Section 11
charitable/religious trusts - EXEMPTION
OF INCOME FROM PROPERTY HELD UNDER
‘Property’
- Meaning of
‘Property’
signifies every possible interest and includes business - ‘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. There is nothing in the language of section 11
which restricts in any manner the normal and accepted meaning of the word
‘property’ and which excludes business from its connotation - J.K. Trust v.
CIT/CEPT [1957] 32 ITR 535 (SC).
Book debt
is ‘property’ - A credit in
the books of account can be ‘property’ with regard to which a trust can be
created - CIT v. Trustees of Sreeram-Surajmull Charity Trust [1971] 79 ITR 649 (Cal.).
Religious
offerings are not ‘property’ -
Offerings received by a religious teacher from his disciples would not
constitute “property held under trust” - Swami Narsingh Giri v. CIT
[1971] 79 ITR 544 (All.).
Exploitation
rights are ‘property’ - The
right to exploit space on either side of an overbridge for advertisements is a
“property” - A.J. Patel v. CIT [1974] 97 ITR 683 (Bom.).
‘Other
legal obligation’ - Meaning of
Settlement
of income in favour of another trust is covered - The words ‘or other legal obligation’ cover
a case in which the trustees of the original settlement are bound to pay income
to other trustees who in their turn are bound to apply it for purposes which
are religious or charitable - Vallabhdas Karsondas Natha v. CIT [1947] 15 ITR 32 (Bom.)/Sree Sree
Iswar Gopal Jew v. CIT [1950]
18 ITR 743 (Cal.).
‘Legal
obligation’ cannot be separated from ‘property’ - Section 11 does not apply to a case where a
trust or legal obligation is not created on any property, but only the income
derived from any particular property or source is set apart and charged for a
charitable or religious purpose. The expression ‘legal obligation’ cannot be
separated from “property” itself, inasmuch as law enjoins that such property
must be held under a trust or other legal obligation, and not the fund derived
therefrom - CIT v. P.K. Barooah [1970] 77 ITR 967 (Assam).
Religious
purpose
If
dedication is total and debutter is absolute, minor expenses on allied aspects
are not relevant - Where
there is an out-and-out dedication to an idol, the reservation of a moderate
portion of the income of the endowed estate for the remuneration of the shebait
would not invalidate the endowment either as a whole or to the extent of the
income so reserved. The quantum of expenditure on the various items is not so
decisive of the character of the debutter as absolute or partial, as the accent
on and subjective importance of the purposes, in the setting of the totality of
commands and cherishments. If, on a consideration of the totality of terms, on
sifting the more essential from the less essential purposes, on sounding the
depth of the donor’s wishes to find whether his family or his deity were the
primary beneficiaries, and on taking note of the language used, if the vesting
is in the idol, an absolute debutter can be spelt out. But if the grant is to
the heirs with a charge on the income for the performance of pujas, the
opposite inference is inevitable - CIT v. Sri Jagannath Jew [1977] 107 ITR 9 (SC).
Creation of
trust
Formal deed
is not necessary - 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 - All
India Spinners’ Association v. CIT [1944] 12 ITR 482 (PC).
No technical
words are necessary - A trust
may be created by any language sufficient to show the intention and no
technical words are necessary and it may even be created by the use of words
which are primarily words of condition. The only requisites which must be
satisfied are that there should be purposes independent of the donee to which
the subject-matter of the gift is required to be applied and an obligation on
the donee to satisfy those purposes - CIT v. Tollygunge Club Ltd.
[1977] 107 ITR 776 (SC).
Wakfs and
endowments are included - A
trust under the Indian law would include Moslem wakfs and Hindu Endowments - Trustees
of the ‘Tribune’, In re [1939] 7 ITR
415 (PC).
Power of
revocation/alteration should not be incorporated - A deed of trust that qualifies for exemption
under section 11 cannot have any stipulation reserving any power to revoke or
alter the terms of the trust deed, because that would lend to the trust the
character of a revocable trust attracting the provisions of sections 61 and 63
- Naresh Sengupta Foundation v. CIT [1994] 207 ITR 340 (Cal.).
Registration
is not compulsory - For
purposes of section 11, there is no requirement under the law that a trust
should be registered under the Societies Registration Act - CIT v.
