The judgment established the principle that the expression 'charitable purposes' must be strictly construed and that the test of general public utility applies to determine the exemption from taxation under Section 4(3)(i) of the Income Tax Act.

Alfred Henry Lionel Leach, C.J.

1. The assessee in this case is the muthavalli of a wakf called the Allajanathud-Deeniya, which was created by one Jamal Mohideen Sahib by a deed, dated the 21st December, 1923. The deed directs that half of the annual net income shall be utilised for the expenses of maintenance, education, marriage, funeral and other necessities of such members of the donors family in the male line as in the opinion of the muthavalli are in poor and needy circumstances. The muthavalli himself is allowed to benefit from this portion of the net annual income if he also happens to be in poor and needy circumstances. The other half of the annual net income is to be utilised for such charitable purposes as (a) helping new converts to Islam by giving them religious instruction, (b) giving help to Muslim orphans, (c) giving secular, especially industrial and technical education to Muslims, (d) helping poor and needy Muslims of the Sunni sect, (e) spreading knowledge of the Islamic religion, (f) giving contributions to public institutions established for the purposes mentioned, and (g) starting and maintaining institutions for the purpose of giving education to Muslim orphans, if considered necessary by the muthavalli. The deed also provides that if the income allotted for the benefit of the needy members of the donors family remains unspent for three consecutive years the moneys are to be transferred to a reserve fund.

2. For the assessment year 1935-36 the Income Tax Officer found that the assessee was in receipt of an income of Rs. 13,907. This includes half of the net income of the trust properties for the year of account. The reason for his finding was that the direction in the deed that half of the income shall be set aside for the needy descendants of the donor does not constitute a trust for charitable purposes within the meaning of Section 4 (3) of the Income Tax Act, 1922. The Income Tax Officer recognised that the deed did constitute a public charitable trust in so far as it dealt with the other half of the net income. The muthavalli challenged the validity of the assessment and when the matter came in due course before him, the Commissioner of Income Tax referred the following questions to this Court for decision under the provisions of Section 66 (2) of the Income Tax Act:

(1) Whether the provisions made in the wakf deed dated the 21st December, 1923, for the maintenance, education, marriage, funeral and other necessities of the poor and needy among the descendants of the wakf in the male line, constitute a charitable purpose and as such falls within the scope of Section 4, Clause (3) (i) of the Indian Income Tax Act, 1922.

(2) Whether the income allotted under the said wakf deed for the purposes mentioned in question No. (1) which remains unspent for want of beneficiaries is assessable in the hands of the muthavalli.

3. Section 4(3)(i) provides that the income derived from property held under trust or other legal obligation wholly for religious or charitable purposes shall not be liable to Income Tax. It is stated that the expression "charitable purposes" includes "relief of the poor, education, medical relief, and the advancement of any other object of general public utility; but nothing contained in Clause (i), Clause (i-a) or Clause (ii) shall operate to-exempt from the provisions of the Act that part of the income of a private religious trust which does not enure for the benefit of the public". The words which constitute the proviso were added by an amendment made in 1939.

4. The expression "charitable purposes" must be construed strictly. As the result of decisions in England spread over a long period the expression can only be applied to a public charity. There is no such thing as a private charitable trust. There may be a private trust for religious purposes and that is why the amendment was made to Section 4 (3) in 1939. It was made in order to put beyond all doubt the intention of the Legislatu