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TMI Blog1957 (9) TMI 67X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, the income derived from the managing agency has been held by their Lordships of the Supreme Court as falling within section 4(3)(i) since the word property in that sub-section includes business as well. But it was contended before their Lordships of the Supreme Court that although the income may appear to fall within section 4(3)(i), as the language of that section is wide enough to include the income, the scope of section 4(3)(i) has been narrowed down by the provision in section 4(3)(ia) which deals with income from business, and, therefore, the sub-section that really applies to the determination of the question as to whether the income sought to be taxed in the hands of the trustees was exempt from tax is section 4(3)(ia) and not section 4(3)(i). Now, it must be pointed out that it is common ground that if section 4(3)(ia) was the section under which the exemption claimed was to be determined, the conditions laid down in that sub-section for the purpose of granting an exemption are not satisfied and, therefore, the assessees will not be entitled to an exemption. The question is, therefore, of vital importance to the assessees as to whether their case falls within sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this sub- section was to narrow down the scope of section 4(3)(i) in so far as it related to businesses held on trust and to grant an exemption in respect of the income derived from such businesses only if the conditions enumerated in sub-clause (ia) were fulfilled. Now, in interpreting a statute, although it is useful to keep in mind the historical background, it does not necessarily help to determine the true meaning to be attached to the language employed in the statute; because whilst Mr. Joshi urges that the object of sub-clause (ia) was to cut down the scope of the exemption under section 4(3)(i), in so far as it related to businesses held on trust, the assessees may well urge that having recognised that the income from businesses held on trust wholly for religious or charitable purposes was exempted under sub-clause (i), the Legislature wanted to extend that exemption in the case of other businesses not held on trust, but the income of which was none the less applied for the purposes of a religious or charitable institution and the business was carried on on behalf of such religious or charitable institution. We have, therefore, really to construe the two sub-sections to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be held on trust does not appear in clause (ia), would it not be reasonable so to interpret clause (ia) as to restrict it to a business carried on on behalf of a religious or charitable institution which is not held on trust ? Such a construction leads to the result that whilst section 4(3)(i) includes within its scope income from business held under trust, the true scope of section 4(3)(ia) is to include within its scope business carried on on behalf of a religious or charitable institution, which business is itself not held under trust, although the words used in clause (ia) are Prima facie capable of including within its scope business which may be held under trust. In our opinion, it is possible to reconcile these two sub-clauses by reading them in this manner, so that the ambit of these sub-clauses is different and does not overlap. Clause (i) relates to income from business held under trust and clause (ia) relates to income from business carried on on behalf of a religious or charitable institution where that business itself is not held on trust. We are strengthened in this view of ours by decisions of two other High Courts. We have first the decision of the Lahore Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave already pointed out, applies to cases where the business itself is held under trust for religious or charitable purposes, while clause (ia) applies only to such business as is carried on on behalf of a religious or charitable institution which was not held under trust. There are also certain observations of this High Court in a judgment, to which I was a party, in Commissioner of Income-tax v. Breach Candy Swimming Bath Trust [1955] 27 I.T.R. 279. The question that we had there to determine was whether the income from the sale of tickets for admission to the bath and from the bar and restaurant which was run in connection with a trust for the maintenance of the Breach Candy Swimming Bath was exempt from tax. The Tribunal had held that the income of the trust was exempt under section 4(3)(ia) and the High Court had come to the conclusion that section 4(3)(i) applied and not section 4(3)(ia). In the judgment of Chagla, C.J., at page 292, the following passage appears with regard to the true scope of the two sub-clauses: Our object, therefore, should be to give an interpretation to section 4(3)(ia) and section 4(3)(i) which removes these difficulties and anomalies and wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 4(3)(i) and 4(3)(ia), then no difficulty would be experienced in the way of the trustees who were carrying on the activity as a part of the trust itself and which activity made profits which the trustees may keep in reserve in order to strengthen the financial position of the institution. As such income would fall under the first part of section 4(3)(i), no question could then arise of that income being necessarily applied for the purposes of the institution in order to earn exemption under section 4(3)(ia). Now, with regard to the second paragraph set out above from this judgment, I was a party to that judgment and accept my full responsibility for the views therein expressed; but upon a fuller examination of the true scope of section 4(3)(ia), it appears to me that the view that we then took was a more restricted view than is warranted. We restricted section 4(3)(ia) to a business which was an integral activity of the trust itself. There does not appear to me to be any warrant for so restricting it. A religious or charitable institution is not required to be necessarily a trust and there are many religious or charitable institutions which are not trusts. Therefore, a busin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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