Supplementary trust deed removing non-charitable benefit preserved charitable status and kept the trust eligible for tax exemption.

A supplementary trust deed that deleted the clause permitting benefit to the settlor's family and confined assistance to persons in distress was treated as binding on the trustees, including future trustees. As a result, the trust funds could no longer be applied for non-charitable purposes, and the trust was regarded as wholly charitable and religious. On that footing, the trust remained eligible for exemption under section 11 of the Income-tax Act, 1961, and the Revenue's challenge to exemption failed.

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Issues: Whether, on the amended trust deed dated 21 May 1958, the assessee-trust became a trust wholly for charitable or religious purposes and whether its income was exempt under section 11 of the Income-tax Act, 1961.

Analysis: The original deed contained a clause enabling aid to persons belonging to the family of the settlor, but the supplementary deed deleted that objectionable element and substituted language confining the benefit to persons in distress. The supplementary deed was treated as binding on the trustees, including future trustees, and the court found no distinguishing facts warranting departure from the earlier decision in the assessee's own case for the assessment year 1972-73. On that basis, it was held that the trust funds could no longer be applied for non-charitable purposes and that the trust had acquired the character of a wholly charitable and religious trust.

Conclusion: The questions were answered in favour of the assessee; the trust was entitled to exemption under section 11 of the Income-tax Act, 1961.

Final Conclusion: The reference was decided for the assessee, and the Revenue's challenge to exemption failed.

Ratio Decidendi: Where a supplementary trust deed validly removes the clause enabling application of trust income for a non-charitable object and binds the trustees, the trust cannot be treated as permitting non-charitable application of income and remains eligible for exemption as a wholly charitable trust.

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