Judgement Appeal (No. 64 of 1942) from an order of the High Court (April 8, 1941) answering adversely to the appellant a question contained in a reference under s. 66, sub-s. 3, of the Indian Income-tax Act, 1922, made by the respondent and dated March 20, 1941. The following facts are taken from the judgment of the Judicial Committee The year of assessment concerned was the year 1936-37, the relevant accounting year being the year ended December 31, 1935. Throughout the accounting year and the year of assessment the appellant was an unregistered and unincorporated association of individuals. Its activities consisted in the acquisition of yarn, and also raw cotton, which was then given out to various poor people to be spun by them into yarn, all of which yarn was then given out to other poor people for hand-weaving into cloth. The cloth so produced for the appellant was then sold by the appellant. During the relevant accounting year those activities resulted in a profit to the appellant. The appellant also had income from interest during the same year, and the appellant was assessed to income-tax and super-tax for the year 1936-37 on the whole of such profit and income. The question at issue in this appeal was whether the appellant was for the year 1936-37, exempt from liability to income-tax and super-tax under s. 4, sub-s. 3 (i.) of the Indian Income-tax Act, 1922, on the ground that the whole of the profit and income in question was " income derived from property held under " trust or other legal obligation wholly for .... charitable " purposes.” That depended on the true construction as applied to the facts of the case of s. 4, sub-s. 3 (i.) of the Act, which was as follows — “(3.) This Act shall not apply 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 * * * " In this sub-section charitable purposes includes relief " of the poor, education, medical relief, and the advancement " of any other object of general public utility.” The facts stated in the reference could be summarized as follows —The appellant was formed in the year 1925, and had its origin in a resolution of the All India Congress Committee passed in 1925. It was started for the purpose of the development of the village industry of hand-weaving (called " khadi ") and the weaving of cotton material (called " khaddar") by the use of hand looms. The constitution of the appellant was set out in a document without date or signature (exhibit " G " of the record) which was contained in a publication by the appellant called the " Khadi Guide," published in 1931. Clause 1 of that document was in the following terms— " Whereas the time has arrived for the establishment of an " expert organisation for the development of hand-spinning " and khaddar and whereas experience has shown that such " development is not possible without a permanent organisation, unaffected and uncontrolled by politics, political changes " or political bodies, an organisation called the All India " Spinners Association is hereby established with the consent " of the All India Congress Committee as an integral part of the " Congress organisation, but with independent existence and " powers." Certain of the other clauses of the document read as follows —" 2 (a). The said Association shall consist " of members and Associates and donors hereinafter defined " and shall have a Board of Trustees who shall also be the " Governing Body of the Association." Clause 2 (b) also contained the names of the members of the Board of Trustees and Executive Council, which included Mahatma Gandhi and Pandit Jawaharlal Nehru. The said Association shall consist " of members and Associates and donors hereinafter defined " and shall have a Board of Trustees who shall also be the " Governing Body of the Association." Clause 2 (b) also contained the names of the members of the Board of Trustees and Executive Council, which included Mahatma Gandhi and Pandit Jawaharlal Nehru. " 3. That the funds and assets now " held by the All India Spinners Association and its various " branches shall vest in the Board of Trustees who shall also " be the Executive Council of the Association, and they shall " hold the same for the purpose of this Association. "4. The Council shall have the right to raise loans, to collect " subscriptions, to hold immovable property, to invest funds " under proper security, to give and take mortgage for the " furtherance of hand-spinning and khaddar, to give financial " assistance to khaddar organisations by way of loans, gifts or " bounties, to help or establish schools or institutions where " hand-spinning is taught, to help and open khaddar stores, to " establish a khaddar service, to act as agency on behalf of " the Congress to receive self-spun yarn as subscription to the " Congress and to issue certificates and to do all the things that " may be considered necessary for the furtherance of its objects, " with power to make regulations for the conduct of affairs " of the Association of the Council and to make such amendments in the present constitution, as may be considered " necessary from time to time." Later clauses of the constitution stated the conditions under which persons could become members of the Association. In particular, they were to be over eighteen years of age, habitually wearing khaddar, and depositing regularly with the Council each month 1,000 yards of self-spun yarn well twisted and uniform. In particular, they were to be over eighteen years of age, habitually wearing khaddar, and depositing regularly with the Council each month 1,000 yards of self-spun yarn well twisted and uniform. The method by which the appellant worked, and the manner in which its profits were earned, were as follows —Out of the funds in its hands, which had mostly been contributed by donations from the public and subscriptions from the members of the Association, the Association bought charkhas and handlooms, and supplied them to the inhabitants of villages within the limits of the various branches of the Association free of charge, and further bought raw cotton and gave the same to the said persons for the purpose