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| The Tax Publishers2020 TaxPub(DT) 4122 (Karn-HC) INCOME TAX ACT, 1961
Section 11
CBDT issued a Circular No.5-P, dated 19-5-1968, which provides that word 'income' in Section 11(1a) must be understood in commercial sense and the entire income of trust in commercial sense has been spent for the purpose of charity. Real income of the trust was exempt to extent to which some income was applied to such purposes in India. Since neither CIT(A) nor Tribunal had examined the case of assessee on touchstone of aforesaid well-settled legal principles, therefore, matter was remanded back to Tribunal afresh for consideration.
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Charitable trust - Exemption under section 11 - Determination of application of income and accumulation of income - Applicability of real income
Assessee-trust filed return of income declaring 'NIL' income. It was the case of the assessee that it had utilized the income derived from the property for purposes enumerated under section 11. Therefore, no tax was paid and income was declared as 'NIL' for the purpose of payment of tax. AO by an order disallowed the claim of deduction of the claim of assessee under section 24(a) on the ground that income of the trust had to be computed in a commercial manner and not as per the Act and further claim for depreciation was also disallowed. Held: The object of Section 11 is to grant immunity to income of a charitable trust from income tax. The immunity however, is confined to the extent to which such income is applied to such purposes in India. The exemption will be denied if the income is not actually applied for charitable purposes. The application or accumulation can only be of real income which has actually been received by an assessee. CBDT issued a Circular No.5-P dated 19-5-1968, which provides that word 'income' in Section 11(1a) must be understood in commercial sense and the entire income of the trust in commercial sense has been spent for the purpose of charity. The real income of trust was exempt to the extent to which some income was applied to such purposes in India. Neither CIT(A) nor Tribunal had examined the case of assessee on the touchstone of the said well-settled legal principles. Therefore, matter was remanded back to Tribunal afresh for consideration.
Relied:CIT v. Ganga Charity Trust Fund (1986) 162 ITR 612 (Guj) : 1986 TaxPub(DT) 1014 (Guj-HC) CIT v. Jayashree Charity Trust (1986) 159 ITR 280 (Cal) : 1986 TaxPub(DT) 0441 (Cal-HC) CIT v. Rajasthan & Gujarati Charitable Foundation Poona (2018) 402 ITR 441 (SC) : 2017 TaxPub(DT) 5384 (SC) CIT v. Institute Of Banking Personnel Selection (2003) 131 Taxman 386 (Bom.) : 2003 TaxPub(DT) 1343 (Bom-HC) DIT (Exemptions) v. Cutchi Memon Union 2014 TaxPub(DT) 0059 (Bang-Trib)
REFERRED :
FAVOUR : Matter remanded
A.Y. : 2007-08
IN THE KARNATAKA HIGH COURT
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