Arya Vysya Kalyana Nilaya Sangam [1986]
159 ITR 324 (AP).
A dedication of property by
Hindu renouncing his/her entire right, title or interest in property for
religious/charitable purposes for benefit of public at large or for part of it,
is sufficient to create such endowment and there is no need to execute
registered instrument for such dedication - CIT v. Dr. (Miss)
Chandrakanta Rohatgi [2006] 150 Taxman 19 (All.).
Who
controls the funds is not relevant - The matter of management of the fund is not an essential matter for
the purpose of defining ‘charitable purpose’ so far as the Income-tax Act is
concerned. What is essential for the Act is whether it ‘enures to the benefit
of the public’ or not, whoever may control the fund. - Smt. Ganeshi Devi
Rami Devi Charity Trust v. CIT [1969] 71 ITR 696 (Cal.).
Objects of
the trust
All the
objects must be considered -
Whether a trust is for charitable purpose is to be determined by reference to
all the objects for which the trust has been brought into existence. The
proposition that what should be taken into consideration is the activity
actually conducted by the assessee and, not what is open to it under the
provisions of its memorandum of association cannot be agreed to. If would be a
different case where one or more of the stated objects were never intended to
be undertaken - Dharmaposhanam Co. v. CIT [1978] 114 ITR 463 (SC).
Words used
by settlor are decisive - In
order to find out whether the relevant clauses of a trust deed create a public
charitable trust or not, one has to go by the express words employed in the
trust deed. - CIT v.
Name given
to the trust is not relevant -
From the fact that the institution bears the name of a private person, the
nature of the trust cannot be determined to be a private one. It is the object
of the trust that has to be looked into - CWT v. H.E.H. The Nizam’s
Supplemental & Religious Endowment Trust [1973] 89 ITR 80 (AP).
Trust deed
should contain broad objectives - The crux of the statutory exemption under section 11(1)(a) is
not the income earned from property held under the trust but the actual
application of the said income for religious and charitable purposes. It is,
therefore, necessary to indicate in the trust deed the broad objectives for
which the income derived from the property was to be utilised - Gangabai
Charities v. CIT [1992] 63
Taxman 501/197 ITR 416 (SC).
Choice
given to trustees is not relevant - A trust for charitable purposes does not become invalid if the choice
of the specific charitable objects to be benefited is left to the trustees, nor
could such a trust be condemned as invalid or illusory, if, by the language of
the deed, the trustees are given an absolute discretion to apply the fund at
such time as they may think fit or retain it so long as they choose - CIT v.
Sardar Bahadur Sardar Indra Singh Trust [1956] 29 ITR 781 (Cal.).
Element of
altruism must be present -
Before an institution can be held to be charitable, there must be an element of
altruism, that is to say, the beneficiaries must not be able to claim the
benefit - Chamber of Commerce v. CIT [1936] 4 ITR 397 (All.).
Absence of
personal/pecuniary benefit is no criterion - The mere fact that the members of a society are not entitled for any
personal or pecuniary benefit or advantage does not automatically render the
society a charitable institution. Unless positive requirements of law are
satisfied, the society cannot be regarded as a charitable institution - Hyderabad
Race Club v. CIT [1985] 153
ITR 521 (AP)(FB).
Dominant
object should be charitable, and not profit-making - What is necessary to be considered is
whether having regard to all the facts and circumstances of the case, the dominant
object of the activity is profit-making or carrying out a charitable purpose.
If it is the former, the character of the purpose would be lost. - CIT v.
Sivakasi Hindu Nadars Uravinmurai [1996]
217 ITR 118/86 Taxman 290 (Mad.).
Rectification
of trust deed
Even
founder or Court cannot delete objects originally spelt out - It is well-established that once a trust has
been founded with certain objects, those original objects cannot be deleted
even by the founder of trust, even though it is possible to add some other
charitable objects without detriment to original objects. Even a Court cannot
do it under section 92 of the Code of Civil Procedure - Sakthi Charities v.
CIT [1984] 149 ITR 624/[1990] 182
ITR 483 (Mad.).
