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PETITIONER: J.   K. TRUST, BOMBAY

       Vs.

RESPONDENT: THE COMMISSIONER OF INCOME-TAX/EXCESSPROFITS TAX, BOMBAY

DATE OF JUDGMENT: 22/05/1957

BENCH: AIYYAR, T.L. VENKATARAMA BENCH: AIYYAR, T.L. VENKATARAMA BHAGWATI, NATWARLAL H. KAPUR, J.L.

CITATION:  1957 AIR  846            1958 SCR   65

ACT: Income Tax-Trust-Exemption from taxation-Trustees conducting business of Managing Agency for the Trust-Business,  whether "Property"-Income  from  Managing  Agency,  whether   income derived  from Property held on trust-Indian Income-tax  Act, 1922 (XI Of 1922), S. 4(3)(i) and (ia).

HEADNOTE: A  deed of trust whereby a sum of Rs. 1 lac was  settled  on various   charities  specified  therein  provided  for   the acquisition of the business of managing agency on behalf  of the trust and with the help of the trust fund.  The trustees of the said trust (appellant) became the managing agents  of a  public company.  The agreement for the  agency  provided, inter alia, that the agency was for a period of twenty years but  that it was open to the trustees to give up the  agency on giving three months’ notice and that the managing  agents were  to  get  a remuneration of 10 per cent.’  of  the  net annual  profits  subject to a minimum of Rs.  50000  and  an office  allowance  of Rs. 1,000 per mensem.   The  appellant claimed that the income derived from the managing agency was income  from property held under trust to be applied  wholly for  charitable  purposes, and was, in  consequence,  exempt from taxation under S. 4(3)(i) of the Indian Income-tax Act, 1922.   It  was  contended  on  behalf  of  the   Income-tax authorities (1) that the income in question was remuneration for services rendered and was not derived from any property, as  a  managing  agency  could  -not  be  considered  to  be property,  and  that, therefore, it did not fall  within  s. 4(3)(i)  of  the Act, (2) that on the terms of the  deed  of trust  the  managing agency could not be  property  held  on trust,  as no part of the sum of Rs. 1 lac was  utilised  in the acquisition of the business so as to impress it with the character  of accretion, and (3) that even if  the  managing agency  business  could be regarded as  property  within  S. 4(3)(i), it was governed by the special provision  contained in S. 4(3)(ia), and as the conditions laid down therein  had not been satisfied, no exemption could be claimed. Held:     (1)  A managing agency is business which would  be property within s. 4(3)(i) of the Act. Lakshminarayan  Ram Gopal and Son Ltd. v. The Government  of

