Charitable purpose exemption upheld for trust income earmarked for acquisition of property and relief to poor descendants.

One-eighth of the income from the B and C schedule properties was exempt because it was earmarked for charitable purposes within section 4(3)(i) of the Indian Income-tax Act, 1922. The part set apart to acquire properties for the trust qualified for the exemption, and the alternative use of the same share for food, clothing, education, marriage and funeral expenses of poor and financially distressed descendants was also treated as charitable. On either basis, the full one-eighth share was regarded as income applied to charitable purposes and remained outside tax.

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Issues: Whether one-eighth of the income from the B and C schedule properties, earmarked partly for acquisition of properties for the trust and partly for relief to poor members of the settlor's descendants, was exempt from income-tax under section 4(3)(i) of the Indian Income-tax Act, 1922.

Analysis: The income already set apart for purchasing properties for the trust was treated as falling within the exemption. The remaining alternative use of the same one-eighth share for food, clothing, education, marriage and funeral expenses of poor and financially distressed members of the family was also held to be a charitable object. On either footing, the whole of the one-eighth share was considered income applied to charitable purposes within the statutory exemption.

Conclusion: The entire one-eighth share was exempt from tax under section 4(3)(i) of the Indian Income-tax Act, 1922, and the reference was answered against the Commissioner of Income-tax.

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