(1) On an application from Sadaya Pillai Trust by its trustee, the Agricultural Income-tax Officer, Kumbakonam, by his order dated 31-8-1962, exempted from tax, under Section4(b) of the Madras Agricultural Income-tax Act, 1955 the income from certain lands specified in the order as being wholly held under trust for religious or charitable purposes. The Commissioner of Agricultural Income-tax, in exercise of his powers under Section 34 and by order dared 4-11-1965 set aside the exemption and directed that the income should be brought to tax in accordance with law. This is on his view that, if any excess out of the income derived from the properties remained after the performance of the objects of the trust, such excess income might be appropriated for himself by the turn trustee for the time being.
(2) In our opinion, the order of the Income-tax Officer granting exemption is correct. The relevant provision in the Act is clause (b) to Section 4. That section defines 'total agricultural income'. But such income does not include under clause (b) 'any agricultural income derived from property held under trust or other legal obligation wholly for religious or charitable purposes, and in the case of property so held in part only for such purposes, the income applied thereto'. This clause contemplates two categories of trust: (1) property held under trust wholly for religious or charitable purposes and (2) property so held in part only for such purposes. The income from the first category, that will not form part of the total agricultural income. But, under the second category, that will be so only that part of the income not applied for such purposes. The test is not therefore, how the income is utilised but how the property is held. In other words, the question will be whether the dedication of the property is entire or partial. If the intention of the Legislature was to bring to tax any income which is not applied for trust purposes, the wording of clause (b) has not achieved that purpose and is not appropriate.
(3) The trust in this case was created by the terms of a family partition deed dated 12-1-1927. The terms are clear that the properties mentioned in the schedule to the deed have been endowed permanently for certain purposes specified, and it was intended that the entirely of the income should be devoted for that end. But the recitals went on to say that, if any particular year and during the management of any turn trustee, there was surplus over expenditure, such surplus might be appropriated for himself by such turn trustee. That provision relating to the surplus does not in any way affect or detract from the entirely of the properties having been endowed and held as trust. As held by the Supreme Court in Dasaratharami Reddi v. Subba Rao, 1957 2 MLJ 175: AIR 1957 SC 797 where the dedication is complete, a trust in favour of public religious or charitable purpose is created. The test is the extent of dedication, and for this purpose, the whole deed will have to be read, as was pointed out in Vadivelu v. Rajabadar, : AIR1967Mad175 Reading the document in its entirety and having regard to the substance and extent of dedication, there is no doubt that this was a case of endowment of the entirety of the properties and the same was as a whole being held as trust. The properties, therefore, fall within the first limb of Section 4.
(4) The petition is allowed with costs Counsel's fee Rs.100.
(5) Petition allowed.