Civil Court
can rectify a trust deed - It
cannot be said that a Civil Court suffers from lack of inherent jurisdiction to
rectify a trust deed, on the ground that the condition precedent for invoking the
jurisdiction under section 26 of the Specific Relief Act (i.e., mutual
mistake on the part of the parties to the document) is absent in the case of a
trust deed, inasmuch as there are no two parties in an instrument of trust. - CIT
v.
Rectified
trust deed cannot be ignored by Assessing Officer - When a rectified trust deed under section 26
of the Specific Relief Act is pressed in service before the income-tax
authorities in assessment proceedings concerning the relevant assessment years,
the ITO will have to interpret such rectified instrument for finding out its
legal effect. It will not be open to the ITO to refuse to look at such
rectified instrument of trust and to insist that the trustees of the trust
should ignore the said rectified objects and should stick to the instrument as
it existed prior to its rectification. The ITO will have to take the instrument
as it exists in its actual amended form when it is pressed into service for
framing the assessment concerning the relevant assessment year in which such
rectified instrument holds the field - CIT v. Kamla Town Trust [1996] 84 Taxman 248/217 ITR 699 (SC).
A conjoint
reading of sections 11, 12 and 12A makes it clear that registration under
section 12A is a condition precedent for availing benefit under sections 11 and
12. Unless and until an institution is registered under section 12A, it cannot
claim the benefit of section 11(1)(a) - U.P. Forest Corporation
v. Dy. CIT [2007] 165 Taxman
533 (SC).
Income -
Meaning of
“Income”
must be understood in commercial sense, and not as ‘total income’ as assessed - It is not the ‘total income’ as would be
assessed by the ITO that is relevant for the purpose of investing the funds of
the trust or assessing the income of the trust. Taking into account the purpose
for which the conditions of section 11(1)(a) are imposed, it would be
clear that ‘income’ to be considered will be that which is arrived at in the
context of what is available in the hands of the assessee subject to an
adjustment of any expenses extraneous to the trust - CIT v. P.S.G.
& Sons Charities 1996 Tax LR 477 (Mad.). See also - CIT v.
Programme for community organisation [1997] 228 ITR 620 (Ker.).
Refund of
income-tax is not ‘income from property held under trust’ - Refund of income-tax can by no stretch of
imagination be held as income derived from property held under the trust, and
hence will not be covered under section 11(2) - CIT v. Hamdard
Dawakhana (Wakf) [2002] 120
Taxman 186 (Delhi).
Heads of
income under section 14 have no relevance and question of allowing statutory
deductions will not arise -
The ‘income’ contemplated by the provisions of section 11 is the real income
and not the income as assessed or assessable. Since the income from property
held under trust has to be arrived at in a normal commercial manner and when
the income from property held under trust as such is excluded, there is no
scope of computing the income from property by applying the provisions of
section 14 of the Act. Therefore, the question of allowing any statutory
deductions as contemplated by the different provisions of the Act dealing with
different heads of income in computing the income accumulated does not arise
when the trust loses the benefit of accumulation - Director of Income-tax v.
Girdharilal Shewnarain Tantia Trust [1993]
199 ITR 215/71 Taxman 150 (Cal.).
Deemed
income (tax deducted at source) must be excluded - CBDT Circular 5-P/LXX-6 dated 19-5-1968
makes it clear that the word ‘income’ in section 11(1)(a) must be
understood in a commercial sense. Thus, deemed income (i.e., tax
deducted at source) is not to be taken into account for determining the
‘application’ or ‘accumulation’ of income - CIT v. Jayashree Charity
Trust [1986] 159 ITR 280 (Cal.).
Depreciation
as per normal rules of accountancy must be allowed - ‘Income’ referred to in section 11(1)(a)
is to be computed not in accordance with the provisions of the Act, but in
accordance with the normal rules of accountancy, under which depreciation has
to be allowed while computing the income - CIT v. Sheth Manilal
Ranchhoddas Vishram Bhavan Trust [1992]
198 ITR 598 (Guj.).
Taxes like
income-tax and wealth-tax must be excluded - Payments of income-tax or wealth-tax made in a year are outgoings and
constitute expenditure of the trust, and are therefore liable to be excluded
from the income of the trust in the year of payment for the purposes of section
11(1) - CIT v. Trustee of H.E.H. Nizam’s Supplemental Religious
Endowment Trust [1981] 127 ITR 378
(AP)/CIT v. Ganga Charity Trust Fund [1986] 162 ITR 612 (Guj.)/CIT v.