of spinning yarn from such cotton. The Association gave a certain wage to the said persons which, in some cases, was the sole source of income to those persons, and in others added to the earnings of the said persons so as to enable them to maintain and support their families. The yarn so spn was taken over by the Association and supplied to the other persons for weaving cloth on hand-looms. The Association also bought hand-spun yarn from the said persons who had spun the same out of their own raw cotton, paying them for the same on the basis of the cost of the raw cotton and the wages for spinning the same into yarn. The persons to whom all the yarn was handed over for weaving were also paid a certain wage, sufficient either in itself or as an addition to the other income of the persons to maintain and support their families. The wages so paid to the spinners and weavers were not based on the current wages prevailing for similar work, but were fixed on the basis of giving to the said persons, as far as possible, an income sufficient to enable them to support their families. The cloth so woven was taken over by the Association and was sold in the khaddar stores established by the Association in various centres by the branches of the Association. The cloth so woven was taken over by the Association and was sold in the khaddar stores established by the Association in various centres by the branches of the Association. The price charged to the public for such cloth was calculated on the basis of the cost price incurred by the Association in the manner hereinbefore stated plus a certain percentage for shop and overhead charges, without any reference to, or connexion with, the demand for the same and the price of similar mill cloth sold in the market. In the ordinary course the moneys realized by the Association by such sales were a little more or less than the cost calculated on the aforesaid basis. When there was a surplus in the amount realized by the sale of cloth, such surplus was utilized in the same manner as the other funds of the Association, inter alia, in getting yarn and cloth manufactured and providing wages for the persons engaged in such manufacture. The Commissioner duly referred the following question with his opinion to the High Court—" Whether having regard to " the objects of the Association and the manner in which they " are carried out and the purpose for which its funds are " applied, the income of the Association is liable to income-tax " and/or super-tax." His opinion was, in substance, that the dominant purpose of the Association was political and, therefore, not charitable, and that it was in any event not a charitable purpose, the object of the Association being the promotion and organization of the hand-spinning and weaving industry, which was carried out on a strictly trading basis and was in no way different from the activity of a trading concern. The wages paid to the workers were based on the word they did and not on their needs. The object, he thought, was not the relief of the poor, nor was the object one of general public utility. At most, only a section of the general public could benefit from it. On the reference coming before the High Court in Bombay, (Beaumont C.J. and Wadia J.) they answered the question in the affirmative. The object, he thought, was not the relief of the poor, nor was the object one of general public utility. At most, only a section of the general public could benefit from it. On the reference coming before the High Court in Bombay, (Beaumont C.J. and Wadia J.) they answered the question in the affirmative. They based their decision on the ground that, assuming as they did for the purpose of the case that the object was the relief of the poor, it still did not fall within s. 4, sub-s. 3, of the Act because the income was not derived from property held under trust or other legal obligation for religious or charitable purposes. There was, they held, no trust deed, nor any clear declaration of trust, and hence no legal obligation to dispose of the income for the purpose of getting yarn and cloth manufactured, and providing wages for the persons employed in the manufacture, though that had been the practice followed throughout by the appellant. On that ground alone they held that s. 4, sub-s. 3, did not apply. 1944. May 11, 15. Roland Burrows K.C. and Colombos for the appellant. The question is one of mixed fact and law, and the court must consider the whole of the circumstances which were in evidence. It is put against the appellant that it is really indulging in some form of political propaganda. It is immaterial whether it is political or not if its main object is, in fact, charitable. The object of the Association is set out in cl. 1 of the constitution ; there is an obligation on both the trustees and the members to apply the funds of the Association for the purpose of carrying out that general object, and the question arises whether income derived in the course of carrying out the operations of the Association is income within the provisions of s. 4, sub-s. 3 (i.) of the Act. So far as the trustees are concerned, there is as a matter of construction of the constitution a complete legal obligation to observe and carry out the objects of the Association. Then comes the question whether the income is applicable wholly to charitable purposes —defined as relief of the poor and general public utility. So far as the trustees are concerned, there is as a matter of construction of the constitution a complete legal obligation to observe and carry out the objects of the Association. Then comes the question whether the income is applicable wholly to charitable purposes —defined as relief of the poor and general public utility. The evidence clearly is that the sole object of the Association is to foster the hand-weaving industry of cotton cloth so that the enormous population in India shall be enabled to relieve itself from a position of economic depression. The object is one which concerns national economy. It is not a question of party politics. The object of the Association is one of general public utility. [Reference was made to Bonar Law Memorial Trust v. Commissioners of Inland Revenue (( 1933) 17 Tax Cas. 508, 515.)]