P L D 1963 Supreme Court 209 (PLP)

CORNELIUS, C. J.‑This appeal by the Commissioner of Income tax, East Pakistan against a trustee Muhammad Abdur Rauf Khan, comes before the Court upon leave granted by the High Court of East Pakistan, and raises a, question regarding the right of exemption from taxation of certain income derived from its activities by a religious and charitable trust known as the Ghaus‑e‑Pak‑i‑Azam Welfare Trust which was created in 1953 by him of which he is himself the sole trustee. The property of the Trust consists of two launches, and an insurance policy for Rs.50,

000. The trustee was then, and still, is, engaged in the trade or business of plying launches for hire. He owned five launches, which were apparently licensed by the authorities for particular routes, and out of these, he donated two launches to the Trust. The Trust thus became engaged in the business of plying these two launches, and it seems that it made a profit, sufficient, in fact, for the purchase of a third launch in 1954. In 1955‑56, some profit was also made by trading in rice. These profits were shown in the return of income for purposes of tax, and the taxing authorities declined to allow the Trust exemption from taxation on these profits. Exemption from tax of the income of religious or charitable institutions is provided by section 4, subsection (3), clause (i) o' the Income‑tax Act, which contains a proviso placing restriction, on the grant of exemption in favour of such income derived from business as below :‑ "(3) Any income, profits or gains falling within the following classes shall not, to such extent as may be specified in this subsection or prescribed in this behalf, be included in the total income of the person receiving them,‑-- (i) Any 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, or finally set apart for application, thereto: Provided that in the case of income derived from business this clause shall not apply unless the business is carried on, on behalf of a religious or charitable institution and the income is applied solely for a religious or charitable purpose of the institution; and either, (i) the business is carried on in the course of the carrying out of a religious or charitable purpose of the institution ; or (ii) the work in connection with the business is mainly carried on by beneficiaries of the institution." The final decision of the Assistant Commissioner of Income? tax was expressed as follows ? "In plying of motor launches and doing side business in rice, as the appellant did, the business cannot be said to be ??????????? carried on in the course of the carrying out of a religious or charitable purpose of the Trust and the business also not being carried on mainly by the beneficiaries of the Trust, by no trace of imagination the business can be said to satisfy the conditions laid down in proviso (i) of section 4 (3) (i)." The stress is laid on the nature of the business in question. There were appeals before the Income‑tax Appellate Tribunal, which were rejected. It was held that to secure exemp?tion for business income of a trust, "the business must run in such manner as would realise and carry out the ideal of the institution". The Tribunal found, in addition, that the purchase of a third launch and investment in rice business showed that the income from the launch‑plying business was not being "used solely for charitable and religious purposes of the institution". Thereafter, the parties agreed upon a reference to the High Court under section 66 of the Income‑tax Act of the following question:? "Whether on the facts and in the circumstances of the case, the assessee was exempt from taxation under the provisions of section 4 (3) (i) of the Income‑tax Act." The reference was heard by a Division Bench of the High Court, which reached the following conclusions. The rice business having been conducted in the assessment year 1956‑57 was not in question in the case, which related to the assessment years 1955‑56 and 1957‑

58. But as to the purchasing of the new launch, the learned Judges found that it was within the powers of the trustee provided by clause (i) of paragraph 2 of the Trust Deed to acquire "movable or immovable properties which may be deemed necessary or convenient for any of the purposes of the Trust and for furtherance of the above‑mentioned objects". The learned Judges went on to hold that the "purchase of a new launch with part of the income of the Trust business cannot be said to have not been solely applied for the purpose of the institution, nor can it be said that the purpose was not religious and charitable when tile institution itself is religious and charitable public trust". They held also that the launch business had been carried on "in the course of the carrying out of the purposes of the institution." Mr. Mesbahuddin for the Commissioner of Income‑tax has relied upon the wording of section 4(3)(i) for the argument that while "property held under trust" may include a running business, yet it is not every kind of running business operated by a trust whose income will be held free of income‑tax for that reason alone. The statute requires a number of conditions of which the following are in this case necessary conditions of qualification for exemption, namely :‑ (1) the business should be carried on, on behalf of the religious or charitable institution; (2) the income should be applied solely for a religious or charitable purpose of the institution ; and (3) the business should be carried out in the course of the carrying out of a religious or charitable purpose of the institution. It is urged that there has been failure of application of the income of the Trust solely for such a purpose