Charitable purpose exemption upheld where company funds were bound by its governing documents and not distributable to members.

Income held under a governing instrument creating a binding obligation for charity, education and industry was exempt, because the company's memorandum and articles required profits to be applied only to those objects and prohibited distribution among members. A separate trust deed was not essential where the property was already subject to a legal obligation arising from the constitutive documents. Limited actual spending on scholarships and charity did not defeat the exemption, since no income was shown to have been used for purposes outside the stated objects. The proviso to section 4(3)(i) was inapplicable, and the assessee's claim for exemption succeeded.

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Issues: Whether the assessee's income was exempt under section 4(3)(i) of the Indian Income-tax Act, 1922, on the footing that the company's property was held under trust or other legal obligation wholly for religious or charitable purposes.

Analysis: The memorandum and articles showed that the company was constituted for objects of charity, education and industry, with profits not distributable among members and required to be applied for those objects. The existence of a trust deed was not essential where the property was held under a legal obligation arising from the governing instrument. The extent to which actual expenditure on scholarships and charity was comparatively small did not negative the character of the objects or the obligation attached to the income, since no part of the income was shown to have been used for purposes outside the stated objects. The proviso to section 4(3)(i) was therefore inapplicable.

Conclusion: The income was exempt under section 4(3)(i) of the Indian Income-tax Act, 1922, and the answer was in favour of the assessee.

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