. Trustees of the Tribune Press, Lahore v. Commissioner of Income-tax (( 1939) L. R. 66 I. A. 241.) shows how the Board approached the problem on a previous occasion when the same section was in question, and equally here an organization for the development of hand-spinning and khaddar is one of general public utility. On a true construction of the appellants constitution, supported by long and uniform practice, the appellants property is held under trust or other legal obligation wholly for charitable purposes, and the income deriving from such property is entitled to exemption from tax within the meaning of s. 4, sub-s. 3 (i.) of the Act. Tucker K.C. and Jopling for the respondent. The real question is whether, on the facts and documents, the business is held under a trust or other legal obligation wholly for charitable purposes. It is the property which has to be so held, and here it is difficult to describe what the property is. The main income to be dealt with is the trading income, and it is conceded that income from property covers income from trading M.E.R. Malak v. Commissioner of Income Tax (( 1927) 2 I. T. C. 443.) ; this argument proceeds on that footing. The profits here arise from the sum total of the activities of the Association, and this is a business carried on by it. The profits here arise from the sum total of the activities of the Association, and this is a business carried on by it. It is agreed that a business can be held in trust or under a legal obligation for charitable purposes Trustees of the Tribune Press, Lahore v. Commissioner of Income-tax (( 1939) L.R. 66 I.A. 241.). If there is a trust or legal obligation in this case it is not wholly for charitable purposes. In an uncorporated association the agreement between the individual members of the Association as to what they will do with the profits or the property is not a trust or legal obligation of the kind contemplated by the section. In the constitution document there is no vestige of any trust or obligation, except that the funds and assets are to vest in a board of trustees who are to hold the same for the purposes of the Association. Not only the immediate purpose is to be looked at, but the ultimate object to be attained, and if there is an ultimate object which is not charitable it prevents the word " wholly " from applying. It is extremely difficult to extract from the constitution document any object other than a commercial object. The only trust, if there be one, is that they shall establish and carry on an expert organization for hand-spinning and khaddar, and under their constitution they have established a business, and they are assessed on the income of that business In re Lachman Das, Narain Das (( 1924) 1 I. T. C. 378.). Clause 1 of the constitution leaves them at liberty to do what they like with their own property, and they can alter the constitution at any time. If there be a case where there is another object in view—if it is a matter of purely party politics—then the courts will say that it is not a good trust. Broadly speaking, however, if the dominant purpose is truly a charitable one, the mere fact that there is some incidental benefit which is not charitable does not prevent it being a charitable trust. No doubt, one of the objects was the relief of the poor, but there is another, the prevention of the importation of foreign cloth into India. Broadly speaking, however, if the dominant purpose is truly a charitable one, the mere fact that there is some incidental benefit which is not charitable does not prevent it being a charitable trust. No doubt, one of the objects was the relief of the poor, but there is another, the prevention of the importation of foreign cloth into India. Taken as a whole, it is submitted that there can be no doubt that the Association was set up with a view to assisting the activities of the All India Congress, why, otherwise, should it be an integral part of it ? [Reference was made to Trustees for the Roll of Voluntary Workers v. Inland Revenue ( 1942 S. C. 47.)]. Jopling followed. Roland Burrows K.C. replied, and on the question of unincorporated associations referred to Inland Revenue Commissioners v. Yorkshire Agricultural Society ([ 1928] 1 K. B. 611, 612, 615.) and Royal Choral Society v. Commissioners of Inland Revenue ([ 1943] 2 All E. R. 101, 103.). It is clear from the constitution document that the object of the Association was not the establishment or carrying on of a business. The business is merely ancillary to the objects. June 27. The judgment of their Lordships was delivered by Lord Wright, who stated the facts above set out and continued While their Lordships agree with the opinion of Wadia J. that " if an association is set on foot by a political " organization and is connected with it, but still has for its " real object the relief of poverty, its connexion with the " political organization does not, in my opinion, make its real " object any the less charitable (I. L. R. [ 1941] B. 680.),” they do not feel able to concur in the decision of the High Court. In their judgment the appellant has brought itself within the exemption contained in s. 4, sub-s. 3 (i.) of the Income-tax Act, 1922. They hold that the income sought to be assessed is income derived from property held under trust or other legal obligation wholly for religious or charitable purposes on the basis of the statutory provision that" charitable purposes " includes relief of the poor, education, medical relief and the advancement of any other object of general public utility. They hold that the income sought to be assessed is income derived from property held under trust or other legal obligation wholly for religious or charitable purposes on the basis of the statutory provision that" charitable purposes " includes relief of the poor, education, medical relief and the advancement of any other object of general public utility. It is now recognized that the Indian Act must be construed on its actual