Charitable trust deduction denied where trust deed included an independent non-charitable business object and trustee discretion over funds.

Deduction under section 15B was unavailable because the recipient trust was not established wholly for charitable or religious purposes. Although the trust deed included charitable and religious objects, it also authorised manufacture, purchase, sale and distribution of pharmaceutical and other preparations, which was treated as an independent non-charitable business object. The trustees' discretion to apply trust income or property to any object of the trust meant no property was specifically set apart wholly for charitable purposes. The contention that the non-charitable activity was merely incidental was rejected, so the trust did not qualify for exemption under section 4(3)(i) and the donation did not qualify for deduction.

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Issues: Whether the assessee was entitled to deduction under section 15B of the Income-tax Act in respect of a donation made to the Agastyar Trust, having regard to whether the trust was established for charitable purposes and whether its income was exempt under section 4(3)(i) of the Act.

Analysis: Section 15B allowed exemption only where the donation was made to an institution or fund established for a charitable purpose whose income was exempt under section 4(3)(i). The trust deed contained several objects, some charitable or religious, but also an object authorising the manufacture, purchase, sale and distribution of pharmaceutical, medicinal, chemical and other preparations, which was treated as a non-charitable business object. The deed further permitted the trustees to apply the whole or any part of the trust property or income towards any object of the trust in their discretion, so that no property was specifically set apart wholly for charitable or religious purposes. On that footing, the property could not be regarded as held under trust wholly for charitable or religious purposes, and the reasoning that the non-charitable object was merely incidental to the charitable objects was rejected.

Conclusion: The trust was not entitled to exemption under section 4(3)(i), and the assessee was not entitled to deduction under section 15B in respect of the donation.

Ratio Decidendi: Where the trustees have discretion to apply trust income to a non-charitable object included as an independent object of the trust, the property is not held wholly for charitable or religious purposes and the resulting donation does not qualify for exemption.

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