Business held in trust can qualify for charitable income exemption; proviso for business carried on on behalf of institutions does not apply.

Business is property capable of being held under trust, and a trust of business income partly for religious or charitable purposes falls within section 4(3)(i) of the Indian Income-tax Act, 1922. The phrase "in part" is not limited to an aliquot share of the property itself; it also covers cases where the business is held in trust and only part of the income is applied to religious or charitable objects. Proviso (b) applies only to income from a business carried on on behalf of a religious or charitable institution, not to a business itself held under trust. Accordingly, the charitable portion of the income is exempt under the main clause.

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Issues: (i) Whether business constituted property capable of being held under trust, and whether a trust of business income partly for religious or charitable purposes falls within section 4(3)(i) of the Indian Income-tax Act, 1922. (ii) Whether proviso (b) to section 4(3)(i) applied to business held in trust for such purposes.

Issue (i): Whether business constituted property capable of being held under trust, and whether a trust of business income partly for religious or charitable purposes falls within section 4(3)(i) of the Indian Income-tax Act, 1922.

Analysis: Business is property within the meaning of the provision. The expression "in part" is not confined to an aliquot part of the property itself, but extends to cases where the property is held in trust and only part of the income is dedicated to religious or charitable purposes. On the will's terms, the business and the other trust properties were vested in trustees, and 60% of the income was earmarked for religious and charitable objects during the relevant period.

Conclusion: The trust fell within section 4(3)(i), and the 60% income applied for religious or charitable purposes was exempt from assessment.

Issue (ii): Whether proviso (b) to section 4(3)(i) applied to business held in trust for such purposes.

Analysis: Proviso (b) is directed to income from a business carried on on behalf of a religious or charitable institution, not to a business that itself is held under trust. A distinction was maintained between a business held in trust and a business merely conducted on behalf of an institution.

Conclusion: Proviso (b) did not apply, and the exemption under the main clause could not be denied on that ground.

Final Conclusion: The income from the trust business was held to be exempt to the extent of the charitable application, and the assessee's challenge succeeded on the construction of section 4(3)(i).

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