as is specified in the statute. It is argued further that the plying of launches for profit not being "a religious or charitable purpose", the third condition is clearly not satisfied. There is force in this argument. There is no presumption that because the institution is a religious or charitable trust, all of its activities must be supposed to be for the carrying out of a religious or charitable purpose. The proviso is carefully worded to distinguish activities whose object is to implement or effectuate directly a religious or charitable purpose, from all other activities, and clearly the plying of launches by itself cannot be brought within any of the religious or charitable purposes which are specified m the Trust Deed. These are briefly medical relief, relief for distress due to natural calamities, relief to the poor, promotion of physical culture and education, establishment of schools and institutions for the relief of the poor etc., providing aid in money to poor students and finally the erection of mosques and places for public worship. In this view, not only is the launch plying business not within the excepted purpose; but expansion of that business by purchase of a new launch cannot be thought to be an application of Trust income solely for "a religious or charitable purpose". It may be true that the launch plying business is being carried on for the purpose of providing an income for the Trust, and that the purchase of a new launch is intended to increase that income, and thereby to expand the area of relief which the Trust can afford, but these circumstances are not sufficient for grant of the exemption from tax which is claimed. The income‑producing business is indeed owned by the Trust, and is carried on, of behalf of the Trust, by the trustee, who is himself in the same business for his own profit. But to secure exemption, it i necessary also that the business should be carried on in implementation of a religious or a charitable purpose of the Trust, any in addition, all the income derived from the business should be applied solely for a religious or charitable purpose of the Trust. Neither of these conditions would appear to b satisfied. The view of the learned Judges of the High Court cannot therefore be sustained on the grounds advanced in the judgment, but Mr. Hamidul Huq Chowdhury has argued that the statute should be so construed as to give full effect both to the main provision granting the exemption, as well as to the proviso, so that the purposes of such trusts should be advanced. It being settled that "property held under trust" may include running businesses, it is, he argued, clear that running businesses may be dedicated, which do not satisfy the requisites of the proviso. Businesses of the types specified in the proviso could, no doubt, be operated by trusts, but such businesses are not likely ever to be the subject‑matter of a dedication to a trust. A running business made over to a trust would ordinarily be one capable of producing substantial profit, and of continuing to provide such profit if properly run. Those conditions cannot ordinarily be ensured where the making of profit is not the primary objective, yet it cannot be the intention that a business, run for profit, when dedicated, should be converted in the manner requisite to satisfy the conditions of the proviso, if the advantage of exemption from tax is desired in relation to the profits. The Trust would be entitled to hold and run the business, as it was received, and the income thus derived, should enjoy the exemption under the main provision. In the submission of learned counsel, the proviso to section 4(3)(i) was intended to be applied only to businesses which were not donated to the trust, but which had been com?menced by the trust itself independently. As for the purchase of a new launch, if the running of the launch business was within the Trust's powers, the addition or replacement of apparatus necessary for the running of the business, e.g., to meet competition, was also permissible, and did not amount to mis?application of income, such as would entail forfeiture of the tax exemption. The argument has elements of attractiveness, but it cannot be sustained on the wording of the statute. The expression "property held under trust" would certainly include a running business donated to a trust, but its meaning is by no means confined to donated property. All the property, which a trust receives by donation or acquires for itself would fall within the expression "property held under trust". This is placed beyond doubt by the provision in the preamble of the Trust Deed that "all additions and accretions to the Trust properties shall also form part thereof". Therefore, whether a running business is one donated to the Trust, or is a business commenced by the Trust independently, flue provisions of the exempting clause would apply equally to both classes, and income derived from the running of either class of business would only qualify for exemption from tax if it should satisfy the precise requirements of the proviso. The proviso itself is quite general in its application, i.e., to all "income derived from business". A number of reasons can be conceived as justifying the statutory restriction of exemption from tax in respect of running businesses owned by trusts, to the cases specified. It would be entirely reasonable to discourage trusts from applying their funds for commencing or promoting a business, in a commercial way, in view of the danger of malversation of Trust funds, or diversion from the true objects of the Trust. Another consideration might be that of ensuring equal conditions of competition to all enterprises in the purely