VALLABHDAS KARSONDAS NATHA Vs. STATE

JUDGEMENT

(1.) THIS reference under Section 66 (1) of the Indian Income-tax Act raises a short point, though one which has shown a tendency to become obscure by the historical background and by the more prominent features concerning questions of fact, of recent times. The question which has been referred to us is in these terms : Whether in the circumstances of the case the sum of Rs. 23,515 received by the assessee as surplus income of the trust property of the Keshavji Jadhavji Trust, or any part of that sum, is exempt from taxation under Section 4 (3) (i) of the Indian Income-tax Act ?

(2.) BEFORE turning to the somewhat involved circumstances of the case, it is essential to consider and bear in mind the terms of Sub-section 4 (5) (1) of the Act. It is that sub-section which exempts from the incidents of taxation certain types of income, described under twelve heads. The opening words are: Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them, and it is with the first head or class with which we are coneerned in this case. It is (1) any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, and then the sub-section continues to make provision for apportionment, in the case in which property is partly so held.

(3.) BY his will, dated February 8, 1886, Keshavji Jadhavji, who died the, day following, made provision for a number of capital funds and annual sums to be applied for purposes which cannot under the will, in view of various decisions of this High Court, with regard to the testator's dispositions, be challenged as being anything but religious or charitable in character. In each case where payments have to be made the total amount which can be expended annually is fixed by the will, and the sum total of these limits, so far as annual payments are concerned, amounts to the sum of Rs. 26,050. One of the executors of the will was the assessee's father and he was also the heir of the testator. Owing to the rise in land values in Bombay and the consequential increase in rents, the testator's estate began to produce a substantial surplus income, and in 1900 and 1903 the assessee's father commenced proceedings in this Court to have the destination of this surplus income and past accumulations of it determined. In the result it was decided that the assessee's father was beneficially entitled to the surplus, but he, being of a charitable disposition, desired that the surplus should go to similar objects to those which bene fit by the testator's bounty. Accordingly by a deed of settlement dated April 1, 1908, which was sanctioned by the Court, there was a settlement of parts of the testator's estate and of part of the accumulated surplus which was' calculated to be sufficient to produce the annual sum of Rs. 26,050 and it is that trust fund, which is the "property" within the meaning of Section 4 (3) (i) of the Act and which has produced the Rs. 23,515 mentioned in the question referred to us.