Law: Income Tax Act, 1922

Section: 4(3)(i)

Income-tax Act (XI of 1922)----S. 4 (3) (i)-Mere placing of certain amount in "Dharain" account towards charity-Nature of charity not indicated, nor trustee or beneficiary named--Account not a charitable trust-Profit accruing from account, held to be "income"-Not exempt from tax. Ranchordas v. Parvatibai 7 Sar. 543 P C ref. JUDGMENT O'SULLIVAN, J.-This is a reference by the Commissioner of Income-tax, Bombay, Sind and Baluchistan, under section 66 (1), Income-tax (Amendment) Act, 1939, raising the question as to whether a sum of Rs. 1,405 shown as interest in the assessee-firm's books .in a certain account headed : "Udharam Virumal Dharamada Account": should be exempted from taxation on the ground that it was income derived from property held under trust, or other legal obligation wholly for religious or charitable purposes within the meaning of section 4 (3) (i), Income-tax Act. It would appear that shortly before his death in the year 1928, one Undharam Virumal, a Karachi merchant, opened an account in his books under the heading set out above crediting to this account the sum of Rs. 30,000 and debiting himself per­sonally with a like amount. The respondent assessees who continued the business of Udharam Virumal credited interest in the said account, from year to year. For the first time in the assessment year 1940-41, the Income­tax authorities decided to include the sum of Rs. 1,405 being the interest shown in the account for that year, in the total income of the assessee-firm. On appeal to the Appellate Assistant Commissioner this amount of Rs. 1,405 was excluded from the total income of the assessee-firm. The Income-tax Commissioner then appealed to the Appellate Tribunal who upheld the decision of the Appellate Assistant Commissioner. Being dissatisfied with the Tribunal's decision, the Commis­sioner of Income-tax has had this reference made to this Court, under section 66 (1) of the Act. Paragraph 6 of the statement of the case by the Tribunal summarises the point at issue as follows: "The only point in contest before us was whether setting apart and placing the fund in the "Udharam Virumal Charity Account" under the circumstances stated before…

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