Trust income from a business held under religious or charitable trust remains exempt; proviso for business carried on on behalf does not apply.

Income from a business held under trust for religious or charitable purposes falls within the exemption in section 4(3)(i) of the Indian Income-tax Act, 1922 when it is applied or accumulated for those purposes. Clause (b) of the proviso does not withdraw that exemption where the business itself is the subject of the trust; it applies only to income derived from a business carried on on behalf of a religious or charitable institution. Accordingly, the income remained exempt and was not brought into the taxable total income, with the answer favouring the assessee.

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Issues: Whether the income derived from a business held under trust for religious or charitable purposes is exempt under section 4(3)(i) of the Indian Income-tax Act, 1922, and whether clause (b) of the proviso to that provision brings such income back into the taxable total income.

Analysis: Income from property held under trust for religious or charitable purposes falls within the exemption in section 4(3)(i) when it is applied or accumulated for those purposes. The proviso in clause (b) applies to income derived from business carried on on behalf of a religious or charitable institution, but not to a business itself held under trust. Where the business itself forms the subject of the trust, the income remains within the exemption and is not treated as income from a business carried on on behalf of the institution.

Conclusion: The income in question is exempt under section 4(3)(i), and clause (b) of the proviso does not apply to it. The answer is in favour of the assessee.

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