Law: Income Tax Act, 1922

Section: 4(3)(i)

Section 11 of the Income-tax Act, 1961 [Corresponding to section 4(3)(i) of the Indian Income-tax Act, 1922] - Charitable or religious trust - Exemption of income from property held under - Assessment year 1956-57 - Objects of assessee-trust were many, and some of them were of religious and charitable character - It claimed exemption from taxation of its share income as partner in a firm under section 4(3)(i) of 1922 Act - Claim was rejected on ground that business did not belong to assessee, being only one of partners of said firm and partnership could not be said to have been held in trust for charitable purposes - Whether multipurpose trust, like assessee trust, with objects religious or charitable mixed with non-charitable or non-religious objects, cannot come within scope of section 4(3)(i), if there is no compelling obligation on trustees administering trust to devote any portion of income of trust for religious or charitable purposes - Held, yes - Whether, therefore, assessee-trust was not a trust, in respect of which income from its properties could be exempted from taxation under section 4(3)(i) of 1922 Act - Held, yes FACTS The assessee was a trust constituted under the registered deed dated 2-7-1944. Some of its objects were of religious and charitable character. One of the objects was to manufacture, buy, sell and distribute pharmaceutical medicinal, chemical, and other preparations and articles such as medicines, drugs, medicinal and surgical articles, preparations and restoratives or foods. A property held by it was a one-third share in a registered firm carrying on business, and, admittedly, the share income of the trust from this firm was business income. For the assessment year 1956-57 the assessee did not include in the return its share income from said firm which was claimed to be exempt from taxation under section 4(3)(i). The ITO rejected this claim. On appeal, the AAC affirmed the decision of ITO holding that the business did not belong to the assessee and that the partnership could not be said to have been held in trust for charitable purposes as the assessee was only one of the partners of the firm. Assessee failed before the Tribunal to…

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