JAGADISAN J.

The question referred under section 66 of the Indian Income-tax Act is " whether the income derived by the assessee-trust from business is exempt from tax under the provisions of section 4(3)(i) of the Act for the assessment years, 1952-53 to 1955-56 ? " The assessee is a religious and charitable trust called. " Thiagesar Dharma Vanikam ". It was founded by one Karumuthu Thiagarajan Chettiar under a deed of trust dated May 13, 1948. The founder furnished the trust with a sum of Rs. 61, 000 as a nucleus fund to be augmented and utilised for the purpose of the trust set out in the deed. A business in cotton yarn and cloth was started by the board of trustees or the managing trustee of the said trust with the help of this sum of Rs. 61, 000. Even during the first year of business a net profit of Rs. 5, 94, 493 was earned and this was added to the capital account. In the next year, 1949-1950, a profit of Rs. 85, 105 accrued and this was also capitalised. During the year ended June 30, 1951, the previous year for the assessment year 1952-1953, the trust acquired a printing press and carried on business as printers. For the years ended June 30, 1951, to June 30, 1954, the previous years for the assessment years, 1952-1953 to 1955-1956 respectively, the assessee submitted returns to the department showing nil income. The income from the business carried on by the trust was not returned as the assessee claimed exemption under section 4(3)(i) of the Act. The Income-tax Officer, however, held that the business income of the trust was not exempt from taxation as claimed by the assessee and passed orders of assessment as per particulars given below

Assessment Date of assessment by Income computed

year Income-tax Officer and taxed

Rs

1952-53 30-10-1954 5, 15, 6341953-54 30-10-1954 21, 349

1954-55 28-1-1958 2, 19, 430

1955-56 28-1-1958 75, 062

(Business)

The view of the Income-tax Officer was that the income from the business of the trust which was carried on by the managing trustee on behalf of the trust would fall within proviso (b) to section 4(3)(i) and would not be covered by section 4(3)(i), the main provision, and that the necessary conditions required to be fulfilled for the operation of the proviso (b) were not present

The assessee preferred appeals to the Appellate Assistant Commissioner. The appeals in respect of the assessment years, 1952-53 and 1953-54, were dismissed by order of the Assistant Commissioner dated December 23, 1957. In his view, it was not the trust or the institution, which was carrying on the business from which the income was earned, that the business was carried on by the managing trustee on behalf of the trust, and that therefore the application of section 4(3)(i) was excluded by the operation of proviso (b) to that section. The appeals in respect of the other two years, 1954-55 and 1955-56, were also dismissed by another Appellate Assistant Commissioner by order dated December 2, 1958, who followed the same reasoning as that adopted by the Assistant Commissioner who dismissed the earlier appeals

The assessee preferred further appeals to the Income-tax Appellate Tribunal. The appeals arising out of the assessment for the assessment years, 1952-53 and 1953-54, were dismissed by the Tribunal by its order dated January 15, 1959. The appeals in respect of the other two years were also dismissed by the Tribunal by a separate order dated October 21, 1959. The Tribunal also took the view that the business of the trust was carried on by the managing trustee on behalf of the trust, that therefore only proviso (b) to section 4(3)(i) was applicable, that the proviso operate as an exception to the main provision, and that the assessee not having fulfilled the conditions prescribed under the proviso could not claim exemption from taxation. On an application by the assessee under section 66(1) of the Act a consolidated reference in respect of the four years has been made to this court raising the question of