Mixed trust objects defeat tax exemption where trustees may benefit private family members and a later deed is not retrospective.

Income from trust property was not exempt where the deed combined charitable objects with a discretionary power to benefit members of the settlor's family, because exemption under the Income-tax Act, 1922 required property to be held wholly for charitable purposes or for income to be applied accordingly. A charitable purpose had to serve a public character, and an unrestricted power to aid private individuals defeated that character. The supplementary trust deed could not operate retrospectively to cure the defect for the relevant assessment years, so the earlier assessments were sustained.

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Issues: Whether the income derived from the trust property was exempt from tax under section 4(3)(i) of the Income-tax Act, 1922, where the trust deed contained both charitable and non-charitable objects and empowered the trustees to apply the funds at their discretion, and whether the supplementary trust deed could operate retrospectively.

Analysis: Exemption under section 4(3)(i) is available only where property is held under trust wholly for religious or charitable purposes, or where property is held in part for such purposes and the income is applied or set apart accordingly. A charitable purpose must have a public character and cannot be directed to the benefit of specified private individuals. Here, the trust deed authorised expenditure on several charitable objects but also permitted aid to members of the settlor's family without requiring that such aid be confined to poor or indigent relatives. The trustees were given full discretion to apply the income to any object in the deed, including the family-benefit object, and therefore the trust could not be treated as wholly charitable. The subsequent supplementary deed could not alter the position for the relevant assessment years because it was not retrospective.

Conclusion: The trust income was not exempt under section 4(3)(i) of the Income-tax Act, 1922, and the supplementary deed did not cure the defect for the years in question.

Final Conclusion: The reference was answered against the assessee, and the assessments were sustained.

Ratio Decidendi: Where a trust deed confers an unfettered power on trustees to apply income to both charitable and non-charitable objects, the property cannot be regarded as held wholly for charitable purposes for the purposes of exemption.

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