commercial sphere. But if the business itself be either in direct furtherance of a religious or charitable purpose e.g., the publication and sale of religious books, or, the setting up of a chain of nursing homes for paying patients, or in the alternative, if the enterprise be commenced to provide gainful occupation to persons in need, e.g. by commencing industries in a distressed area by way of flood or famine relief, or a similar work in an orphanage, these considerations would fall away, and the ordinary exemption from taxation may be allowed in favour of any moderate profit so made, otherwise ft .n in the pure pursuit of profit. The avoidance of exemption being by means "of a proviso" it is necessary that its terms should be narrowly construed so as to restrict the denial of relief against taxation within the words of the proviso, construing and applying them to the facts of the case, bearing in mind not only the intention of the main provision allowing exemption but also the duty of ensuring that, on a fair appreciation, both of language as well as of the circumstances, evasion of the tax is not assisted. For this purpose, it is necessary to refer briefly to the history of this particular provision in the Income‑tax Act. The present proviso was inserted in replacement of clause (i‑a) of section 4 (3), by amendment in 1951, and there have been certain further minor amendments since. As it originally stood, the provision was in the following shape, viz :‑ "(3) This Act shall not be applied to the following classes of income :‑ (i) any 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, or finally set apart for application, thereto: (i‑a) any income derived from business carried on on behalf of a religious or charitable institution when the income is applied solely for 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." These provisions came under examination by the Lahore High Court in the case of the Charitable Gadodia Swadeshi Stores (1944 I T R 385) where the business in question did not fulfill the requirements of clause (i‑a), and it was sought to deny the relief from tax on this basis. The Lahore High Court held that clause (i‑a) did not derogate from the exemption granted by clause (i), but on the contrary provided an additional exemption for certain types of business which did not fall within clause (i). Taking the matter in this light, it was held as follows :‑ "Viewed in its proper perspective therefore, clause (i‑a) can be taken to apply only to such business as is carried on on behalf of religious or charitable institutions which were not held under trust, and not to such business as was itself held under trust or was conducted by or on behalf of such charitable or religious institutions as were held under trust. If it was intended to narrow down the scope of clause (i) so as to destroy the exemption enjoyed by a business held in trust or conducted by or on behalf of a religious or charitable trust, the new clause should have been added as a proviso to the old clause." In the context of the taxing provisions, I find it a little difficult to conceive of religious or charitable institutions being themselves either held or not held "under trust". The question does not in any case arise here since the business, whether with the original two launches or with the third launch added, would nevertheless qualify for the description of property held under trust. Be that as it may, it appears that following the suggestion made in the Gadodia case, the Act was amended, in 1951, when clause (i‑a) was replaced by the present proviso. No occasion appears to have arisen prior to the present case for the meaning and application of this proviso to be examined in the Courts in Pakistan. There have been cases in India, where the law is in pari materia. A proviso in terms similar to the proviso here under examination was considered by a Division Bench of the Bombay High Court in the case of the Dharma Vijaya Agency (38 1 T R 392). Mr. Justice Shah was of the view that "business", within the meaning of the proviso "need not be business which is held for religious or charitable purposes, provided it is business carried on on behalf of a religious or charitable institution". Mr. Justice Desai observed that there was "nothing in proviso (b) to clause (i) of section 4(3) which in any way touches the case of a business which is held under trust for religious or charitable purposes". A statement in the "Statement of Objects and Reasons" which accompanied the Bill by which the Act was amended in 1953, to the effect that the intention was to bring all businesses carried on by trusts within the scope of the proviso was held to be inadmis?sible to explain the content of the words used. More recently, two cases have come before the High Court of Kerala in India and have been reported as Commissioner of Income‑tax v. Krishna Warriar (44 1 T R 828) and Dharmodayam Co. v. Commissioner of Income‑tax (45 1 T R 478). The view expressed in the case of the Dharma Vijaya Agency was relied upon in each case for coming to the same conclusion, which was expressed in two propositions, viz :‑ (1) there is nothing in proviso (b) to clause (i) of section 4 (3) which touches the case of a business which is held under trust for religious or charitable purposes ; and (2) if the business is not itself the subject of the trust, but the business is carried on by an institution which is held under a trust and the business does not itself form part of the trust then section 4 (3) (i) (b) will apply. It is appropriate that I should acknowledge the assistance derived from a perusal of these judgments of foreign High Courts in the examination of the question before this Court. It