Charitable trust status survives accumulation and investment where trustees retain freedom to apply funds to public charitable objects.

A trust remains charitable where the deed shows a dominant charitable intention and the income is accumulated before later application to scholarships, medical relief, aid to the poor, and relief in calamities. Investment of the accumulated income in shares was only a mode of administration and did not alter the charitable character of the property. A discretionary preference for employees of the associated company did not create a closed private trust, because the trustees were still free to apply the bounty within the charitable objects. The trust property was therefore treated as held wholly for charitable purposes, and the income was exempt from tax.

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Issues: Whether the trust property was held wholly for charitable purposes within the meaning of section 4(3)(i) of the Indian Income-tax Act, 1922, so that the income derived from it was exempt from tax.

Analysis: The trust deed showed a dominant charitable intention: the income was to be accumulated for eighteen years and then applied to clearly charitable objects such as scholarships, medical relief, aid to the poor, and relief in calamities. The direction to invest the income in shares during the accumulation period was only a mode of administration and did not change the charitable character of the trust property. The proviso permitting preference to employees of the associated company was discretionary, not mandatory, and did not convert the trust into a private trust, because the trustees remained free to apply the bounty to any person falling within the charitable objects. A trust does not lose its charitable character merely because the charitable application of income is postponed, provided the income is preserved for the ultimate charitable purpose and is not directed to non-charitable ends.

Conclusion: The trust property was held wholly for charitable purposes within section 4(3)(i), and the income was exempt from tax.

Ratio Decidendi: Where property is settled on a charitable trust and income is accumulated pending later application to charitable objects, the trust remains charitable during the period of accumulation if the trustees are not bound to divert the bounty to a closed private class and the accumulation is only a mode of carrying out the charitable purpose.

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