words, and is not to be governed by English decisions on the topic. The English decisions on the law of charities are not basd on definite and precise statutory provisions. They have been developed in the course of more than three centuries by the Chancery Courts. The Act of 43 Elizabeth (1601) contained in a preamble a list of charitable objects which fell within the Act, and this was taken as a sort of chart or scheme which the court adopted as a ground-work for developing the law. In doing so they made liberal use of analogies, so that the modern English law can only be ascertained by considering a mass of particular decisions, often difficult to reconcile. It is true that s. 4, sub-s. 3, of the Act has largely been influenced by Lord Macnaghtens definition of charity in Commissioners for Special Purposes of Income-tax v. Pemsel ([ 1891] A. C. 531, 583.) but that definition has no statutory authority and is not precisely followed in the most material particular ; the words of the section are for " the advancement of any other " object of general public utility," whereas Lord Macnaghtens words were " other purposes beneficial to the community." The difference in language, particularly the inclusion m the Indian Act of the word " public," is of importance. The Indian Act gives a clear and succinct definition which must be construed according to its actual language and meaning. English decisions have no binding authority on its construction, and though they may sometimes afford help or guidance, cannot relieve the Indian courts from their responsibility of applying the language of the Act to the particular circumstances that emerge under conditions of Indian life. English decisions have no binding authority on its construction, and though they may sometimes afford help or guidance, cannot relieve the Indian courts from their responsibility of applying the language of the Act to the particular circumstances that emerge under conditions of Indian life. The judgment appealed from treated the problem under two main headings (1.) was there a trust or other legal obligation under which the property from which the income was derived was held ; (2.) was that trust a legal obligation for the relief of the poor or for any other object of general public utility. In dealing with these questions it is, in their Lordships opinion, necessary to examine the constitution of the appellant Associa tion. It is true that it is an unincorporated body of individuals, but it is assessable and chargeable as such under s. 3 of the Act, as amended by the Indian Income-tax (Amendment) Act, 1930, which includes every individual, Hindu undivided family, company, firm and other association of individuals as taxable. Clause 1 of the constitution establishes the association as an organization for the development of hand-spinning and khaddar. This is the dominant object and purpose of the Association. It is to be a permanent organization, unaffected and uncon trolled by politics, and though established with the consent of the All India Congress Committee as an integral part of the Congress Association, it is to have independent existence and powers. The statement of the object excludes, in their Lordships opinion, any question of profit making, and also excludes any element of party politics. Any participation in political propaganda would be ultra vires. Under cl. The statement of the object excludes, in their Lordships opinion, any question of profit making, and also excludes any element of party politics. Any participation in political propaganda would be ultra vires. Under cl. 3 " the funds and 11 assets " then held by the All India Spinners Association were to vest in the Board of Trustees, who were also to be the executive council, and to " hold the same for the purposes of " this Association." Clause 4 defines the powers of the Council of the Association ; which is to have independent existence and they are " to do all the things that may be considered necessary for the furtherance of its objects.” There is, of course, a special provision enabling the Council to act as an agency on behalf of the Congress to receive self-spun yarn as subscriptions to the Congress, but that has been rightly regarded as a separate and independent matter, apart from the general object of the Association and not affecting its freedom from political purposes. There is no power to distribute any surplus income among its members. By cl. 20 every person wishing to join the Association must sign an application to be enrolled, stating that he has read the rules and forwarding his subscription. On a fair construction of the constitution their Lordships cannot agree with the opinion of the learned judges that no trust or legal obligation is shown binding the Association or its trustees or council to devote the property of the Association from which the income is derived to the charitable purposes for which the Association was formed, assuming for the moment that the purposes were charitable within the meaning of the Act. It is not really questioned that the practice has been to use the surplus income for the purposes of the Association, and that the business has been carried on in pursuance of the primary purpose in addition mainly by beneficiaries of the Association. The practice, however, is not enough. The purpose is to be ascertained from the constitution. In their Lordships judgment, its provisions already quoted show a trust or binding obligation so to carry it on. The constitution is a written instrument, the terms of which bind not only the trustees and council, but the members who by their application for membership accept its rules. The purpose is to be ascertained from the constitution. In their Lordships judgment, its provisions already quoted show a trust or binding obligation so to carry it on. The constitution is a written instrument, the terms of which bind not only the trustees and council, but the members who by their application for membership accept its rules. Any departure either by the trustees or council or members from the rules would be a breach of trust or legal