Business held under trust for charity remained exempt, as the proviso for business on behalf of an institution did not apply.

Income derived from a business held under trust for charitable purposes falls within the exemption for property or business held under trust, and is not brought back to tax by the proviso applicable to a business carried on on behalf of a charitable institution. The distinction turns on whether the business itself is the trust property or merely an activity conducted for the institution. On the facts stated, the kuri business was the very object of the trust and was undertaken to raise funds for charitable objects, so the income remained exempt and the reference was answered for the assessee.

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Issues: Whether the income derived by the assessee trust from business in kuries was exempt under section 4(3)(i) of the Indian Income-tax Act, 1922, as amended by Act 25 of 1953.

Analysis: The decisive distinction was between a business held under trust for charitable purposes and a business carried on on behalf of a charitable institution. The exclusion under section 4(3)(i) extends to income from property or business held under trust for religious or charitable purposes. The proviso to clause (i) applies only where the business is carried on on behalf of a religious or charitable institution. On the facts, the company's very object was to conduct kuries and raise funds for charitable objects, showing that the business itself was held under trust. In that situation, the proviso did not operate to bring the income back into charge.

Conclusion: The income from the kuri business was exempt from tax, and the answer to the referred question was in favour of the assessee.

Ratio Decidendi: Income derived from a business itself held under trust for charitable purposes is not affected by the proviso applicable to business carried on on behalf of a charitable institution.

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