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Hyderabad, (1955) I.S.C.R. 393, followed. All  India Spinners’ Association v. Commissioner of  Income- tax,, Bombay [1944] 12 I.T.R. 482, relied on, 66 (2)Though  the  office of managing agency  carries  with  it certain  obligations,  in law there can be no  objection  to creating  a trust over property burdened  with  obligations, though, if it is onerous by reason of such obligations,  the trustee may be entitled to disclaim it. (3)When  trustees  carry on business with the aid  of  trust fund  the  position in law is the same as if  they  actually employed  it  in the business, though, in fact,  it  be  not actually invested therein and, taking the provisions of  the deed  of  trust and the agreement of  agency  together,  the managing agency must be held to be property held on trust. Rocke v. Hart, (1805) 32 E.R. 1009 and Moons v. De Bernales, (1826) 38 E.R. 117, relied on. The  case was remanded to the High Court for a  decision  on the  question whether profits from business would be  exempt from  taxation  under  S.  4(3)(i)  of  the  Act  when   the conditions laid down in S. 4(3)(ia) were not satisfied.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 246 of 1954. Appeal  by  special leave from the judgment an  order  dated October  6,  1952, of the Bombay High  Court  in  Income-tax Reference No. 1 of 1952. N.   A. Palkhivala, J. B. Dadachanji, S. N. Andley Rameshwar Nath and P. L. Vohra, for the appellant. O.   N. Joshi and R. H. Dhebar, for the respondent. 1957.  May 22.  The Judgment of the Court was delivered by VENKATARAMA  AIYAR  J.-’This is an appeal by  special  leave against  the judgment of the Bombay High Court passed  in  a reference under s. 66(1) of the Indian Income-tax Act,  1922 (hereinafter  referred to as the Act) and ss. 21 and  19  of the  Excess  Profits  Tax Act, 1940,  and  of  the  Business Profits  Tax Act, 1947, respectively read with s.  66(1)  of the  Act.   The dispute between the parties relates  to  the assessment  of income-tax for the assessment years  1946-47, 1947-48  and  1948-49  and of excess  profits  tax  for  the chargeable  accounting periods, September 3, 1945, to  March 31,  1946,  April 1, 1946, to March 31, 1947  and  April  1, 1947, to March 31, 1948, and it arises out of the same facts and involves the same points for determination, 67 On  June  15, 1945, three brothers Sir  Padampat  Singhania, Lala Kailashpat Singhania and Lala Lakshmipat Singhania  who were  carrying  on  business  under  the  name  of  Juggilal Kamlapat,  executed  a deed of trust, Ex.  A,  whereby  they settled a sum of Rs. 1,00,000 on various charities specified therein  and called the J. K. Trust, Bombay,  and  appointed themselves  and two other persons Lala Ramdeo Podar and  Sir Chunnilal  Mehta as its trustees.  The trust  deed  provided inter alia that "the trustees may with the help of the trust fund, for and on behalf of and for the benefit of the trust, carry   on  such  business  including  the  taking  up   and conducting  the  managing agency or selling  agency  of  any company  in  such name or names as they  in  their  absolute discretion  may think fit and proper and may close  and  re- start  such business and utilise the profits for all or  any of  the objects aforesaid.". Large powers were conferred  on them  in  the conduct of the business, and  they  were  also authorised  to  "raise  or borrow  money  required  for  the

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purpose of the trust". At this time, Messrs.  E. D. Sassoon and Co., Ltd. were  the managing  agents  of  a public Company  called  the  Raymond Woollen  Mills Ltd.  The firm of Juggilal Kamlapat of  which the  three Singhania brothers were the partners, acquired  a controlling  interest in the said Mills by purchase  of  the shares  of  Messrs.   E. D. Sassoon  and  Co.  therein;  and following  on  this,  the  shareholders  passed  a   special resolution on September 3, 1945, appointing the trustees  of the  J.  K. Trust as managing agents of the Company  in  the place of Messrs.  E. D. Sassoon and Co’, Lid., who resigned. On September 10, 1945, a memorandum of agreement, Ex. B, was duly  executed by the Company constituting the  trustees  of the J. K. Trust, Bombay, as its managing agents on the terms and conditions set out therein.  It is to be noted that  the five  persons named as trustees under Ex.  A were  appointed as managing agents in their character as trustees, and it is expressly  provided  therein that the  expression  ’managing agents’,  "unless  excluded by or repugnant to  the  context shall  include the Trustees for the time being of  the  said Trust or 68 any  other  Trust with which the same may  be  amalgamated". The  agency was to be for a period of 20 years; but  it  was open to the trustees to throw it up on giving three  months’ notice.   The managing agents were to get a remuneration  of 10 per cent. of the net annual profits subject to a  minimum of  Rs.  50,000  and an office allowance of  Rs.  1,000  per mensem.  Clause 7 of the agreement provided that, "  During  the continuance of this agreement,  the  Managing Agents  shall  maintain with the Company a  deposit  of  Rs. 1,00,000  (Rupees one lack only) in cash by way of  security for due fulfilment of their obligations as specified therein and shall be entitled to charge interest at 3 1/2 per  cent. per annum on the amount of such deposit in addition to their remuneration." Clause  8  laid  an obligation on the  managing  agents  "to arrange  loans  and  advances to the  Company  as  and  when required up to and not exceeding Rs. 10 lacs at any time and if  necessary to guarantee such loans or advances from  time to time".  Under el. 14, "Notwithstanding  anything herein contained, all  the  terms and  conditions  of this Agreement including the  period  of appointment  of  the  Managing  Agents  may  be  varied   or abrogated by mutual agreement." The  trustees  entered on their duties  as  managing  agents under  this  agreement, and by an agreement  dated  May  14, 1946,  they appointed one Tej Narain Khaitan, son-in-law  of one of the three Singhania brothers as their  representative to carry on the managing agency work on a remuneration of 30 per  cent.  of the annual income which would be  payable  to them  under Ex.  B. Before the Income-tax  authorities,  the appellant claimed that the income derived from the  managing agency was income derived from property held under trust  to be  applied  wholly  for charitable purposes,  and  was,  in consequence, exempt from taxation under s. 4 (3) (i) of  the Act.   The  Income-tax authorities held that the  income  in question was remuneration for services rendered, and was not derived  from any property, and that, therefore, it did  not fall within s. 4 (3) (i) of the Act.  They further held 69 that even if the managing agency business could be  regarded as  property  within s. 4 (3) (i), it was  governed  by  the special  provision  contained in s. 4 (3) (ia), and  as  the conditions  laid  down therein had not  been  satisfied,  no

