Charitable trust exemption denied where a fund benefits private employees and their dependants rather than a public purpose.

Income from a trust is exempt only if the property is held wholly for charitable purposes, understood in the ordinary legal sense as a public purpose or a benefit to the community, or to a sufficiently defined section of it. A trust deed that permits discretionary grants to present, past and future employees of named companies and their dependants, including assistance based on service as well as need, does not satisfy that test because the class is a fluctuating body of private persons. The trust was therefore not wholly charitable, and the income was not exempt under section 4(3)(i) of the Income-tax Act, 1922.

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Issues: Whether income derived from property held under the trust deed was exempt from tax under section 4(3)(i) on the ground that the trust was wholly for charitable purposes.

Analysis: The trust deed and supplemental deed allowed the administrators to apply the fund for the benefit of present, past and future officers, staff and employees of named companies and their dependants, and the discretion retained under the deeds was wide enough to permit grants based not only on indigence or ill-health but also on service to the companies. The statutory expression "charitable purposes" had to be understood in its ordinary legal sense, and the exemption was confined to property held wholly for such purposes. Applying the established authorities, a charitable trust required a public purpose or a benefit to the community, or to a sufficiently defined section of the community. A fund for a fluctuating body of private persons, including employees of a particular group of companies, did not satisfy that requirement merely because assistance might be given in cases of poverty or necessity.

Conclusion: The trust was not wholly for charitable purposes and the income was not exempt under section 4(3)(i) of the Income-tax Act, 1922.

Ratio Decidendi: A trust for the benefit of a fluctuating body of private employees is not a charitable trust unless it is confined to a public purpose or to relief of poverty of a sufficiently defined section of the community.

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