Direct dedication to a deity qualifies for income-tax exemption where income is bound to religious purposes

Property directly and completely dedicated to a deity was not held under a trust, because no trustee was created and the shebait acted only as manager and human agency for the idol. The instrument nevertheless imposed a legal obligation to apply the income solely to the specified religious purposes, so the property was held under an obligation wholly for religious purposes. On that basis, the exemption under Section 4(3)(i) of the Indian Income-tax Act applied, and the explanation excluding private religious trusts did not defeat the claim because the endowment was a direct religious dedication rather than a trust.

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Issues: Whether the income of property dedicated to a deity under an instrument of dedication was held under a trust, or alternatively under a legal obligation wholly for religious purposes, so as to qualify for exemption under the income-tax exemption provision, and whether the explanation concerning a private religious trust withdrew that exemption.

Analysis: The deed effected a direct and complete dedication of the properties to the deity. No trustee was created, and the shebait was only the manager and human agency through which the deity acted. The essential elements of a trust were therefore absent. The instrument nevertheless created a legal obligation to apply the income solely for the religious purposes specified in the dedication. Since the property was held under such legal obligation wholly for religious purposes, the exemption applied. The explanation denying exemption to income of a private religious trust did not apply, because the endowment was not a trust at all, but a religious endowment by direct dedication to the idol.

Conclusion: The income was exempt from taxation under Section 4(3)(i) of the Indian Income-tax Act, and the reference was answered in the affirmative in favour of the assessee.

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