seems to me to be sufficiently clear that the proviso in the case has particular reference to institutions of a religious or charitable nature, and to, income from business carried on on behalf of such an institution, but I consider that to regard such business as being wholly outside the purview of the main exempting provision, fails to take sufficiently into account, that the proviso is now attached as an exception to clause (i) and cannot be treated as if it were still in the shape of a separate clause (i‑a), to be interpreted in the manner of the Gadodia case aforesaid. Therefore, to apply the proviso only if the business is not itself the subject of the trust may be to defeat the very purpose of the amendment which was carried out in 1951 in consequence of the opinion expressed by the 8 Lahore High Court in the Gadodia case. On the wording of clause (i) and its proviso, regarded fairly, I consider that the A proviso can be held without hesitation to apply to a business which may itself be the subject of a trust, as in the present case. But, it will be necessary for the purposes of applying the proviso so as to avoid the relief, also to find that there is a "religious or charitable institution" and that the business is carried on on behalf of such institution. The expression "institution" does not necessarily convey the sense of an elaborate organization, particularly in the context of religious or charitable activity. It does not appear to me to mean anything more thank that there should be a distinct operating unit with an individuality of its own. It need not be a corporate body, and the intention of the proviso would in my opinion be sufficiently carried out if the case be that there is a duality, that is, that the active operation of the business is by one person or entity, on behalf of another entity, the latter being of a religious or charitable character. There is nothing in the language used to indicate that the relationship between the agent and the institution should be of a special kind, and equally there are no words to indicate that either the agent or the entity for which the business is being carried on should possess any special character. The words must be intended to apply to every kind of religious or charitable trust, from the smallest to the largest. The smaller trusts of this kind are indeed by far the most numerous, and it is just as important for the purpose of carrying out the intentions of the statute that the language should be understood as being applicable to these small trusts as it may well be for the case of the larger and wealthier trusts. In the case of a small trust, the distinction between the trust and the operating unit of the trust may be wholly imperceptible. The trust itself would, in that case, be the entity by, or on whose behalf, the business in question is being carried on, and would be the "institution", for the purposes of the proviso, where the business is being carried on through another. I am of the opinion that the expression "religious or charitable institution" in the proviso, in its application to the present case, embraces the Trust created by the respondent. There remains for consideration the question of agency. Here, the respondent is himself the sole trustee, and the argument may be put forward that the running of the three launches which are property of the Trust is done by the Trust itself, and not on behalf of the Trust. But it is to be remembered that the respon?dent is himself in the launch business and that he is operating these three launches along with his other launches. There is nothing to show that there is a separate office or organization, which attends exclusively to the business of the three launches owned by the Trust. Everything indicates that the business is being carried on by the respondent as a part of his main launch business although an account for the Trust launches is prepared separately. When he created the Trust he retained for himself as his personal property the larger portion of his fleet, which then consisted of five launches. Moreover, it seems to me that an assessee claiming an exemption should carry the burden of establishing that all the circumstances requisite for the grant of the exemption are satisfied. In the present case, the assessee has left it in doubt whether the business is carried on exclusively by the Trust or is being carried on on behalf of the Trust, through the F circumstance that the same person is the trustee and is also carrying on the larger business of which a part appertains to the Trust. In the circumstances, I would hold that the assessee has failed to establish that it is entitled to the exemption, which it claims. The result is that the affirmative answer returned by the learned Judges of the High Court to the question which was referred to them must be reversed and in its place there should be substituted an answer in the negative. I would allow the appeal accordingly, but would leave the parties to bear their own costs. S. A. RAHMAN, J.