Janaki Ammal Ayya Nadar Trust [1985]
153 ITR 159 (Mad.).
Amounts
returned by beneficiaries must be included - Section 11(1) itself contains sufficient indication to treat moneys
received by a trust from its beneficiaries as income of the trust. Under this
sub-section, only the income spent on charitable or religious purposes is
excluded from the total income of the trust and when that amount is returned by
the beneficiaries of the trust, the receipt in the hands of the trust can only
be its income of the years in which it is received; it cannot have any
different character. This is also the tenor of Circular dated 24-1-1973 issued
by the CBDT - CIT v. Cutchi Memon Union [1985] 155 ITR 51 (Kar.).
Salaries
and other administrative expenses must be allowed - Expenditure on salaries and miscellaneous expenses
for purpose of carrying out objects and purposes of the trust can be considered
as application of income for charitable purpose - CIT v. Birla
Janahit Trust [1994] 208 ITR 372/73
Taxman 465 (Cal.).
Expenditure
on earning dividend must be apportioned - Where the quantum of expenditure for carrying out the objects and
purposes of the trust and the expenditure made to earn income from dividend had
not been separately allocated or determined, the assessee would be entitled to
the benefit of the said expenditure incurred for the purpose of carrying out
objects and purposes of the trust only, but any expenditure incurred for
earning the income from dividend would not qualify as amount spent for carrying
out objects and purposes of the trust - CIT v. Birla Janahit Trust
[1994] 208 ITR 372/73 Taxman 465 (Cal.).
Legal
expenses are allowable - The
same principle as applies to allowability of expenses for defence in a criminal
proceeding emanating in the course of carrying on a trade shall also apply to
expenses on defence that a charitable institution may have to incur for the
defence of any of its founders or trustees getting involved in criminal
prosecution in the course of carrying out the objects of the trust. Hence,
legal expenses incurred by a charitable institution for defending its president
from criminal charges are allowable as a permissible deduction while computing
its income - Ananda Marga Pracharaka Sangha v. CIT [1994] 76
Taxman 88 (Cal.).
Application
of income
Section
11(1)(a) and section 11(2)
- If section 11(1)(a) has been fully exploited and there is still
accumulated income left to be dealt with, sub-section (2) of section 11 can be
pressed in service and if it is complied with, such additional accumulated
income beyond the prescribed percentage can also earn exemption under section
11(2) - Addl. CIT v. A.L.N. Rao Charitable Trust [1995] 83 Taxman 252/216 ITR 697 (SC).
The
accumulated income which is exempt under section 11(1)(a) need not be
invested in the Government securities. It is only in respect of any additional
accumulated income beyond the prescribed percentage that, if the assessee wants
exemption of this additional accumulated income also, the assessee is required
to invest the additional accumulated income in the manner laid down in section
11(2) after following the procedure laid down therein - S.RM.M.CT.M.
Tiruppani Trust v. CIT [1998] 96 Taxman 635 (SC).
Purpose
need not be confined to taxable territories - In view of the absence of the words ‘in India’ in section 11(1)(a),
it is immaterial for the purpose of that clause whether the charitable or
religious purposes are confined to taxable territories or not. It is sufficient
if the income is spent in
‘Applied’
need not be equated with ‘spent’ - It is not correct to equate the word ‘applied’ with the word ‘spent’.
If the Legislature intended that the amounts should actually be spent, there
was nothing preventing it from using that word - CIT v. Trustees of
H.E.H. The Nizam’s Charitable Trust [1981]
131 ITR 497 (AP).
The word
‘applied’ does not necessarily mean ‘spent’. Even if the amount has been
earmarked for the purposes of the institution and allocated, it may be deemed
to have been applied - CIT v. Radhaswami Satsang Sabha [1954] 25 ITR 472 (All.).
Effect of
making ‘provision’ - Where an
amount was set apart as provision in the accounts of the assessee and the
finding of fact was that the amount was not actually applied for charitable or
religious purposes, assessee would not be entitled to exemption under section
11 in respect of that amount - Nachimuthu Industrial Association v. CIT
[1999] 235 ITR 190 (SC).