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exemption  could be claimed.  In this view, they  allowed  a sum of Rs. 30,000 per annum for remuneration of Mr.  Khaitan as a deduction under s. 10 (2) (x) of the Act, and held that the balance of the income, Rs. 23,287 in 1946-47, Rs. 36,786 in  1947-48  and Rs. 2,16,460 in 1948-49 was  liable  to  be taxed under the provisions of the taxing statutes. On  applications made by the assessee under a. 66(1) of  the Act  and the corresponding provisions in the Excess  Profits Tax  Act  and  the Business Profits Tax  Act,  the  Tribunal referred  the  following questions for the decision  of  the High Court of Bombay: 1.   "  Whether  on  the facts of the  case  the  commission earned  by  the managing agents for  managing.  the  Raymond Woollen  Mills was income earned by the managing agents  for services rendered and not income derived from property  held under trust or for other legal obligations and therefore not exempt under s. 4 (3)  (i) of the Income-tax Act? 2.   Whether  on the facts of the case the business  carried on by the Trustees falls to be considered under s. 4 (3) (i) or s. 4 (3) (ia) of the Income-tax Act?" The reference was heard by Chagla, C.J., and Tendolkar,  J., who  held that no part of the sum of Rs. 1,00,000 which  was the only property settled on trust under Ex. A was  actually invested  in the managing agency business, which could  not, therefore,  be  regarded  as trust property,  and  that  the income  received  from  that business was  ’not  within  the exemption  enacted  in  s.  4  (3)  (i).   They  accordingly answered  the  first  question against  the  appellant.   As regards the second question, the learned Judges held that it was  unnecessary to express any opinion thereon, as  it  was common ground that even if s. 4 (3) (ia) applied, neither of the  conditions  laid down in sub-cl. (a) or  (b)  had  been fulfilled,  and that accordingly no relief could be  granted thereunder. 70 The  points that arise for determination in this appeal  are (1)  whether  the income received by the  trustees  of  J.K. Trust, Bombay, as managing agents of Raymond Woollen  Mills, Ltd., is income derived from property held on trust or on an obligation in the nature of trust; and (2) whether the claim for exemption in respect of such income is to be  determined under s.  4 (3) (i) or s. 4 (3) (ia). With reference to the first question, the contention of  Mr. Palkhivala is that managing agency is business and therefore it  is  property,  and that it is  property  held  on  trust because  it  is conducted by the trustees on behalf  of  the trust  with the help of trust properties and  in  accordance with  the directions contained in the trust deed.   He  also contends that even if the business is not held on trust,  it is at least held, on the principle laid down in s. 88 of the Trusts  Act,  on an obligation in the nature of  trust,  and that  s. 4 (3) (ii) is, in consequence, attracted.  For  the respondent, Mr. Joshi does not dispute that managing  agency is  to be regarded as business, but he contends  that  there can  be no trust of such agency, because it really  involves rendering  of services and cannot be said to be property  in respect  of  which alone trust can be created,  and  further because managing agency is an office, and that again is  not property.   He  also  contends  that,  in  any  event,  ,the managing agency created under Ex.  B could not be held to be trust property, because it could be terminated at any  time, if the trustees so desired, on three months’ notice and that there could be no trust of’ such a precarious, ephemeral  or evanescent  kind of property, if indeed it could be held  to