‑This is an appeal arising out of a reference made under section 66 (1) of the Income‑tax Act by the Income ?tax Appellate Tribunal, Dacca, to the Dacca High Court, in re: Muhammad Abdur Rauf Khan, Trustee, Ghaus‑e‑Azam Welfare Trust, Dacca. The High Court held that in respect of the assess?ment year?s 1955‑56 and 1957‑58, the respondent as assessee was entitled to claim exemption from tax under section 4(3)(i) of the Income‑tax Act (hereinafter referred to as the Act). The Commis?sioner of Income‑tax, East Pakistan, Dacca, was granted a certificate by the High Court for appeal to this Court, in view of the valuation of the subject‑matter involved. The question referred to the High Court reads as follows:‑ "Whether in view of the first proviso to section 4(3)(i) of the Income‑tax Act, the income arising to the Trustee of Ghaus‑e-?Azam Welfare Trust, Dacca, derived from business, is exempt from assessment to income‑tax." The relevant facts may be briefly summarized. The respondent, Muhammad Abdur Rauf Khan, is the proprietor of Messrs Pak River Service, which carries on launch plying business. He created a Trust known as the "Ghaus‑e‑Azam Welfare Trust", by deed dated the 13th March 1955, and transferred the ownership of two motor launches, along with permits for plying them, and a life insurance policy of the nominal value of Rs.50,000 to the Trust. The Trust funds thus created were admittedly of a religious or charitable nature. The public character of the trust, is moreover common ground between the parties. The Income‑tax Officer while assessing the Trust for the years 1955‑56 and 1957‑58, expressed?????????? the opinion that the income derived from the running of the launches transferred to the Trust fund, was not exempt from taxation, in view of the first proviso to section 4(3)(i) of the Act. The assessee appealed to the Appellate Assistant Commissioner who upheld the view of his subordinate. A further appeal to the Income‑tax Appellate Tribunal, Dacca, also failed. The High Court on reference, found that the assessee could avail of the exemption provided by section 4(3)(i) of the Act, as the business of the launches was admittedly carried on, on behalf of the religious and charitable institution, that income thereof was applied solely for the purposes of the institution and that the business was being conducted in the course of the carrying out of the purposes of the institution. Apparently, a new launch had also been purchased by the Trust out of the income of the Trust property, but it was held that this expansion of the business did not affect the matter. There was in addition some question raised as to whether a rice business started by the Trustee under the Trust, would also be exempt from tax or not, but the High Court did not consider it necessary to decide that question, as the rice business pertained to the account year 1955‑56 (assessment year 1956‑57) and the assessment therefore was not the subject of appeals to the Income‑tax Appellate Tribunal. Section 3 of the Act is the charging section. It declares that where any Act of Parliament enacts that income‑tax shall be charged for any year at any rate or rates, tax at that rate or those rates, shall be charged for that year, in accordance with and subject to the provisions of the Act, in respect of the total income of the previous year, of the assessee. Section 4 gives details of the categories of income which are to he included, while computing the total income of an assessee, for any account year, subject to certain exceptions. These exceptions are contained in sub?section (3). The relevant part of subsection (3) of section 4, so far as it concerns this case, is reproduced below:?

"(3) Any income, profits or gains falling within the following classes shall not, to such extent as may be specified in this subsection or prescribed in this behalf, be included in the total income of the person receiving them : ‑ ??????????? (i) Any 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, or finally set apart for application, thereto Provided that in the case of income derived from business this clause shall not apply unless the business is carried on on behalf of a religious or charitable institution and the income is applied solely for a religious or charitable purpose of the institution ; and either,? (i) the business is carried on in the course of the carrying out of a religious or charitable purpose of the institution ; or (ii) the work in connection with the business is mainly carried on by beneficiaries of the institution." A reference to the Trust deed shows that the Trustee for the time being, and the authority to receive, for the general purposes of the Trust, the income arising or accruing from the use and investment of the Trust property and all additions or accretions thereto, which were all to be included in the expression "Trust Fund". The expansion of the business, by purchase of a third launch was, therefore, within the Trustee's power and would not alter the nature of the business carried on by the Trust. It is plain that the two launches could not last forever and might in course of time require replacement. Such a replacement could have been anticipated and a new launch purchased. In any event, the expansion of the business itself seems to be an immaterial factor in the situation. The main contention raised on behalf of the Commissioner of Income‑tax by Mr. Mesbahuddin is that the word "property" in clause (i) of subsection (3) of section 4 of the Act should be read to include "business" and that the first proviso to that clause detracts from that exemption in respect of the class of property called business. The proviso, he contends, applies to all business, irrespective of whether it is owned by the Trust or is a business whose income, apart from the corpus, vests in the Trustee and narrows down the scope of exemption to that business alone which satisfies the conditions mentioned therein. He claims that these conditions are not satisfied in the present case because the business in question is not being "carried on in the course of the carrying out of a religious or charitable purpose of the institution." In support of his position, learned counsel has referred us to Charitable Gadodia Swadeshi Sores v. Commissioner of Income‑tax, Punjab (1944 1 T R 385). It was held by a Division Bench of the Lahore High Court in that case that the term "property" occurring in sec?tion 4(3)(i) of the Act, as it then stood, would include securities or business or share in a business. It was further found, after con?sidering the language of the provisions, then existing, that the income derived by the Trustees from the business of the Trust in that case, was exempt from assessment to income‑tax, under section 4(3)(i) of the Act and that this position was not affected by clause (i‑a) of that subsection, which could not be regarded as a proviso to clause (i). This latter part of the decision, learned counsel contends, would not be apt in the circumstances of this case, in view of the amendments made in subsection (3), by the omission of clause (i‑a) and the insertion of the first proviso to clause (i) of that subsection, by the Finance Act, 1951 (1 of 1951), section

