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Interpretation of a trust deed for tax exemption under section 4(3)(i) of the Indian Income-tax Act. Analysis: The case involved a trust deed executed by Seth Meghji Mathuradas in 1943 for a sum of Rs. 3,50,000 for wholly religious or charitable purposes. The trust deed specified various charitable purposes for which the income could be utilized, along with a proviso giving preference to members of the settlor's caste and family. The Income-tax Department contended that the trust was not wholly charitable due to this proviso, while the Tribunal ruled in favor of tax exemption, stating that the preference clause only applied when all other conditions were equal regarding the charitable nature of the beneficiaries. The High Court analyzed the trust deed and the proviso in detail, emphasizing that the settlor's dominant charitable intention was evident from the trust's primary objectives. The Court noted that the proviso regarding preference for specific beneficiaries did not undermine the overall charitable nature of the trust. Referring to a Supreme Court judgment in a similar case, the Court held that the proviso did not affect the public charitable trust established by the settlor. Therefore, the Court answered the question of whether the trust qualified for tax exemption under section 4(3)(i) of the Income-tax Act in the affirmative, ruling in favor of the assessee and directing the Commissioner of Income-tax to pay the costs. In conclusion, the High Court upheld the charitable nature of the trust despite the preference clause, emphasizing the settlor's primary intent for charitable purposes. The judgment highlighted that the preference clause did not negate the trust's overall charitable character and did not disqualify it from tax exemption under the Income-tax Act. The Court's decision was influenced by a previous Supreme Court ruling on a similar matter, which supported the interpretation that the preference clause did not undermine the charitable trust's validity for tax exemption purposes.
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