1961 Present : Weerasooriya, J., and Sansoni, J.

COMMISSIONER OF INCOME TAX,

Appellant, and BADDRAWATHIE
FERNANDO CHARITABLE TRUST, Respondent

S. C. 1 of 1959-Income Tax Case Stated

Income tax-Trust for charitable purposes-Can religious trust be included ?-Meaning of expression " charitable purposes " prior to 1st April 1959-Income Tax Ordinance (Cap. 188),ss. 2, 7(1) (c), 7(1) (d)-Income Tax (Amendment) Act, N'.-. 44 of 1958-Trusts Ordinance (Cap. 72), s. 99 (1).

By section 7 (1) (c) of the Income Tax Ordinance as amended by Ordinance No. 27 of 1934 :-

" There shall be exempt from tax the income of any institution or trust of a public character established solely for charitable purposes."

Held, that the expression " charitable purposes " in section 7 (1) (c), read with the definition of charitable purpose " in section 2 prior to its amendment on 1st April 19S9 by the Income Tax (Amendment) Act No. 4- of 1958, excluded from its ambit purposes for the advancement of religion or for the maintenance of religious rites and practices.

CASE Stated under section 74 of the Income Tax Ordinance (Cap. 88) on. the application of the Commissioner of Income Tax.

V. Tennekoon, Senior Crown Counsel, with Mervyn Fernando, Crown Counsel, for the Appellant.

H. V. Perera, Q.C., with S. Nadesan, Q.C., and N. Nadarasa, for the assessees-respondents.

Cur. adv. vult.

March 3, 1961. WEERASOORIYA, J.-

This is a case stated under section 74 of the Income Tax Ordinance (Cap. 188) on the application of the Commissioner of Income Tax.

By deed No. 1388 dated the 30th January, 1952, one W. D. Fernando (since deceased) transferred to himself, his three sons, two daughters and another, as trustees of the Baddrawathie Fernando Charitable Trust, certain premises known as Urumutta Estate valued at Rs. 600,000/- and subject to a mortgage of Rs. 180,000/-. The Baddrawathie Fernando

Charitable Trust was constituted by a separate deed, No. 1389, executed by him at the same time. The following are the objects of the trust, as set out in clause 2 of that deed :-

(a) to aid and assist in Ceylon and elsewhere causes identified with the advancement and propagation of the Buddha Dharma in particular;

(b) for the advancement of the teaching of Buddhist Philosophy and Buddhist Pali Scriptural Texts at recognised places of learning .

(c) for the maintenance of Buddhist rites and practices associated with the worship of the Triple Gem ;

(d) for the endowment and maintenance of deserving pious Buddhist monks ;

(e) for the maintenance and endowment of Buddhist Missionary enterprise in foreign lands, such as the propagation and preaching of the Buddha Dharma in foreign lands where Buddhism does not form the religion of the majority of the people, and

(f) for any purpose beneficial or of interest to the Buddhist religion not falling within the preceding categories.

Clause 4 of deed No. 1389, in so far as is material to this case, provides that the trustees shall stand possessed of the trust estate upon trust:-

" to apply the nett income thereof in discharge of the mortgage debt now existing in respect of the said 'Urumutta Estate'.created by Mortgage Bond No. 2771 dated 14th August 1950 attested by J. S. Paranavitana Notary Public and after the discharge and cancellation of the said mortgage debt, the Trustees shall stand possessed of the Trust Estate upon trust to apply the nett income thereof for and towards all or any of the objects of the Trust in such proportions as the Trustees shall in their absolute discretion think fit and thereafter to accumulate any income not required for the aforesaid purposes or any of them with power in the absolute discretion of the Trustees to invest such accumulation in immovable property or in securities expressly mentioned in section 20 of the Trusts Ordinance No. 9 of 1917 and to hold such accumulation and