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TMI Blog1962 (10) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... his was added to the capital account. In the next year, 1949-1950, a profit of ₹ 85,105 accrued and this was also capitalised. During the year ended June 30, 1951, the previous year for the assessment year 1952-53, the trust acquired a printing press and carried on business as printers. For the years ended June 30, 1951, to June 30, 1954, the previous years for the assessment years, 1952-53 to 1955-56 respectively, the assessee submitted returns to the department showing nil income. The income from the business carried on by the trust was not returned as the assessee claimed exemption under section 4(3)(i) of the Act. The Income-tax Officer, however, held that the business income of the trust was not exempt from taxation as claimed by the assessee and passed orders of assessment as per particulars given below: Assessment year Date of assessment by Income-tax Officer Income computed and taxed Rs. 1952-53 30-10-1954 5,15,634 1953-54 30-10-1954 21,349 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the terms of the deed of trust dated May 13, 1948. The author or the founder of the trust is one Karumuthu Thiagarajan Chettiar. The object of the trust is to establish, maintain and run schools, colleges, libraries, hospitals, maternity homes and other institutions of a public charitable nature. The objects also include renovation of places of worship and temples dedicated to Hindu religion and the establishment of institutions devoted to the propagation of Hindu religion. Karumuthu Thiagarajan Chettiar constituted himself as the first trustee of the trust. He made over and delivered to the trust a sum of ₹ 61,000 to form the nucleus of the trust funds (vide clause 3). The number of trustees was not to exceed 5 exclusive of the trustees appointed for their special knowledge or technical skill, whose number was not to exceed 2. Clause 6 is in these terms: The said Karumuthu Thiagarajan Chettiar shall be the first managing trustee and he shall, subject to the provisions of clause 8 hereof, hold that office for life and upon his death the senior most male descendant of the members of his family according to the rule of primogeniture shall hold the office in succession for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spaper falls within the scope of the section. It was also held in that case that the income from property, which term includes business, held wholly for religious or charitable purpose was exempt from taxation irrespective of the fact whether or not the income was in fact applied or accumulated for application to the purposes of the trust. The legislature amended the Act in 1939 and clause (ia) was inserted. That clause is in the following terms: Any income derived from business carried on on behalf of a religious or charitable institution when the income is applied solely to the purposes of the institution and-- (a) the business is carried on in the course of the carrying out of a primary purpose of the institution, or (b) the work in connection with the business is mainly carried on by beneficiaries of the institution. The exact scope of clause (ia) raised a controversy. The department contended that the object of this sub-section was to limit the scope of section 4(3)(i) in so far as it related to business held on trust and that the business income of a trust would be immune from taxation only if the conditions prescribed in clause (ia) were fulfilled. On the ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4(3)(ia) is that it includes within its scope income from business carried on on behalf of a religious or charitable institution whether or not there is any trust either in regard to the business or in regard to the institution. In this state of judicial pronouncements, the legislature brought in the amendment to the section by Act XXV of 1953. This amendment took effect from April 1, 1952. The amended provision is in these terms: Any income, profits or gains falling within the following classes shall not be included in the total income of the person receiving them: (i) Subject to the provisions of clause (c) of sub-section (1) of section 16, any income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, in so far as such income is applied or accumulated for application to such religious or charitable purposes as relate to anything done within the taxable territories, and in the case of property so held in part only for such purposes, the income applied or finally set apart for application thereto: Provided that such income shall be included in the total income.......... (b) in the case of income derived fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aining to attribute to it the character of a segment of that main enactment. The unambiguously clear language of the main provision cannot be controlled or overridden by mere implication from the existence of a proviso unless the words of the proviso have necessarily that effect. The meaning of the proviso should be derived from its own terms without any predilection that the subject-matter of the proviso is already covered by the main provision and that its object is to exclude something out of that main provision. Bearing this principle of statutory interpretation in mind we have to find out whether proviso (b) to section 4(3)(i) covers an independent category not within the main provision or whether it is merely an exception to such provision. The word property in section 4(3)(i) includes business. Income from business held in trust for a religious or charitable purpose applied or earmarked for application for the purpose of the trust falls within the exemption provided for under section 4(3)(i). A business owned and carried on by the trust is of course held in trust. A trust is an institution which has no corporate personality. It is not a legal person. The word trust is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and all benefits and profits arising therefrom upon trust to pay and apply the same for the relief of the poor, education, medical relief and the advancement of any other object of public utility as the trustees shall from time to time think fit . The question was whether the income earned in the business in respect of the assessment years, 1951-52 to 54-55, was exempt from tax under section 4(3)(i). It was held by the Bombay High Court that the word business referred to in clause (b) of the proviso need not be business which is held for religious or charitable purpose and that there is nothing in that proviso which in any manner touches the case of a business which is held under trust for religious or charitable purposes. The income derived from the business was held exempt from tax under section 4(3)(i). At page 405 Shah J., as he then was, observes thus: Mr. Joshi's argument is that if business is property within the meaning of section 4(3)(i), and that business is held on trust, the business in clause (b) of the proviso must also be held on trust, and if it is not so held on trust the income thereof will not be exempted as income derived from property held under a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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