Charitable trust deed construed to require exclusive application of property and income for charitable purposes under wealth-tax rules.

A trust deed was treated as creating a valid charitable trust because it mandated that, if the settlor left no wife or children, the trust properties be applied only for charitable purposes chosen by the trustees. The governing test was whether the deed required application of the trust property and income to charity, not merely the source of income. Construed in context, "properties" included income derived from them, and the trustees' discretion was confined to selecting among charitable objects. The trust estate was therefore directed solely to charitable use, supporting assessment under section 21(1) read with section 21A of the Wealth-tax Act, 1957.

---

---

Issues: Whether the trust deed created a valid charitable trust and whether the trust property and its income were required to be applied only for charitable purposes so as to justify assessment under section 21(1) read with section 21A of the Wealth-tax Act, 1957.

Analysis: The trust deed provided that, if the settlor left no wife or children, the trust properties were to be applied for such charitable purpose as the trustees might decide. The governing principle is that the relevant inquiry is not the mere source of income but whether the trust mandates application of the income and property for charitable purposes. The discretion conferred on the trustees was limited to selecting among charitable purposes only. Read in context, the word "properties" included the income derived from them, and the deed manifested a clear mandate that the trust estate be used solely for charity.

Conclusion: The trust was held to be a valid charitable trust, and the question referred was answered in favour of the assessee and against the revenue.

---