CHATURBHUJ VALLABHDAS Vs. COMMISSIONER OF INCOME-TAX

JUDGEMENT

(1.) This is a reference under Section 66(7) of the Indian Income-tax Act, 1922, by the Tribunal of Income-tax, inviting the Court's opinion on the following question:- Whether in the circumstances of the case and on a true construction of Clause 15 of the will of the late Gordhandaa Khetsey the income from the deceased's residuary estate is income from property held in trust or other legal-obligation, wholly for religious or charitable purposes so as to be exempt from assessment under Section 4(3) (i) of the Act ?

(2.) The material facts are few. Gordhandas Khetsey made his will dated April 30, 1934, and died on February 27, 1935. He left a large estate. Clause 15 of the will runs as follows: My trustee shall utilise my residuary property for such acts of charity as he deems proper. But if my trtustee thinks fit, ha can give a one-fourth part of my residuary property to all or one or more than one of my daughters or to the sons of my daughters.

(3.) In the statement of case it is stated that the residuary estate consists of immoveable properties in Bombay and its suburbs and also securities. The taxing authorities sought to tax the whole income of the residue on the ground that it did not fall under Section 4(3) (?) of the Indian Income-tax Act. Before the Assistant Commissioner it was in fact found that a certain amount was spent for religious and charitable purposes and he permitted the amount to be exempted from tax. Except for that, he directed that the balance should be taxed at the maximum rate. The assessee appealed. The Commissioner did not appeal against the order of the Assistant Commissioner. Before the Tribunal it was argued that the word, " charity " used in Clause 15 of the will was not covered by the definition of " charitable purpose " found at the end of Section 4 of the Act. That definition runs as follows: In this sub-section charitable purpose includes relief of the poor, education, medical relief, and the advancement of any other object of general public utility. It was contended on behalf of the Commissioner that the word charity was indefinite and may include public or private charity, and also benevolent or philanthropic objects, Therefore, the income of the residue was not exempt from taxation under the Act. This line of reasoning is found in the judgment of the Tribunal. The assessee asked the abovementioned question of law to be referred to the Court and the matter has thus come before us.