9. Mr. Hamidul Haq Chowdhury who appeared for the respondent-assessee, tried to suggest that the first proviso to clause (i) of subsection (3) would be attracted only where the income of Trust property is invested in business and not where the Trust property is itself a business. It seems to me that this contention is not consistent with the words employed by the Legislature. Learned counsel would interpret the term "business" in the first proviso as meaning "business not included in property held under the Trust". This would amount to reading words into the subsection such as don't exist therein. The contention raised, that though expressed in the form of a proviso, the provision is really to be construed independently of clause (i), would be contrary to well‑recognised canons of construction. Indeed, the proviso seems designed to meet such an argument and the Legislature appears to have taken its due from certain observations made by Din Muhammad, J., in the case of the Charitable Gadodia Swadeshi Stores. The scheme of subsection (3) appears to be that complete exemption is granted to income derived from all property including business, held under Trust, wholly for religious or charitable purposes by clause (i). But if the property in question happens to be "business" or if Trust funds are derived from any other "business", then the proviso would come into play and r: strict the exemption to such business only,‑ (i) as is carried on on behalf of a religious or charitable institution and the income whereof is applied solely for a religious or charitable purpose of the institution ; and (ii) either of the two further conditions enumerated as (i) and (ii) under the proviso, is satisfied. Here the first condition that the business should be carried on.1 on behalf of the religious or charitable institution and its income should be applied solely for the purposes of that institution, is undoubtedly met. Clause (ii) of the proviso is out of the question in this case, as the business is not being carried on by beneficiaries of the institution. The point therefore that calls for determination is whether the condition envisaged by clause (i) of the proviso, is satisfied in the circumstances of the present case or not. Clause (i) of the proviso appears to contemplate business of a character, which has a direct and intimate relation with one of the religious or charitable purposes of the institution. For instance, if a charitable institution adopts as one of its objects, the teaching of a profession or trade, to its beneficiaries and starts business strictly for that purpose so that some income accrues to the Trust in the course of running that business intended to train the beneficiaries, the income would be exempt from taxation. If the business be not of that nature, its income would appear to be outside the purview of the exemption altogether. The object may have been to limit the exemption to such subsidiary business only, as was part and parcel of the execution of an object of the charitable institution and to avoid conferring an undue advantage on other business carried on by or under a Trust, in competition with business sponsored by commercial companies or private individuals. This seems to me to be the plain intention of the language of the proviso. Mr. Hamidul Haq Chowdhury referred us to two decisions from the Indian jurisdiction which, he thought, lent support to his argument. The first of these cases is the J. K. Trust, Bombay v. Commissioner of Income‑tax (AIR 1957 S C 846). The decision in, that case was rendered under the old un-amended Act and was merely to the effect that the term "property" occurring in section 4(3)(i) of the Act includes "business". The proviso was a subsequent addition to this clause. The decision therefore affords no assistance in interpreting the proviso. The second case is Dharma Vijaya Agency v. Commissioner of Income‑tax, Bombay City I(381 T 9 392). Apparently, by the time the Bombay High Court came to consider that case, the Income‑tax Act in India had also been amended, in 1953 and is so far as material, section 4 (3) (i) came to be worded as follows:--? "Any income, profits or gains, falling within the following classes, shall not be included in the total income of the person receiving them (i) . . . . 