1962 (3) TMI 91 - HC - Income Tax

Summary

Issues Involved:
1. Whether the income derived from property held by the assessee is exempt from income-tax under section 4(3)(i) of the Indian Income-tax Act.
2. Whether the objects of the assessee's association are charitable in nature.

Issue-wise Detailed Analysis:

1. Exemption under Section 4(3)(i) of the Indian Income-tax Act:
The primary question was whether the income or any portion thereof was exempt from the levy of income-tax under section 4(3)(i) of the Indian Income-tax Act. The assessee, a society registered under the Societies Registration Act, 1860, claimed that the income from a house property was exempt as it was utilized for religious or charitable purposes. The Income-tax Officer disallowed this claim, stating that the association was formed for the benefit of a specific section of the community and that there was no specific property bound by a trust or legal obligation. The Appellate Assistant Commissioner partially allowed the claim, stating that the income devoted to charitable objects was exempt. However, the Appellate Tribunal overruled this, concluding that the institution was not solely for charitable purposes due to the presence of non-charitable objects in its memorandum of association.

2. Charitable Nature of the Assessee's Association:
The court examined whether the objects of the society, as stated in its memorandum of association, were charitable. The memorandum included various objects, such as promoting the social, moral, religious, physical, and material conditions of the Kedia community, establishing funds for maintenance, marriage, and funeral ceremonies, and providing relief to the needy members of the community. The court noted that promoting the material condition of a community and contributing towards marriage expenses could not be considered charitable purposes. The court also referred to the Societies Registration Act, which allows registration of societies with non-charitable purposes. It was concluded that the presence of non-charitable objects in the memorandum meant that the society could not be considered solely for charitable purposes.

Judgment:
The court held that the income derived from the property was not held under a trust or other legal obligation wholly for religious or charitable purposes. Therefore, it was not exempt under section 4(3)(i) of the Indian Income-tax Act. The court answered the question in the negative, indicating that the assessee was not entitled to the claimed exemption. The assessee was ordered to pay the costs of the reference.