968. 
After hearing the parties, we came to the conclu-
sion that the leave asked for should be granted. That Petition is 
now numbered as Civil Appeal No. 1084 of 1971. 
The two questions referred to the High Court are : 
" ( 1). Whether on the facts and in the circums-
tances of the case, the Tribunal was right in holding 
that the gift made by Sardar Ajaib Singh was valid and 
complete in law ? 
( 2) If the answer to the first question is in the 
affirmative then whether on the facts and in the circum-
stances of the case, the assessee was entitled to · the 
refund of tax deducted at source on the dividends accru-
ing on the shares gifted by Sardar A jaib Singh ?" 
The High Court answered these quest1ons as follows : 
"l. The gift made by Sardar Ajaib Singh was a 
valid and complete gift but did not have the efiect of 
augmenting 1the assessee trust, and 
2. The assessee was not entitled to the refund of the 
tax deducted a1 source on dividends accrued on the 
shares gifted by Sardar Ajaib Singh ?" 
Now let us turn to the facts a< set out in the Statement of 
case. 
The assessment years with which we are conc

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