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 . . . . . Provided that such income shall be included in the total income,‑ (a) . . . . . (b) In the case of income derived from business carried on, on behalf of a religious or charitable institution, unless the income is applied wholly for the purposes of the institution and either,‑ (i) the business is carried on in the course of the actual carrying out of a primary purpose of the institution, or (ii) the work in connection with the business is mainly carried on by beneficiaries of the institution ; (c) If it is applied to purposes other than religious or charitable purposes or ceases to be accumulated or set apart for application thereto, in which case it shall be deemed to be the income of the year in which it so applied or ceases to be so accumulated or set apart." It will be seen that the language employed by the Indian Legislature was different from that of the Pakistan Act. After granting the exemption by clause (i) of subsection (3) to income derived from all property held under Trust, in so far as such income was applied or accumulated for application to religious or charitable purposes of the Trust, the exemption was cut down only in the case of business "carried on on behalf of" an institution and subject to one of the two alternatives mentioned under clause (b). If the income was derived from business which was itself the property of the Trust, clause (b) was not at all applicable and it was so held by the Bombay High Court in that case. Such income, it follows, would remain exempt from taxation by virtue of clause (i) and could not be included in the total income of the assessee. The decision, if I might say so with respect, was perfectly correct in view of the qualifying phrase "carried on, on behalf of a religious or charitable institution" following the word "business" in clause (b) of the proviso in the Indian Act. The proviso to clause (i) of subsection (3) of our Act, however, employs different wording. There is no adjective phrase qualifying the terra "business" here, such as would limit it to one carried on on behalf of a Trust. It seems to me concurrently that this decision has no persuasive efficacy in advancing the case for the assessee, before us. After carefully considering the provisions of the Pakistan Act, I have reached the conclusion that the interpretation placed by the High Court on the first proviso to clause (i) of subsection (3) of section 4 of the Act, was erroneous. The business in this case was not outside the ambit of the proviso and therefore the relevant income was not exempt from tax. I would consequently allow the appeal and declare that the income of the business in question for the two assessment years, was amenable to income‑tax. The parties may be left to bear their own costs throughout. B. Z. KAIKAUS, J.‑Although learned counsel for the respon?dent did support the decision of the High Court even on the grounds on which the High Court based it, his main contention before us was that the proviso to section 4(3) (i) is not applicable at all to a case where a business itself has been dedicated for religious or charitable purpose. According to learned counsel the proviso is attracted only if after property has been dedicated for a religious or charitable purpose, the trust starts a business. On the wording of the proviso I am wholly unable to see how this contention can be supported. The proviso speaks of "income derived from business". Learned counsel for the respondent wants us to read it as "income derived from business which was not itself the subject matter of a trust for religious or charitable purposes." There is no justification whatsoever for reading into the proviso words which do not appear there. The words used in the proviso point to an intention that all income which is derived from business is liable to payment of income‑tax except where the fulfilment of the purpose of a religious or charitable trust involves in itself the carrying on of some business by the trust. If the intention of the law was that in case a business as such was dedicated to a religious or charitable purpose, it should not be liable to payment of income‑tax at all, there is no reason why simple words to that effect should not have appeared in section 4(3). The Legislator when using the words "income derived from business" was well aware of the fact that these words will apply even to a case where the business itself was the subject‑matter of a trust. At the same time I fail to see how the contention put forward could be supported in reason. If this contention were accepted the result would be that it would be very easy to avoid payment of income‑tax in case of any business that is being carried on by a trust and the stringent conditions laid down in the proviso for exemption from income‑tax would be useless. It would be quite easy always to dedicate a business instead of dedicating property out of the proceeds of which business is to be run. If a person creates a trust of a lac of rupees with the intention that this sum may be used for running some business the income would be liable to income‑tax in accordance with the contention of learned counsel for the respondent, because only a sum of money has been dedicated, but if the person who is creating a trust even notionally establishes a business making this sum of one lac the capital of that business and then dedicates the business the income from such business would not be liable to income‑tax Now, in order to establish a business the person who creates a trust has simply to give the business a name and has to indicate only in a very general way, the kind of business that may be carried on. He need not carry on the business even for a day. He has simply to establish a business. For instance he may say that he is establishing a company (not a limited company) for the carrying on of some kind of business and that the sum which he wants to dedicate is the capital for that business and he may then dedicate that business to a religious or charitable use. In such a case without the business ever having been run, the conditions for exemption from income‑tax would in accordance with the contention of learned counsel have been fully satisfied. A small purchase of material, which is to be sold or which is