Charitable trust exemption upheld where a family-assistance clause was merely incidental and did not divert income from charitable objects.

A trust remains exempt as charitable where the deed, read as a whole, shows a dominant religious and charitable object and any reference to assisting poor family members is only an expression of desire. A permissive or incidental family-related clause does not create a binding obligation to apply income for non-charitable purposes, nor does it displace the public charitable character of the settlement if trustees retain unrestricted power to apply income to charitable objects. On that construction, income from the trust properties fell within section 4(3)(i) of the Indian Income-tax Act, 1922 and was exempt.

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Issues: Whether income from properties held under a trust was exempt under section 4(3)(i) of the Indian Income-tax Act, 1922 despite a clause expressing a desire to provide financial aid to poor members of the settlor's family.

Analysis: The trust deed had to be read as a whole and the dominant object of the settlement was religious and charitable. The family-related clause was only an expression of desire and did not create a binding fetter or direct the trustees to apply trust income for non-charitable purposes. The principle applied was that a public charitable trust is not displaced by a merely incidental or preferential reference to relatives when the trustees retain unrestricted power to apply the income to charitable objects. On that footing, the trust remained within the scope of section 4(3)(i).

Conclusion: The income from the trust properties was exempt under section 4(3)(i) and the answer to the referred question was in favour of the assessee.

Ratio Decidendi: A trust remains charitable for income-tax exemption purposes where its dominant object is charitable and any reference to assisting relatives is only permissive or incidental, without diverting or binding the income to non-charitable application.

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