Trust income exemption denied where fair receipts first accrued to assessee and were only later applied to temple worship.

Income from a fair used for the deity's temple and worship was held not to fall within the exemption for property held under trust or other legal obligation. The deed of dedication created an obligation to apply part of the income for religious purposes, but it did not set apart any specific property exclusively for the temple. The income therefore first accrued to the assessee and was only thereafter diverted to meet the obligation, which is insufficient for section 4(3)(i). The arrangement was treated as a private religious trust, outside the statutory exemption. The amount remained assessable in the assessee's hands.

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Issues: Whether the income derived from the fair and applied for the deity's temple and worship was exempt as income from property held under trust or other legal obligation under section 4(3)(i) of the Income-tax Act, and whether the amount was not assessable in the hands of the assessee.

Analysis: The deduction claimed was based on a deed of dedication creating an obligation to apply part of the income towards worship and maintenance of the temple. The decisive question was whether the income itself arose from property held under trust or whether the assessee first received the income and then applied part of it to meet an obligation. The deed did not set apart any property exclusively for the temple; the income from the fair accrued to the assessee first and was thereafter diverted for the religious purpose. The exemption in section 4(3)(i) applies only where the income is derived from property held under trust or other legal obligation, and not where a future or accruing income is merely charged with an obligation. The arrangement was also treated as a private religious trust, which did not attract the statutory exemption intended for the relevant class of trust property.

Conclusion: The income was not exempt under section 4(3)(i) of the Income-tax Act, and the amount remained assessable in the hands of the assessee.

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