Trust income exemption requires direct derivation from trust property; managing agency commission remained taxable.

Managing agency commission earned by trustees was held not to be exempt under Section 4(3)(i) because the income did not directly and substantially arise from property held under trust. The charitable trust covered only the settled fund, which was kept as deposit security and yielded interest, while the commission arose from the trustees' services as managing agents, not from the trust property itself. The fact that received income was subject to a charitable obligation was insufficient for exemption. The commission therefore remained taxable and the answer was against the assessee.

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Issues: Whether the managing agency commission earned by the trustees was exempt as income derived from property held under trust within Section 4(3)(i) of the Income-tax Act.

Analysis: The charitable trust covered only the settled fund of Rs. 1,00,000. Exemption under Section 4(3)(i) applies only where the income is derived from property itself held under trust, not merely where the income, once received, is impressed with a charitable obligation. The commission arose from the trustees' services as managing agents and not from the trust fund, which only yielded interest and was kept as a deposit security. The trust fund was not invested in the managing agency business, and the commission did not directly and substantially arise from the trust property.

Conclusion: The commission was not exempt under Section 4(3)(i), and the answer was against the assessee.

Final Conclusion: The reference was answered by holding that the managing agency commission remained taxable because it was not income derived from trust property.

Ratio Decidendi: For exemption under Section 4(3)(i), the income must directly and substantially arise from property held under trust, and an obligation to apply received income to charitable purposes is not enough.

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