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be property.  He also contends that s. 88 was  inapplicable, as there was no property which was held on an obligation  in the nature of a trust. Whether a managing agency could be regarded as business  was considered by this Court in Lakshminarayan Ram Gopal and Son Ltd. v. The Government of Hyderabad (1), where the  question arose with reference to assessment of excess profits tax  on the  remuneration  received by managing  agents,  tax  being leviable under (1)  [1955] 11 S.C.R. 393. 71 that Act only on business income and it was held that it was business,  and  that  the  profits  therefrom  were  rightly assessed  to tax under the Act.  The law must  therefore  be taken to be settled beyond controversy that managing  agency is itself business. Then the question is whether that business can be held to be property within s. 4(3)(i) of the Act.  Now ’property’ is  a term of the widest import, and subject to any limitation  or qualification which the context might require, it  signifies every possible interest which a person can acquire, hold and enjoy.  Business would undoubtedly be property, unless there is  something  to the contrary in  the  enactment.   Section 4(3)(i) of the Act under which exemption is claimed runs  as follows: "4.  (3)  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 purpose,  and in the case of property so held in  part  only for such purposes, the income applied, or finally set  apart for application thereto." Now,  confining  ourselves solely to the language  of  s.  4 (3)(i),  there  is  nothing- in it which  restricts  in  any manner   the  normal  and  accepted  meaning  of  the   word property’, and excludes business from its connotation. There is also authority in support of the view that business is  property within the intendment of s. 4(3)(i).  In In  re The  Tribune (1), the question was whether a  trust  created over  the Tribune press and newspaper was for  a  charitable purpose as defined in s. 4 (3) (i) of the Act.  The majoritv of  the learned Judges of the High Court took,the view  that the  object  of  the  trust  was  not  wholly  religious  or charitable,  and that accordingly the exemption  under  that section  could not be claimed.  This decision was  taken  in appeal  to  the  Privy Council,  which  held  reversing  the judgment of the High Court that the object of the trust  was in  its  entirety  charitable and that it  came  within  the exemption enacted in s. 4 (3) (i).  Vide In re The  Trustees of the Tribune (2).  That is a question with (1) [ 1035] 3 I.T. R. 246.  (2) [1939] 7 I.T.R. 415; L.R. 66 I.A. 72 which  we are not concerned in this appeal, and  the  actual decision  of the Privy Council does not bear on the  present controversy.   What  is  relevant to our  purposes  is  that before the High Court, a contention was raised that the word ’property’  must bear the same meaning both in ss. 9  and  4 (3)  (i), that in s. 9 it was used in  contradistinction  to business  which  was  dealt  with  under  s.  10,  and  that therefore  ’property’  in  s. 4  (3)(i)  could  not  include business.   This contention was repelled by the High  Court, which  held that the meaning of the word ’property’ in s.  4 (3)  (i) could not be controlled by the connotation of  that