obligation which the court could restrain. A formal deed is not necessary to constitute a trust, still less to constitute a legal obligation binding the trustees, the council and the members inter se. Their Lordships hold that there is such a trust or, at least, that there is a legal obligation, which is all that the section requires. It is true that the rules may be altered by the unanimous agreement of all the members. But that is immaterial so long as the rules remain unaltered. The High Court have, it seems, attached too much importance to cls. 3 and 4 of the constitution, and not sufficient importance to cl.1, which is the constituent and dominant provision. On that footing a question was suggested that the property of the Association from which the profits were derived was not " held " within the meaning of the section. But cl. 3 provides expressly that the funds and assets of the Association are to vest in the trustees, to be held for the purposes of the Association. The High Court seem to have been of opinion that the property from which the profits were derived was the cloth which from time to time was sold. Their Lordships, however, prefer the view implied in the decision of the Board in Trustees of the Tribune Press, Lahore v. Commissioner of Income-tax (( 1939) L. R. 66 I. A. 241.) to which fuller reference will be later made, where the "property" in question was the stock and goodwill of the press and newspaper. Here the property consisted of the organization and the undertaking as well as in the fluctuating stock of yarn and cloth. So far the case seems to fall within the exemption of the section. The second and more important point is whether the undertaking is a charity. Here the property consisted of the organization and the undertaking as well as in the fluctuating stock of yarn and cloth. So far the case seems to fall within the exemption of the section. The second and more important point is whether the undertaking is a charity. Their Lordships are fully conscious of the importance of applying correct principles in such a matter, and do not repeat the reasons for caution stated by the Board in the Tribune Press case (Ibid. 250.). The limits fixed by the section must be strictly observed, and its definition must be satisfied by the character of the Association and its activities. Whether that is so depends on the true construction of the section and on the meaning and effect of the constitution which defines the character of the Association. The construction of the section is obviously a question of law, but so also is the question what is the real purpose of the Association. The court must make its decision on the latter point on the basis of the facts found for it, but given the facts the question is one of law. In this particular case the principal fact is the constitution, the true construction of which is again a question of law. The High Court were prepared to assume (in the words of Wadia J.) that " the real underlying object of the Association " was to benefit the poor agriculturalists in the villages, specifically at that time of the year when they are not actively " engaged in agricultural operations." The judges in India with their knowledge of Indian conditions are peculiarly qualified to form an opinion on these matters. But their Lordships see no sufficient reason to doubt the conclusion that the primary object of the Association was the relief of the poor. That would be enough prima facie to satisfy the statute. Bu1 there is good ground for holding that the purposes of the Association included the advancement of other purposes of general public utility. These last are very wide words. Their exact scope may require on other occasions very careful consideration. They were applied in the Tribune Press case (( 1939) L. R. 66 I. A. 241.) without any very precise definition to the production of the newspaper in question under the conditions fixed by the testators will. These last are very wide words. Their exact scope may require on other occasions very careful consideration. They were applied in the Tribune Press case (( 1939) L. R. 66 I. A. 241.) without any very precise definition to the production of the newspaper in question under the conditions fixed by the testators will. The Board stated that " the object of the "paper may fairly be described as the object of supplying the Province with an organ of educated public opinion " (Ibid. 256.) and that " it should prima facie be held to be an object of " general public utility." These words, their Lordships think, would exclude the object of private gain, such as an undertaking for commercial profit, though all the same it would sub-serve general public utility. But private profit was eliminated in this case. Though the connexion in one sense of the Association with Congress was relied on as not consistent with " general public utility " because it might be for the advancement primarily of a particular party, it is sufficiently clear in this case that the Associations purposes were independent of, and were not affected by, the purposes or propaganda of Congress. Nor is there any ground for the court holding that the scheme is not one which " may be " for the public benefit. The court might in proper cases refuse to admit as charitable schemes purposes eccentric or impracticable. But though economists might differ about the wisdom of some aspect at least of the Associations purposes, the court could not hold that it was beyond the pale of legitimate charitable trusts. This general line of reasoning seems to accord with that of the Board in the Tribune Press case (( 1939) L. R. 66 I. A. 241.). The English cases there cited do not turn on the words " general public “utility," but they illustrate how courts of first instance in England have actually dealt with the particular questions there submitted to them. Their Lordships are of opinion that the appeal should be allowed, and the question submitted to the court answered in the negative. The respondent will pay the appellants costs of this appeal and of the proceedings below. They will humbly so advise His Majesty.