Law: Income Tax Act, 1922

Section: 4(3) (i)

Income-tax-Trust-Providing for aid to persons belonging to settlor's family -Income exclusively used for charitable purposes Income of trust-Whether exempt-Income-tax Act, 1922, S. 4(3) (i). By reason of one of the clauses of the trust deed dated August 25, 1948, which made provision for rendering aid to arty persons belonging to the family of Laths and to grant monthly and other periodical aids to them, the Income-tax Officer refused to grant exemption under section 4(3)(i) of the income-tax Act, 1922, to the income of the trust, though as a fact it was found by him that the income had not been utilised for any non-charitable purposes but had been utilised exclusively for charitable purposes only. A supplemental deed dated May 21, 1958, purporting to introduce new clauses in the original deed was also not held to be of assistance as, accord ing to the officer, it could not have retrospective operation. The Appellate Assistant Commissioner held that the dominant intention of the trust being charitable, the said clause did not detract from the charitable nature of the dominant intention and hence the income of the trust was exempt from taxation. The Tribunal, however., held that, as the clause in question enabled the trustees to aid persons belonging to the Lath family also, the assessee was not entitled to the exemption and the supplementary deed cannot also have retrospective opera tion and hence restored the order of the officer. On a reference to the High Court: Held, in view of the full discretion to the trustees to spend trust fund, they may spend the entire funds on one abject is the exclusion of the other and within Ire framework of the trust deed may be able to spend the entire funds for the aid of the members of the settlor's family and hence the exemption under section 4(3)(i) was not available to the assessee ; Held also, that it was for an assessee to show that his case is covered by the exemption. [Case-Law referred.]                                   …