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 properties held under - Assessment years 1954-55 to 1958-59 - Assessees were trustees of a wakf fund - As per trust deed surplus out of income of wakf was to be utilised to help poor and in doing so, help must first be given to relations of settlor who were poor and thereafter preference must be given to members of Menon Jamat residing in vicinity of settlor who were poor - ITO held that income of trust was not exempt under section 4(3)(i) inasmuch as deed did not mention what amount was set apart for help of such poor relations of settlor but it was left to discretion of trustees to spend whatever amount they chose for such purpose - Whether since dominant object of settlor was to benefit poor, mere fact that a provision had been made that relations of settlor out of poor were to be helped first could not make any difference - Held, yes - Whether therefore, income of assessee was exempt under section 4(3)(i) of 1922 Act - Held, yes FACTS The assessees were the trustees of a Wakf Fund. Clause 7 of the trust deed provided that the surplus out of the income of the wakf would be utilised by the trustees to help poor. In doing so, help must first be given out of the income of the wakf to the relations of settlor who were poor. Thereafter, preference should be given to the members of the Memon Jamat residing in the mohalla of settlors who were poor. There were other provisions subsequently, set out. The trustees were authorised to apply the income of the trust fund to any of the objects of the trust in such manner and to such extent as the trustees might, in their absolute discretion, deem fit. The ITO dismissed the assessee's applications for refund of income-tax on the basis of the income of the trust being exempt under section 4(3)(i) of 1922 Act. On a reading of the wakf deed he came to the conclusion that the deed did not mention what amount was set apart for the help of such poor relations of the settlor but it was left to the discretion of the trustees to spend whatever amount they chose on…

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