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TMI Blog1964 (4) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... herefrom in certain proportions to the Arya Vaidya Sala, Arya Sikitsa Sala and Arya Vaidya Pata Sala and to his descendants. Broadly stated 60 per cent. of the income was directed to be spent on the said three institutions and 40 per cent. to be given to his descendants. Till the Amending Act came into force the income-tax department gave exemption from assessment for the 60 per cent. of the income under section 4(3)(i) of the Act; but, after the Amending Act came into force, which was given retrospective operation from April 1, 1952, the said department refused to give exemption from assessment even in regard to the 60 per cent. of the income. For the assessment years 1954-55 and 1955-56 the Income-tax Officer assessed the entire income from the said properties; and in respect of the income pertaining to the assessment years 1952-53 and 1953-54, which had already been assessed in the usual course giving exemption for the said 60 per cent. of the income, the Income-tax Officer issued notices under section 34 of the Act and by two separate orders dated September 28, 1956, assessed the said 60 per cent. of the income on the basis of escaped assessment. On December 20, 1956, for the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B, C and D all other properties, movable as well as immovable, belonging to me I hereby constitute into a trust to be managed by the trustees as per the directions in the will. They are described in Schedule E, and on my demise those properties will vest in the trustees. It is my intention that except the properties mentioned in paras. 4 and 5 (B, C and D Schedules), all my properties are to be included in the trust and, therefore, even if some item of property is left out by inadvertence, it is also to be deemed included in the trust and vested in the trustees. " " 8. Provisions rgarding the trust.--I hereby nominate the following persons as the first Board of Trustees : ... (Name of 7 persons given) ". " 9. The above trust is to be managed and conducted according to the terms and conditions detailed below :-- . . . . G. The primary and chief objects of the Trust are to carry on for ever the two institutions, viz., the Arya Vaidya Sala and the Arya Vaidya Hospital on the lines followed now with the object of enlarging and increasing their scope and utility. The work of Arya Vaidya Sala now consists of : 1. preparation of Ayurvedic medicines, 2. sale of the same, 3. tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble properties. M. The Trustees are not bound to pay any amount to the said two tavazhies after the expiry of 20 years. The 40% of the profit so earmarked for 20 years and so released after the expiry of 20 years are therefore to be utilised for the development of the Arya Vaidya Sala and Arya Vaidya Hospital according to the discretion of the Trustees. E Schedule : All remaining properties constituted into the Trust. It will be seen from the said recitals of the will that the testator created a trust in respect of his entire properties, including those mentioned in Schedules B, C and D and specifically vested them into the trustees appointed thereunder. The properties so vested included the business carried on in the name and style of Arya Vaidya Sala. The main objects of the trust were to carry on the said two institutions, namely, Arya Vaidya Sala and Arya Vaidya Hospital and also the other objects mentioned thereunder. Out of the income from the business so vested in the trustees, he directed the trustees to spend 25% for the development of Arya Vaidya Sala, 25% to meet the expenses of the Arya Vaidya Hospital, not exceeding 10% for the Arya Vaidya Patasala, 25% to be sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ritable purposes, it would fall under clause (ia) and the income therefrom could not be exempted from income-tax unless the conditions laid down in the said clause were complied with. In Charitable Gadodia Swadeshi Stores v. Commissioner of Income-tax, the Lahore High Court rejected that contention, and one of the reasons given for the rejection was that if the said clause was intended to narrow down the scope of clause (i), the said clause should have been added as a proviso to the old clause. Presumably on the basis of this suggestion the Amending Act of 1953 substituted clause (ia) by clause (b) of the proviso. But it is not an inflexible rule of construction that a proviso in a statute should always be read as a limitation upon the effect of the main enactment. Generally the natural presumption is that but for the proviso the enacting part of the section would have included the subjectmatter of the proviso ; but the clear language of the substantive provision as well as the proviso may establish that the proviso is not a qualifying clause of the main provision, but is in itself a substantive provision. In the words of Maxwell, " the true principle is that the sound view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fall under clause (i), if the other conditions laid down therein were satisfied. The necessary condition for the application of clause (i) of section 4(3) of the Act is that the said property, namely, the business, shall have been wholly or in part held for religious or charitable purposes. As 40 per cent. of the profits in the business would be given to purposes other than religious or charitable purposes it cannot be said that the business was held wholly for religious or charitable purposes. But as 60 per cent. of the profits thereof would be spent for religious or charitable purposes, the question is whether it can be held that the business was held in trust in part for religious or charitable purposes. The argument advanced on behalf of the revenue is that the expression " in part " in clause (i) applies only to a case where an aliquot part of property is vested in trust and that is not legally possible in the case of business. It is said that a business is one and indivisible and, therefore, the subject-matter of trust can only be the share of the profits payable to a partner during the continuance of the partnership or after its dissolution. Reliance is placed in support of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that only a part of the income of that property is utilized for religious or charitable purposes. The dichotomy between the two expressions " wholly " and " in part " is not based upon the dedication of the whole or a fractional part of the property, but between the dedication of the said property wholly for religious or charitable purposes or in part for such purposes. If so understood, the two limbs of the substantive clause fall into a piece. The first limb deals with a property or a part of it held in trust wholly for religious or charitable purposes, and the second limb provides for such a property held in trust partly for religious or charitable purposes. On the said reading of the provision it follows that the entire business of Arya Vaidya Sala is held in trust for utilizing 60 per cent. of its profits, i.e., a part of the income, for religious or charitable purposes. The present case, therefore, falls squarely within the scope of the substantive part of clause (i) of section 4(3) of the Act. Even so it is contended that clause (b) of the proviso imposes further limitations before the exemption can be granted. But the said clause of the proviso only applies to the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income from such business is applied or accumulated for application for the purpose of the trust, which must of course be of a religious or a charitable character, the conditions prescribed in section 4(3)(i) are fulfilled and the income is exempt from taxation. This exemption cannot be defeated even if the business were to be conducted by somebody else acting on behalf of the trust. Proviso (b) to section 4(3)(i) has application only to businesses which are not held in trust, and the field of its operation is, therefore, distinct and separate from that covered by section 4(3)(i). " . Emphasis is laid upon the expression " such income " in the opening words of the proviso and a contention is raised that the income dealt with in the proviso is income derived from property held tinder trust. To state it differently, the adjective " such " in the expression " such income " refers back to the income in the substantive clause. There is some plausibility in the contention, but if the interpretation be accepted, we will be attributing an intention to the legislature to make a distinction between business and other property though both of them are held under trust. There is no acceptabl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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