D V ARUR Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) THIS is a reference under Section 66 (1) of the Indian Income-tax Act, 1922. The assessment year is the year 1939-40 in respect of the accounting year, which in this case is the year ending May 31, 1938.

(2.) THE asseasee is a trustee, and the amount in dispute is the sum of Rs. 1,263, which is the income for the accounting year of a trust fund created by a settlement dated February 10, 1924. THE questions referred to us are as follows: (1) Whether the income of the trust fund called Shri Kailaje Umamaheshwar Vidya Nidhi is income derived from property held under trust or other legal obligation wholly for charitable purposes within the meaning of Section 4 (3) (i) of the Indian Income-tax Act? (2) Whether the income of the trust is taxable at the maximum rate under the first proviso to Section 41 (1) of the Act?

(3.) NO question arises with regard to this trust being for a religious purpose, but it is submitted on behalf of the assessee that the trust is educational in character and, therefore, is of a charitable purpose within the meaning of Sub-section A (3) (i) of the Act. Whilst reliance was placed upon the fact that by Sub-clause (ii) (b) of para. 6 of the trust deed it is permissible to award scholarships outside the Arurkar family, provided that the applicants are deserving and in the Saraswat community, it is not suggested that any part of the Rs. 1,263 was so applied. Looking at the scheme of the trust deed as a whole, it is clear that the dominant abject is the provision of scholarships for young members of the Arurkar family, in the case of females limited to three degrees of relationship from the donor. The power to use surplus income for scholarships for deserving members of the Saraswat community and the power to make advances to enable a start in life to be made by a scholar are subsidiary objects. In my opinion the trust though educational in character is of a private and limited scope.