to help in carrying on the business would be an effective though not an essential step for establishing a business. I am unable to agree that we can interpret this provision in a way that will permit avoidance of income‑tax in respect of all business carried on by a trust while the proviso lays down strict conditions for exemption from income‑tax of income received from business. Also I see no rational ground for treating income from business dedicated on a different footing from income from business that is not dedicated when the income is in both cases ultimately to be used for a religious or charitable purpose. I may add that in present case it would be difficult to accept that a business had been dedicated. A trust was created only m respect of two launches. It is true that launches were dedicated in order that a business may be run by their use but that is not the same thing as the dedication of a business already in existence. On principle there would be no difference between a case where money is dedicated in order that launches may be purchased with that money for running a business and a case where launches already purchased are dedicated. I will now consider the question as to the applicability of the conditions mentioned in the proviso for exemption from income‑tax. The first condition is that the business should be carried on by a religious or charitable institution. I will assume that this condition has been satisfied, because it may be said that there is in existence here an entity which carries on business under certain directions given by the creator of the trust and it may be called an institution. The next condition to be satisfied is that the income should be applied solely for a religious or charitable purpose of the institution. The question for con?sideration is whether the purchase of a launch or the investment in rice business can said to be a religious or charitable purpose of the institution. The argument on behalf of the respondent is that as the income from the launch or the rice business was ultimately to be applied for the religious or charitable purposes of the institution, the purchase of the launch or the investment in rice business in itself becomes a religious or charitable purpose. I have little hesitation in holding that the words quoted above would cover a case only where the income is directly applied to a religious or charitable purpose of the institution. By religious or charitable purposes are meant purposes for the fulfilment of which a trust is created. The production of income is not by itself a religious or charitable purpose. The contention of learned counsel for the respondent amounts to this that all sources of income which the advancement of the religious or charitable purpose of an institution themselves become religious or charitable purposes. Even income from dances or musical shows may dedicated for a religious or charitable purpose, but the dancing or the musical show does not thereby become a religious or charitable purpose. Out of the two further alternative conditions mentioned in the proviso the one that is relied upon is: ?that the business is being carried on in the course of the carrying out of a religious or charitable purpose of the institution‑ " The argument on behalf of the respondent is that the running of launches was by itself the carrying out of the religious or' launch charitable purpose of the institution. The answer to this argument is contained in what has been stated above. The production of income is not by itself a religious or charitable purpose of the institution. By religious or charitable purposes are meant purposes like relief to the poor, education, medical facilities, etc. If. the carrying on of a business by the income of which some religious or charitable purpose is to be served is by itself a religious or charitable purpose then this condition in the proviso is without any meaning because all income from business that is being carried on by a religious or charitable institution has to be applied to the religious or charitable purposes of the institution, and this condition will be satisfied in the case of any business run by a religious or charitable institution. It seems obvious to me that the intention by this condition was to exempt from income‑tax income from business carried on by a trust only in a case where not to exempt it would amount to the placing of obstructions in the way of the fulfillment of the purpose of a trust. There are some business has to be carried trusts of a kind where necessarily on in the execution of its purpose. For instance if free training is to be given to persons for making a particular article, then during the course of that training that particular article is to be produced and it will have to be sold. In such a case there is a business, which is being carried on in the course of the execution of a trust. I am of the opinion that the order of the High Court is not supportable either on the ground on which it had been placed or on the contention raised by learned counsel for the respondent in this Court. I would, therefore, accept the appeal and setting aside the order of the High Court would answer the question referred to the High Court in the negative, but would leave the parties to bear their own costs throughout. We allow this appeal and direct that the affirmative answer returned by the learned Judges of the High Court to the question, which was referred to them must be reversed and in its place there should be substituted an answer in the negative. We leave the parties to bear their own costs. A. H.??????????????????????????????????????????????????????????????????????????????????????? ??????????? Appeal allowed.