S. K. KAPUR J. - This matter relates to the assessment year 1952-53, the previous year being the year ending 31st March, 1952.
The facts found by the Income-tax Appellate Tribunal are that one Dewan Chand was engaged in different types of businesses. He had lime business at Mathar carried on under the name and style of Imperial Lime Co., salt business at Sambhar, and transport business in Calcutta. He was also carrying on the business of supplying tents in partnership with D.C.M. Ltd. He also owned large movable and immovable properties. He had two wives, but no issue. He made a will on 28th July, 1929, in which he bequeathed certain specified properties in favour of his two wives and directed that the residue should vest in the trustees for public charitable purposes. Dewan Chand died on 4th February, 1930, and the will could not be proved since it suffered from certain technical defects. The two wives of the deceased with a view to giving effect to the wishes of their deceased husband as reflected in the said will, executed a trust deed on the 7th of June, 1930. In this trust deed it was, inter alia, provided tha :
'The two widows from the very start have been acting on the will considering it to be a part of their duty and, accordingly, have entrusted the entire property to the trustees. Now the third party also feels the necessity and all the three parties agree that in accordance with the wishes and instructions of the deceased which are sufficiently expressive, beyond any doubt, and with a view to remove legal defects, if any, in the will which might later result in any dispute, all the three parties have mutually decided and settled.... (1) that all the property of Dewan Chand, deceased, except that mentioned in paragraphs 4 and 5 of the will, which is the exclusive property of the two widows and which they may manage either personally or through attorney : the remaining property and the entire business of the deceased will be entrusted to the third party (trustees). (2) All the remaining property will be entrusted to the management of the third party who as trustees and as per instruction and for purposes mentioned in annexure (a) will be considered owners of the same.'
It may be pointed out that in paragraphs 4 and 5 of the will referred to above the two widows were to get only cash, jewellery, bank deposits, clothes and the proceeds of the insurance policies and the entire business was to be entrusted to the trust. The revenues case before the Tribunal was that as the business of the lime company had not been specifically transferred to the trustees, therefore, the income therefrom did not fall within the ambit of the trust deed. In the alternative it was contended that the Imperial Lime Co. had ceased to exist as such before the trust deed was executed since the lime business had been converted into a partnership under a deed dated the 10th April, 1930, with Dewan Chand Trust through its secretary and two others as partners. The trust had 0-8-0 annas belonged to the other two partners. In respect of this business the Income-tax Officer held tha :
(a) the partnership business was not entrusted to the trustees under the deed and, therefore, it was not entitled to the exemption granted by section 4(3)(i) of the Indian Income-tax Act for the assessment year 1951-52 and earlier years and, in any case,
(b) for the assessment year 1952-53 the assessees case was hit by the amended section 4(3)(i)(b) of the Indian Income-tax Act.
The matter was taken up in appeal to the Appellate Assistant Commissioner who upheld the contention of the assessee and allowed the claim.
When the matter went before the Tribunal in appeal at the instance of the revenue, the Tribunal allowed the assessees contention and dismissed the appeal. The Tribunal inter alia, held that the trust was valid and it enjoyed 0-8-0 annas share in the lime business. Relying on the decision of the Bombay High Court in Dharma Vijaya Agency v. Commissioner of Income-tax, the Tribunal held that clause (i) of section 4(3) contemplated a very wide category of business which was trust property and in section 4(3)(i), proviso (b) a restored and lesser category of business which was carried on by or on behalf of a religious or charitable institution was contemplated and that if the business was carried on by a trust then the exemption under section 4(3)(i) would be available to the assessee and it would not be hilt by proviso (b) to clause (i). In short, the Tribunals conclusion was that the charitable trust was created in respect of the business and the income therefore fell within the exemption contained in section 4(3)(i) of the Indian Income-tax Act. On these facts the Tribunal referred the following question of law for the opinion of this cour :
'Whether, on the facts and in the circumstances of the case, the share of income from Messrs. Dewan Lime Co. was exempt under section 4(3)(i) of the Income-tax Act, 1922.'
The only question raised before us is whether in view of proviso (b) to section 4(3)(i) of the Act, the assessee is not entitled to the benefit of section 4(3)(i) and, consequently, whether the share of income from Messrs. Dewan Lime Co. is exempt from tax. This matter now stands concluded by the decision of the Supreme Court in Commissioner of Income-tax v. P. Krishna Warriar. In this case the testator was carrying on the business of making and selling Ayurvedic medicines under the name of Arya Vaidya Sala. He, by his will, vested the business in trustees directing them to apply 60 per cent of the income thereof for the charitable purposes and 40 per cent. for the benefit of his family. The question was whether the 60 per cent. of the income which was to be applied for charitable purposes was liable to tax under proviso (b) to section 4(3)(i) of the Indian Income-tax Act, 1922, on the grounds that the entire income was not applied for charitable purposes. It was held that the business was 'property' held in trust and therefore 60 per cent. of the income from business was exempt from income-tax under section 4(3)(i) of the Act. It was also held that if a business is held in trust wholly or partially for religious or charitable purposes, it falls clearly under the substantive part of section 4(3)(i) and in that event clause (b) of the proviso could not be attracted as that clause was applicable only to a business not held in trust but carried on behalf of religious or charitable institutions.
In view of the above decision of the Supreme Court, it is not necessary to discuss the point any further. In the result the question has to be answered in the affirmative and in favour of the assessee. The Commissioner of Income-tax will pay the costs of this reference which are fixed at Rs. 200.
D. K. MAHAJAN J. - I agree.
Question answered in the affirmative.