Recovery of
any outstanding in any form is not application of income - Where the assessee recovers an outstanding,
it cannot be stated that it has applied the income of the trust for charitable
purposes. The asset, as it is sometimes called, is ‘in mean or in malt’. The
change of its shape or form involves no application of income for charitable
purposes. Purchase of a building in discharge of a debt due to the
assessee-trust could not be said to be an application of income for charitable
purposes, even if the building was to be used for charitable purposes - CIT v.
S.RM.CT.M. Thiruppani Trust [1982]
134 ITR 555 (Mad.).
Expenditure
can be even on capital purposes except those on improvements to property - As far as the objects of the trust are
concerned, the application of the amount can be for revenue or capital
purposes. So long as the expenditure has to be incurred out of the income
earned by the trust, even if such expenditure is for capital purposes on the
objects of the trust, the income would be exempt. But expenditure on
improvement of a property held under trust would by itself not come within the
scope of ‘application of income for charitable purposes’. - CIT v.
Kannika Parameswari Devasthanam & Charities [1982] 133 ITR 779 (Mad.).
Donation to
another trust is also application of income - When a donor trust which is itself a charitable and religious trust
donates its income to another trust, the provisions of section 11(1)(a)
can be said to have been met with by such donor trust, notwithstanding the fact
that the donation is subjected to any conditions that the donee trust will
treat the donation as towards its corpus and can only utilise the accruing
income from the donated corpus for charitable and religious purposes. What the
donor trust does is the only relevant matter. Utilisation by the donee trust in
any year will not be relevant for the purpose of deciding whether the donor
trust can get exemption under section 11 or not - CIT v. Sarladevi
Sarabhai Trust (No. 2) [1988] 172
ITR 698 (Guj.)/CIT v. Hindusthan Charity Trust [1983] 139 ITR 913 (Cal.).
Amount given
by assessee-trust to educational institution by making credit entries in its
books and withdrawn by educational institution would be entitled to exemption
since it could not be said that despite credit entries assessee trust retained beneficial
ownership of sums or retained any control over them - CIT v. Thanthi
Trust [1999] 239 ITR 502 (SC).
Donation at
commencement of year is eligible provided it formed part of that year’s profits
- A donation made on the
first day of the accounting year can be treated as application of income under
section 11(1)(a), provided that the trust earned profits in that
accounting year, and the accounts for that year disclosed that the donation was
made, not out of capital account, but out of the profits for that year - Siddaramanna
Charities Trust v. CIT [1974]
96 ITR 275 (Mys.).
Donation of
shares purchased out of accumulated income is not covered - Section 11 does not permit accumulation of a
larger amount that what is prescribed. If the assessee does not apply the
income of a year for charitable purposes but spends a like amount for
charitable purposes out of its accumulated profits, the conditions laid down in
section 11(1)(a) are not fulfilled. The mere fact that the assessee had
applied its accumulated income of the earlier years for the purpose of charity
will not absolve the assessee of its duty to apply its income for the current
year for the purpose of charity, nor will it enlarge the limit of the amount
which is permitted to be accumulated under section 11(1)(a). Thus,
donation of shares purchased out of accumulated income of earlier year will not
amount to application of income for the year of donation - CIT v.
Ramchandra Poddar Charitable Trust [1987]
164 ITR 666 (Cal.).
Reimbursement
of expenditure of earlier year out of income of current year is application of
income - There is nothing in
the language of section 11(1)(a) to indicate that the expenditure
incurred in the earlier year cannot be met out of the income of the subsequent
year, and utilisation of such income for meeting the expenditure of earlier
year would not amount to such income being applied for charitable or religious
purposes - CIT v. Shri Plot Swetamber Murti Pujak Jain [1994] 119
CTR (Guj.) 144/CIT v. Maharana of Mewar Charitable Foundation [1987] 164 ITR 439 (Raj.).
Repayment of
borrowals is also covered - Where
the assessee-trust constructed a building out of its accumulated income as well
as from borrowed funds, and later earned rental income from the said building,
a part of which was utilised for the repayment of the borrowed funds, such
repayment of debt was to be treated as application of income for purposes of
section 11 - CIT v. Janmabhumi Press Trust [2000] 242 ITR 457 (Kar.).
