Complete dedication under trust preserves agricultural income exemption despite a surplus-appropriation clause.

Agricultural income from properties permanently endowed under a family partition deed remained exempt under section 4(b) of the Madras Agricultural Income-tax Act, 1955, because the decisive test is the extent of the dedication, not the later use of the income. Reading the deed as a whole, the properties were wholly held under trust for the specified religious or charitable purposes, and a clause allowing the turn trustee to appropriate any yearly surplus did not reduce the dedication to a partial trust. The entire income from the properties was therefore outside tax under section 4(b).

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Issues: Whether the agricultural income from properties endowed under a family partition deed was exempt under section 4(b) of the Madras Agricultural Income-tax Act, 1955, where the deed provided that any yearly surplus could be appropriated by the turn trustee.

Analysis: Section 4(b) excludes from total agricultural income income derived from property held under trust wholly for religious or charitable purposes, while in the case of property held only in part for such purposes, only the income applied thereto is excluded. The decisive test is the extent to which the property is dedicated, not the manner in which the income is later utilised. On a reading of the deed as a whole, the properties were permanently endowed for the specified purposes and the surplus clause did not detract from the completeness of the dedication. The entire properties were therefore held under trust within the first limb of section 4(b).

Conclusion: The exemption was rightly granted and the income from the properties was not liable to be brought to tax under section 4(b).

Ratio Decidendi: Where property is completely dedicated and held wholly under trust for religious or charitable purposes, exemption depends on the character and extent of the dedication, and a clause permitting appropriation of any surplus does not convert the trust into a partial dedication for purposes of section 4(b).

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