Section 11 exemption requires statutory investment of set-apart income and genuine charitable objects, not preferential benefit to relatives.

Income set apart for exemption under section 11(2) must be invested or deposited in the specified statutory securities; use of the amount for acquiring or constructing properties and buildings does not satisfy that requirement, so the exemption claim fails. Preference to poor relatives was treated as inconsistent with the charitable character of the trust's objects for exemption purposes, following binding precedent, and was therefore not accepted as a basis for relief under section 11.

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Issues: (i) Whether one-fourth of the income set apart for augmenting the trust properties was entitled to exemption under section 11 of the Income-tax Act, 1961. (ii) Whether giving preference to poor relatives militated against the charitable nature of the objects and disentitled the assessee to exemption under section 11 of the Income-tax Act, 1961.

Issue (i): Whether one-fourth of the income set apart for augmenting the trust properties was entitled to exemption under section 11 of the Income-tax Act, 1961.

Analysis: The amount was used for acquisition and construction of properties and buildings. It was not invested or deposited in specified securities in the manner contemplated by section 11(2) of the Income-tax Act, 1961. The statutory conditions for the claimed exemption were therefore not satisfied.

Conclusion: The claim to exemption failed and the issue was answered in favour of the Revenue.

Issue (ii): Whether giving preference to poor relatives militated against the charitable nature of the objects and disentitled the assessee to exemption under section 11 of the Income-tax Act, 1961.

Analysis: The issue was concluded by applying the earlier binding decision holding that such preference was inconsistent with the charitable character of the trust's objects for the purpose of exemption.

Conclusion: The issue was answered in favour of the Revenue and against the assessee.

Final Conclusion: The referred questions were substantially answered against the assessee, and the exemption claimed under section 11 did not succeed on the decided issues.

Ratio Decidendi: Income set apart for exemption under section 11(2) must be invested or deposited in the specified manner prescribed by the statute, and a charitable claim fails where the statutory conditions are not met.

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