Law: Income Tax Act, 1922

Section:

(On appeal from the judgment and order of the High Court of East Pakistan, Dacca, dated the 16th February 1961, in Reference Case No. 11 of 1960).   (a) Income-tax Act (XI of 1922), S. 4 (3) (i), proviso-Business itself, subject of trust-Proviso applicable-Business carried on "on behalf of" a religious or charitable "institution"-Requirement of "on behalf of" to be satisfied-"Institution" does not convey the sense necessarily of an "elaborate organization"-Property held in trust: two launches-Run by trustee himself who was engaged in the trade of plying launches for hire-Trust business, held, not one carried on "in the course of the carrying out of a religious or charitable purpose of the institution"-Requirement of "on behalf of" not established by assessee [S. A. Rahman, J. (contra)]-Trust not entitled to exemption-"Religious or charitable" purposes include "relief to the poor", "education", "medical facilities", etc.   Held (per Cornelius, C. J.) that on the wording of clause (i) and its proviso, regarded fairly, the proviso applies to a business which may itself be the subject of a trust.   To apply the proviso only if the business is not itself the subject of the trust may be to defeat the very purpose of the amendment, which was carried out in 1951.   It will be necessary for the purposes of applying the proviso so as to avoid the relief, also to find that there is a "religious or charitable institution" and that the business is carried on on behalf of such institution.   The expression "institution'." does not necessarily convey the sense of an elaborate organization, particularly in the context of religious or charitable activity. It does not appear to mean anything more than that there should be a distinct operating unit with an individuality of its own. It need not be a corporate body, and the intention of the proviso would be sufficiently carried out if the case be that there is a duality, that is, that the active operation of the business is by one person or entity, one behalf of another…