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word in s. 9. Vide In re The Tribune (1).  Before the  Privy Council,  however,  the  question whether  business  of  the Tribune press and newspaper was property was not raised, the Board merely observing that in the letter of reference there was  "no suggestion that the income under assessment is  not derived from property held under trust declared in the  20th and 21st paragraphs of the will". The point, however, arose directly for decision in All India Spinners’ Association v. Commissioner of Income-tax,  Bombay (2).  There,  the assessee was an  unregistered  association called  the  All  India Spinners’ Association,  and  it  was formed  for  the  purpose  of  development  of  the  village industries of handspinning and handweaving. -The Association collected subscriptions from its members and also  donations and  invested them in the purchase of raw cotton  which  was supplied  to  poor labourers for being spun into  yarn,  the yarn  being.  then  supplied to them for  being  woven  into cloth,   which   was  then  sold  and  the   sale   proceeds appropriated  to  the  funds  of  the  Association  for  the purposes aforesaid.  The assessee claimed exemption under s. 4(3)  (i)  on the ground that its income  was  derived  from property  held  under  trust.  The High  Court  was  of  the opinion  that  the  yarn and the cloth  the  sale  of  which yielded  the income, could not be regarded as property  held in  trust,  and that, in consequence, s. 4(3)  (i)  did  not apply.   In reversing this judgment, the Privy Council  held that  "the  property consisted of the Organisation  and  the undertaking as well as in the (1) [1935] 3 I.T.R. 246. (2) [1944] 12 I.T.R. 482; L.R. 71 I.A. 159, 73 fluctuating stock of yarn and cloth", and that the exemption in s. 4(3)(i) applied.  This is direct authority in  support of the contention of the appellant. As  against these authorities, the respondent relied on  the decision in Eggar v. Commissioner of Incometax (1).   There, a  certain  professor agreed to hand over  the  remuneration which would be payable to him by the University for lectures to  be  delivered by him, for certain  charitable  purposes, but,  in fact, no deed of trust was executed.  The  question was  whether  the  amounts  actually  paid  to  him  by  the University  were exempt from taxation, and it was held  that they  were not, and that the income in question was  at  the time  of  the receipt the private property of  the  assessee being  remuneration  for services rendered  by  him.   There could  be no question in this case of any source  of  income being  dedicated to trust, and the decision accordingly  has no  bearing on the point, which falls to ’be  decided  here. The  weight of authority is therefore clearly in  favour  of the  view that business would be ’property’ for purposes  of s. 4(3)(i) of the Act. It  is  next  contended  for the  respondent  that  even  if business  could in general be held to be property within  s. 4(3)  (i),  managing agency cannot be so  regarded,  because having  regard  to  ss. 2(9A), 87A and  87B  of  the  Indian Companies Act, it is merely an office which consists in  the performance   of   services   and   discharge   of   certain obligations,  and  that  that  could  not  be  regarded   as property,  which could be the subject-matter of  trust.   We are  unable  to  accede to this  contention.   In  Angurbala Mullick  v.  Debabrata Mullick (2),  and  The  Commissioner, Hindu  Religious  Endowments,  Madras  v.  Sri   Lakshmindra Thirtha  Swamiar of Sri Shirur MUtt (3), even an  office  of trusteeship   was  held  to  be  property  especially   when emoluments were attached to it, and that must a fortiori  be

