47 NLR 313

• Jurisdiction: Sri Lanka
• Court: Supreme Court (Sri Lanka)
• Citation: 47 NLR 313
• Date: 19 July 1946
• Case Number: NLR47V313
• Type of Document: Case report

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1946 Present: Howard C.J. and Canekeratne J.

TRUSTEES OF THE WIJEYEWARDENE CHARITABLIE

TRUST, Appellants, and COMMISSIONER OF
INCOME TAX, Respondent.

29-8-Income Tax. No. 93/174.

Income Tax-Trust for relief of the poor relations of set floe-A valid charitable trust--Exemption coin to, ration-Income Tax Ordinance (Cap, 188), .5. 7 (1) (c).

A trust for the relief of the poor relations of a settler constitutes a via lid eliminable trust, oral any income derived from property held antler such trust is exempt, under section 7 (1) (e) of the Income Tax Ordinance, from taxation.

CASE stated for the decision of the Supreme Court under the provisions ,l of section 74 of the Income Tax Ordinance (Cap. 188). The appellants were the trustees appointed under the last will of Mrs. Helen Wijeyewardene, who died in the year 1940. By Clause 7 of the said last will the deceased devised certain properties to her trustees in trust to use the net ingestion thereof for the following purposes

(a) recombine gradually the restoration work now being carried on by inc at the Kelaniya Temple.

(b) To aid either occasionally or regularly my relations who are or may become poor including members of my own family and who in the judgment of my trustees are in need of such aid in consequence of illness, financial difficulties and the like or on the occasion of marriage, deaths, and the like.

(c) To support in such manner and to such extent as my trustees may think fit such Buddhist charitable institutions and temples as my trustees may from time to time select.”

The questions of law on which the decision of the Supreme Court was sought were formulated in the case stated as follows

(a) In view of the provisions of Clause 7 (6) of the last will of the deceased, is the Trust ‘of a public character’ within the meaning of section 7 (1) (c) of the Income Tax Ordinance ?

(b) The view of the provisions of the said Clause 7 (6) has the Trust been ‘established solely for charitable purposes ‘ within the meaning of the said section 7 (1)

H. V. Perera, K.C. (with him C. B. L. Wickremasinghe ), for the assessee, appellant.-The income of any institution or trust of a public character established solely for charitable purposes is exempted from taxation under section 7 (1) (c) of the Income Tax Ordinance (Cap. 188). Charitable purpose includes relief of the poor, education and medical relief-vide section 2 of the Ordinance. “Poor relations must be distinguished from “next of kin “. Charitable trusts are mainly an institution of English law. In the case of Compton, Powell e. Compton and others (1944) 2 A. E. R. 255 certain moneys

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were to be invested in trustee stocks for the education of children of three specified families. All the cases dealing with poor relations are cited at the bottom of page 256 and at page 257. In the present case the poor relations are at specified and therefore a larger class of persons would be able to chitin than in Compton’s case ; the benefit of poor relations indirectly benefits the public. Trusts for the benefit of poor relations are to be considered charitable trusts-See Tudor en Charities (5th Edition) p. 26.

[HOWARD C. J.-Are not peer relations a fluctuating body of private individuals ?

Poor relations of an individual are a section of the public. Where an estate was bequeathed to the trustees of a fund for the benefit if Now South Wales returned soldiers, it was held that the gift created a valid charitable trust -Verge s. Somerville and others (1924) A. C. 496. Lord Greene discusses the meaning of the terms “public character and “a section of the public “ in Re Compton, Powell v. Compton (1945) 1 A. E. R. 198 at 201. Section 7 (1) (c) of on Income Tax Ordnance uses the words “public character “and therefore it is wider in its application than the words “for the relief of the public “.

H. H. Basnayake, Acting Solicitor-General (with him T. ,S. Fernando, Crown Counsel), for the Commissioner of Income Tax, respondent.- The decision itself of Compton’s case is inapplicable to the present case, but the reasons given by Lord Greene are very helpful. It is submitted that this trust has a private family purpose, lacking the necessary public character as stated by Lord Greene at page 206 of Compton’s case. The fundamental requirement of a charitable trust is its public character; the purpose must be directed to the benefit of the community or a section of the community; see at page 200 and also section 7 (1) (c) of our Income Tax Ordinance. It is submitted that poor relations are a body of private individuals or a fluctuating body of private individuals.

[CANEKERATNE J.-Isn’t the essential element the relief of poverty 1]

Yes, but this is for the relief of poverty among relations, and therefore lacks the “public character “. A trust for the benefit of poor relations is not one for a charitable object ; it has to benefit the public at large and not the relatives of the deceased-See Commissioner of Income Tax, Madras v. Aga Abbas Ali Shirazi (1944) A. I. R. Madras, 292.

[HOWARD C.J.-Do you draw a distinction between a trust “for the benefit of the public “ and “of a public character” ?]

“Public character “is much wider than” for the benefit of the public “. But a trust for the benefit of the members of a family is of a private not of a public character; it imports a conception or notion of something private and not something which is public- Arur v. Commissioner of Income Tax, Bombay (1946) A. I. R. Bombay, 44 at page 47. The exemption only applies to trusts of a public character-Commissioner of Income Tax, Madras v. Jamal Mohamed Sahib (1941) A. I. R. Madras, 535, which is referred to in (1944) A. I. R. Madras 292 (supra).

For the purposes of Income Tax the meaning to be assigned to the term charitable” should be different from that given to it in the Trusts

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Ordinance-The Commissioner of income Tax v. Pemsel (1891) A. C. 531. Charity ‘‘ in its legal sense comprises four principal divisions ; these divisions are stated in Pemsel’s Case at page 583.

The class to be benefited should not be described by their relationship to the donor, but it should have reference to geographical limits. In English statutes the words “ of a public character ‘‘ are not used, but they are found in section 7 (1) (c) of our Ordinance ; they are used in addition to the term ‘‘ charitable purpose ‘‘ our section. The first essential is an institution or trust of a public character ‘‘, and secondly it must be for a “charitable purpose “. In determent what a charitable trust is tinder the Income Tax Ordinance the English decisions are not applicable- Spinners’ Association v. Income Tax Commissioner (1944) A. i. B. (Privy Council) 88 at 91-92. The Indian Act uses the words “general public utility ‘‘.

[HOWARD C.J.-Our Ordinance does not contain the phrase “general public utility “.]

No, but our Ordinance uses the words “of a public character” ; these words are wider than “public utility” and therefore our section goes further than the Indian section. The English Act does not contain the words “of a public character “. “ Poor relations “ cases are charitable trusts of ‘. private character, not of a public character.

In Trustees of Wernher’s Charitable Trusts v. inland...