Voluntary contributions to a charitable institution can qualify for exemption when income is secured by a deed executed in its favour.

A trust deed concerning income from specified properties was examined for exemption under the Indian Income-tax Act, 1922. For section 4(3)(i), the deed was held insufficient because it created no complete trust over the properties themselves; an intention to create a trust over income alone was not enough, so that exemption failed. For section 4(3)(ii), the institution was treated as religious or charitable, and the income secured by a deed executed voluntarily in its favour was regarded as a voluntary contribution. On that basis, the income applied to the institution's objects was exempt and not chargeable to tax.

---

---

Issues: (i) Whether the trust deed created a trust in respect of the properties so as to attract exemption under section 4(3)(i) of the Indian Income-tax Act, 1922; (ii) Whether the income secured under the deed constituted voluntary contributions to a religious or charitable institution so as to attract exemption under section 4(3)(ii) of the Indian Income-tax Act, 1922.

Issue (i): Whether the trust deed created a trust in respect of the properties so as to attract exemption under section 4(3)(i) of the Indian Income-tax Act, 1922.

Analysis: The deed, read as a whole, showed that the subject of the trust was the income from the described properties and not the properties themselves. For exemption under section 4(3)(i), the property must be held under a complete trust, and mere intention to create a trust is insufficient unless the trust over the property is fully constituted in law.

Conclusion: The claim under section 4(3)(i) failed and was against the assessee.

Issue (ii): Whether the income secured under the deed constituted voluntary contributions to a religious or charitable institution so as to attract exemption under section 4(3)(ii) of the Indian Income-tax Act, 1922.

Analysis: The institution was found to be religious or charitable, and the income from the properties was applied for its objects. Section 4(3)(ii) requires receipt of income from voluntary contributions, and a deed executed freely by the donor, securing the income of the properties in perpetuity for the institution, satisfied that requirement.

Conclusion: The income was exempt under section 4(3)(ii), which was in favour of the assessee.

Final Conclusion: The exemption was upheld on the independent ground that the income secured by the trust deed amounted to voluntary contributions for a charitable institution, so the income from the properties was not chargeable to tax.

Ratio Decidendi: For exemption under section 4(3)(ii), income secured by a deed executed voluntarily in favour of a religious or charitable institution may constitute voluntary contributions, even if the contribution is created by a single instrument and operates in perpetuity.

---