Charitable trust exemption requires merit-based findings; reference could not be answered and matter was remitted for rehearing.

A reference on exemption for a charitable trust under section 4(3)(i) of the Income-tax Act could not be answered because the Tribunal had not recorded findings on the merits of the trust's objects and had merely followed its earlier order. The absence of a fresh finding on whether the objects were charitable or non-charitable in the relevant assessment years meant the legal issue was not fit for determination on the existing record. The appropriate course was to remit the matter to the Tribunal for rehearing and a fresh decision in accordance with law.

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Issues: Whether the reference concerning exemption of a charitable trust under section 4(3)(i) of the Income-tax Act, 1961 could be answered when the Tribunal had not recorded findings on the merits and had merely followed its earlier decision.

Analysis: The Tribunal had disposed of the later assessment years by relying on its earlier order, although there was no finding on the actual nature of the objects of the trust in the present proceedings. The absence of a merit-based finding, particularly on the objects said to be non-charitable in the earlier year, meant that the legal question referred to the Court could not properly be answered on the existing record. The appropriate course was for the Tribunal to rehear the appeal and decide the matter in accordance with law after recording findings on merits.

Conclusion: The reference was returned unanswered and the matter was sent back to the Tribunal for rehearing and fresh decision in accordance with law.

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