Trust income exemption limited to charitable receipts where family allowances are charged on estate income.

A will creating a single trust over the estate can vest the property in the trustees once the executors assent to the bequest, even if some liabilities remain unpaid. Recurring payments to relatives charged on the income do not require a separate fund, and the existence of those payments does not prevent assent or vesting. For income-tax purposes, the trustees were assessable in that representative capacity, but exemption was available only for the portion of income applied wholly to religious or charitable purposes. The income used for monthly allowances to relatives remained chargeable, while the charitable balance fell within the exemption.

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Issues: Whether any part of the income of the estate was exempt under the proviso to section 4(3)(i) of the Income-tax Act, 1922, and whether the trustees had become assessable only in their capacity as trustees after the executors had assented to the bequest.

Analysis: The will created a single trust over the entire estate for religious, charitable and other directed payments, with the trustees also appointed as executors by implication for limited administrative purposes. Under section 211 of the Indian Succession Act, the executor initially represents the deceased and holds the estate, but title may pass earlier if the executor assents to the bequest, even before all debts are discharged. The Court held that the obligation to make recurring payments to relations did not require the creation of a separate fund under section 343 of the Indian Succession Act, especially where the will charged those payments on the income and prohibited sale of the properties. It further held that the existence of outstanding liabilities did not prevent assent to the residuary bequest, and that on the facts the executors had assented to the property vesting in them as trustees. However, the income applied towards monthly allowances to relatives was not income held wholly for religious or charitable purposes, while the balance devoted to the charities fell within the exemption.

Conclusion: The assessment had to proceed under section 41 of the Income-tax Act, 1922 as trustees, but exemption under section 4(3)(i) was only for the charitable portion of the income and not for the portion applied to monthly allowances to relatives.

Final Conclusion: The estate was not fully taxable as executorial income; the charitable income was exempt, while the income used for family allowances remained chargeable.

Ratio Decidendi: Where an executor assents to a bequest and the will itself charges the estate's income with recurring payments while earmarking the balance for charity, the estate may vest in the trustees before all debts are discharged, and exemption applies only to the income actually held or applied wholly for religious or charitable purposes.

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