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3. The assessee claimed exemption of its entire income under section 11 of the Act. The Income Tax Officer rejected the claim of the assessee on the ground that the trust was not a charitable trust and it was hit by the provision contained in section 13(1)(b) of the Act. The Income Tax Officer also rejected the claim on the ground that the income was not applied for charitable purposes, but only for construction of building for commercial purposes which was not one of the objects of the trust. In appeal, the Appellate Assistant Commissioner found the trust to be partly charitable and partly religious in nature. The Appellate Assistant Commissioner, therefore, held that the part of the income, which was used for charitable purposes, was exempt under section 11 of the Act. He, accordingly, directed the Income Tax Officer. to bifurcate the income of the assessee in the two objects and allow exemption in respect of that part of the income which was applied for charitable purposes. The Appellate Assistant Commissioner also held that the income of the 1 trust had been properly applied for the purposes of the trust notwithstanding the fact that the assessee had used the same in the construction of the building for commercial purposes. Aggrieved by the order of the Appellate Assistant Commissioner, both revenue and the assessee appealed to the Tribunal. The revenue felt aggrieved because the Appellate Assistant Commissioner held that apart of the income of the trust was eligible for exemption. The assessee felt aggrieved because the Appellate Assistant Commissioner denied exemption in respect of a part of the income. The Tribunal analysed any clauses 13 and 14 of the Instrument of Trust, which contained the objects of the trust, and held that the trust was partly charitable and partly religious. The Tribunal further held that as there was no apportionment of income between the two objects of the trust and it was left to the exclusive discretion of the trustees to spend whatever they liked on only of the objects, the assessee was not entitled to claim exemption under section 11 in respect of its income. Hence, this reference at the instance of the assessee.

9. Moreover, even if, we hold that the object is not only promotion of Muslim theology amongst the Muslim intelligentsia, but also promotion of science and technology among them, the income of the trust would not be exempt under section 11 because law is well-settled that if, there are several objects of the trust, some of which are charitable and some non-charitable, and the trustees in their discretion are to apply the income to any of the objects, the whole trust would fail and no part of its income would be exempt from tax. The reason is that in such a case, no definite part of the property or its income is allocated to charitable purposes and it would be open to the trustees to apply its income to any of the non-charitable objects or religious purposes. In the instant case, the trustees are at liberty to, apply whole of the income for the promotion of Muslim theology among the Muslim intelligentsia.

11. To the same effect is the decision of the Supreme Court in Fast India Industries (Madras) (P) Ltd. v. CIT (1967) 65 ITR 611(SC). In that case, the Supreme Court held:

"...If the trustees can, under a trust held validly, spend the entire income of the trust on this non-charitable object, it is difficult to hold that the trust property is held under a trust or other legal obligation wholly for religious or charitable purposes within the meaning of section 4(3)(i) of the Act."

12. It is clear from the above decisions that where the objects are distributive, each one of the objects must be charitable in order that the trust might be upheld as a valid charity. The reason is that in such cases, no definite part of the property or its income is allocated to charitable purposes and it would be open to the trustees to apply the whole income to any of the non-charitable objects. The fact that the income is applied only for charitable purpose in such a case would be immaterial.

13. This position was reiterated by the Supreme Court in Yogiraj Charity Trust v. CIT (1976) 103 ITR 777(SC). In that case, the Supreme Court held that, if one of the objects of the trust is not of a religious or charitable nature and the trust deed confers full discretion on the trustees to spend the trust funds for an object other than of a religious or charitable nature, the exemption from tax under section 4(3)(i) of the Indian Income Tax Act, 1922 [corresponding to section 11(1) of the Act] is not available to the assessee. The Supreme Court also held that where in a trust deed providing for many charitable objects the trustees were given uncontrolled discretion to spend the whole of the trust funds for any of the non-charitable purposes of the trust, the income of the trust would not be exempt from tax under section 4(3)(i) of the Indian Income Tax Act.