Waqf income exemption denied where trustees could divert funds to a non-charitable purpose, defeating statutory charitable dedication.

Income from waqf property was not exempt under Section 4(3)(i) of the Income-tax Act, 1922 because the trust deed allowed the trustees to apply the whole income, at their discretion, to objects including the settlor's poor relations. A trust for poor relations was treated as a private purpose, not a charitable purpose within the section, and property is exempt only to the extent it is truly dedicated to religious or charitable objects. Since the settlement could be applied to a non-charitable object, no part of the waqf income qualified for exemption. The exemption claim therefore failed.

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Issues: Whether income from the waqf property was entitled to exemption under Section 4(3)(i) of the Income-tax Act, 1922 when the trust deed permitted the trustees to apply the whole of the income to objects including the settlor's poor relations.

Analysis: Section 4(3)(i) exempted income derived from property held wholly or in part for religious or charitable purposes, but only to the extent that the property was in truth dedicated to such purposes. A trust for the settlor's poor relations was treated as a private purpose and not a charitable purpose within the meaning of the section. The deed conferred discretion on the trustees to divert the income among the objects of the waqf, including the non-charitable object, so the whole settlement could be applied to a purpose outside the statutory exemption. A specified part of income would have been exempt if it had been irrevocably dedicated to a charitable object, but that was not the arrangement here.

Conclusion: The assessee was not entitled to exemption from assessment of any portion of the income of the waqf property and the answer was against the assessee.

Ratio Decidendi: Where trustees are empowered to apply trust income wholly or at their discretion to an object that is not charitable, the trust does not satisfy the statutory requirement of property held wholly or in part for charitable purposes so as to attract exemption.

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