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the position in the case of office of managing agency, which is  clearly one of profit and even alienable  under  certain circumstances.  The office requires no doubt the performance of services; but there is no antithesis between service (1)  (1926) 2 I.T.C. 286. (2)  [195I] S.C.R. 1125. (3)   [1954] S.C.R. 1005, 1019. 10 74 and business, as there are several kinds of business,  which involve  the performance of services, such as insurance  and commission  agency.  The true test is whether  the  services are  a regular source of income.  And if managing agency  is business,  as was held in Lakshminarayan Ram Gopal  and  Son Ltd.  v. The Government of Hyderabad (1), then there  is  no reason  why  it should not be property for  purposes  of  s. 4(3)(i) of the Act.  Nor is it an accurate statement of  the true position to describe trust of the managing agency as  a trust of an obligation.  It is in truth a trust of property, which carries with it certain obligations, and in law, there is  no objection to creating a trust over property  burdened with obligations, though, if it is onerous by reason of such obligations, the trustee may be entitled to disclaim it. It  is then contended that even if managing agency could  be the subject of trust, the managing agency created by Ex.   B must be held to be incapable of being held on trust  because it  is  of  the essence of  public,  as  distinguished  from private, charity that it must be permanent and incapable  of being revoked or put an end to at the option of the trustee, whereas  the  managing  agency created by Ex.   B  could  be terminated  by the trustees by giving three months’  notice. This  is  to  confuse charity  with  properties  devoted  to charity.   It is true that a public charity is perpetual  in character, and that means that it is capable of enforcement, so  long  as  there  is  any  property  left  which  can  be appropriated  for its objects.  And even if some or  all  of the  objects  become  incapable  of  fulfilment,  the  trust properties will be devoted to the performance of similar  or allied charitable purposes on the doctrine of cy pres.   But so  far  as the trust properties themselves  are  concerned, they  will be held only on the incidents to which  they  are subject under the law.  Thus, if the property is a leasehold interest,  it  must cease on the termination of  the  lease. Likewise, if trust property is alienated under circumstances binding on the trust, it will go out of the trust.  But that does not operate (1)  [1955] I S.C.R. 393. 75 as  an extinction of the trust, unless there is no  property at  all  left, with which the trust could  be  carried  out. That  is  the principle enacted in s. 77(c)  of  the  Indian Trusts  Act, 1882, which in terms, however, applies only  to private  trusts.  We must therefore hold that the fact  that the  trustees have the option at any. time to throw  up  the managing  agency  is  no  legal’  impediment  to  its  being property which could be held on trust. Lastly,  it  is contended that on the terms of Ex.   A,  the properties  which  the  trustees are "  to  hold  and  stand possessed  of  "  are " the sum of Rupees One  Lao  and  any donations or contributions received by the Trustees and  all accretions  thereto  and  thereof  and  the  investments  in securities  for  the  time  being  and  from  time  to  time representing  the same ", that on the terms  aforesaid,  the managing agency cannot be held to be property held in trust, as  no part of the sum of Rs. 1,00,000 was utilised  in  the

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acquisition  of  the business so as to impress it  with  the character of accretion.  It is argued that though the sum of Rs. 1,00,000 was given as security by the trustees under Ex. B,   that  was  only  for  the  due  performance  of   their obligations  as managing agents, and that the amount  itself was not actually thrown into the business.  But it is to  be observed that cl. 3 of the trust deed expressly provides for the acquisition of the business of managing agency on behalf of  the  trust and " with the help of the trust  fund",  and that  precisely  is what has happened  and  indeed,  reading together  Exs.   A  and B, it is impossible  to  resist  the conclusion  that  both  the  documents  formed  part  of  an integral  scheme, and that what the settlors had in view  in cl.  3  of  Ex.  A is the very managing  agency,  which  was acquired  under Ex.  B. There is considerable  authority  in England that when trustees carry on business with the aid of trust  fund,  the  position in law is the same  as  if  they actually employed it in the business, though, in fact, it be not actually invested therein.  Thus, in Rocke v. Hart  (1), Sir William Grant observed: (1)  (1805) 11 Ves.  Jun, 58 ; 32 E.R. 1009, 1010. 76 a  trader lodges money at his banker’s, he has in  effect  a benefit  from that.  As he must generally keep a balance  in his banker’s, it answers the purpose of his credit; as if it was  his own money; and I should hold that to be  employment in his trade." There are similar observations by Lord Gifford, in Moons  v. De Bernales (1). In  the result, we are of opinion that the word I  property’ in  s.  4(3)(i)  of the Act is of  sufficient  amplitude  to comprehend  ’business’,  and  if the  question  fell  to  be decided  solely  on  the  terms  of  that  sub-section,  the managing agency constituted under Ex.  B must be treated  as property held on trust within s. 4(3)(i) of the Act. This  conclusion, however, is not sufficient to  dispose  of the  appeal  in favour of the appellant,  because  there  is still  the  question raised by the respondent that  even  if under  the general law, the word I property’ is wide  enough in  its significance to include business, in its context  in s.  4(3)(i)  read  along with s. 4(3)(ia) it  bears  a  more restricted  sense  as  meaning  only  property  other   than business.  And it is this contention that forms the subject- matter of the second question under reference.  In order  to understand  this question, it is necessary to state that  in the  Act  as  originally  passed,  the  only  provision  for exemption  from  taxation of income  derived  from  property dedicated to religious or, charitable trust was contained in s.  4(3)(i).   On this section, the question  arose  whether when a business was carried on for and on behalf of a trust, the profits derived therefrom were exempt from taxation.  It was   held   in  Commissioner  of  Income-tax,   Madras   v. Arunachalam Chettiar (2), following a decision of the  House of  Lords  in Coman v. Governors of  the  Rotunda  Hospital, Dublin(3), that they were not.  That was also the view taken by  the Allahabad High Court in Lachhman Das Narain Das,  In re  (4).   Then came the decision in In re The  Tribune  (5) already referred to, wherein the Lahore High Court held that ’property’ in s. 4(3)(i) was (1) (1826) 1 Russ. 301 ; 38 E.R. 117.  (3) [1021] A.C. 1. (2) I.L.R. (1926) 49 Mad. 833.    (4) I.L.R. (1925) 47  All. 68. (5) [1935] 3 I.T.R. 246. 77 sufficiently  comprehensive  to include business,  and  that

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profits from business carried on by trustees would be exempt from  taxation.   As already stated, though the  matter  was taken  in appeal to the Privy Council this question was  not raised.   It  was  in  this  state  of  the  law  that   the Legislature  intervened,  and enacted a  new  provision,  s. 4(3)(ia), which is as follows: "  4(3)  Any  income, profits or gains  falling  within  the following classes shall not be included in the total  income of the person receiving them: (ia)  Any income derived from business carried on on  behalf of a religious or charitable institution when the income  is applied solely to 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." Under  this provision,  the profits of business would be exempt only  if the  conditions laid down therein are satisfied.  It is  the contention  of  the  Department that as this  is  a  special provision dealing with the topic of exemption in respect  of business carried on for and on behalf of a trust, any  claim for  exemption  as  regards profits derived  from  any  such business can be made only under that provision, and when the conditions  laid down therein are not satisfied, it  is  not open to the assessee to fall back upon the general provision contained  in s. 4(3)(i) and claim exemption  thereunder  on the  ground  that business is property.  The basis  of  this contention  is the well-known maxim,  Generalia  specialibus non  derogant.   In Charitable Gadodia  Swadeshi  Stores  v. Commissioner of Income-tax, Punjab(1), this question came up for consideration before the Lahore High Court.  It was held by the learned Judges that the fact that the business failed to  satisfy the two conditions laid down in s. 4(3)(ia)  was no  reason why it should not be exempt from taxation  if  it fell within 1)   [1944] 12 I.T. R. 385. 78 s.   4(3) (i), and the main ground of the decision was  that the  two  categories mentioned in s. 4(3) (i)  and  s.  4(3) (i)(a) having been enacted as two different clauses, it must be taken that the one did not exclude the other. It  was this decision that was relied upon by the  appellant before   the   Tribunal,  which,  however,   considered   it distinguishable.   A  reading of its order,  however,  shows that  it  was not really satisfied  about  its  correctness. Accordingly, when the appellant applied for reference under- s.  66  (1)  of the Act, the Tribunal  referred  the  second question  also for the decision of the High Court.   But  in the  view which the learned Judges of the Bombay High  Court took  that business was not property within s.  4(3)(i),  it became  unnecessary for them to express an opinion  on  that question.   Now that we have held that the word property  in s. 4 (3) (i), standing by itself, is susceptible of a  wider connotation so as to include business, it becomes  necessary to  consider the second question under  reference.   Learned counsel   on  both  sides  agree  that  it  would  be   more satisfactory  that this question should be remitted  to  the High Court for determination. In  the  result,  we remand the case to the  High  Court  of Bombay   for  a  fresh  disposal  of  the  reference  on   a consideration  of  the second question.  As  for  costs,  we direct that the respondent do pay the appellant the costs of this appeal as also the costs of the hearing before the High Court.   The  costs  of the further hearing  which  we  have directed will be dealt with by the High Court on remand.

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Appeal allowed.  Case remanded. 79