Monies given to
sister-concern but was kept idle - Monies given by assessee-trust to sister concern purportedly for
construction of hospital and which was kept lying unused with sister concern
could not be regarded as having been applied for charitable purposes - CIT v.
V.G.P. Foundation [2003] 262
ITR 187/[2004] 134 Taxman 663 (Mad.).
Accumulation
of income
‘Accumulation’
must be a conscious act - The
‘accumulation’ contemplated under section 11(1)(a) has to be a conscious
accumulation and not just a mass of unspent or unapplied profits. - CIT v.
State Bank of
Deemed
income can be included for purposes of accumulation - Where, due to non-investment of accumulated
income in the prescribed securities in a year, such income is deemed to be the
income of the trust for that year, the assessee will be entitled to accumulate
prescribed percentage of the total income of that year, inclusive of such
deemed income - CIT v. Natwarlal Chowdhury Charity Trust [1991] 189 ITR 656 (Cal.).
Prescribed
percentage of accumulated income should be out of ‘Income derived from property
held under trust’ - Where the
assessee-trust received donations in the aggregate sum of Rs. 2,57,376, out of
which it applied to its charitable purposes the aggregate sum of Rs. 1,70,369
leaving a balance of Rs. 87,010, it was entitled to accumulate prescribed
percentage of Rs. 2,57,376, and not prescribed percentage of Rs. 87,010 - CIT
v. Programme for Community Organisation [2001] 248 ITR 1/116 Taxman 608 (SC).
If after
filing Form No. 10 for accumulation of income, assessee without investing
income in Government securities applied the same for charitable purposes,
exemption could not be denied on the ground that conditions of section 11(2)(b)
were not complied with - S.R.M.M.CT.M. Tiruppani Trust v. CIT
[1998] 96 Taxman 635 (SC).
Whether
purpose must be definite and concrete and must be specified - The long-term accumulation of income
contemplated under section 11(2) should be for a definite and concrete purpose
or purposes, and should not admit of any amount of vagueness. The purposes to
be specified cannot under any circumstances tread beyond the objects clause of
the trust. - Director of Income-tax (Exemption) v. Trustees of
Singhania Charitable Trust [1993]
199 ITR 819 (Cal.).[contra]
Plurality
of purposes for accumulation is not precluded; in other words, it need not
necessarily be specifically stated for which purpose accumulation is sought - Director of Income-tax v. Mitsui & Co. Environmental Trust
[2007] 211 CTR (Delhi) 352.
Where assessee
had mentioned that it was accumulating funds for all objects (three in number)
for which it was created, denial of benefit of section 11(2) to assessee on
ground that it did not specifically indicate purposes for which amount was to
be accumulated, was not justified - Bharat Kalyan Pratisthan v. Director
of Income-tax [2007] 160
Taxman 216 (Delhi).
Specifying
more than one of the declared purposes is no bar to allow exemption - Where, out of 29 objects stipulated in the
memorandum of association, the assessee had mentioned eight purposes in Form
No. 10 for purposes of accumulation of income, and it was not the case of the
Revenue that any of those eight purposes was not charitable or that the same
did not figure in the memorandum of association, Revenue would not be justified
in denying exemption on the grounds, (i) that more than one purpose had
been specified, and (ii) that details about the plans which the assessee
had for spending on such purposes were not given. So long as one or more of the
purposes specified by the assessee found place in the objects for which the
society had been incorporated and so long as the said purposes were charitable in character, the benefit
admissible under section 11 must flow to the assessee - Director of
Income-tax (Exemptions) v. Daulat Ram Education Society [2005] 278
ITR 260 (Delhi).
Option can
be exercised along with return filed under section 139(4) - If a return is filed within the time
allowed under sub-section (4) of section 139, and the option contemplated by Explanation
to section 11(1) is exercised in writing along with such return, the
requirements of the said Explanation will stand satisfied - Trustees
of Tulsidas Gopalji Charitable and Chaleshwar Temple Trust v. CIT [1994] 73 Taxman 612/207 ITR 368 (Bom.).
Option is
available for capital gains also - Since the definition of ‘income’ under section 2(24) includes ‘capital
gains’, the option exercisable under the Explanation to section 11(1)(a)
is available on capital gains also, provided such option is exercised in
writing before the expiry of the time allowed under section 139(1) for
furnishing the return - CIT v. East India Charitable Trust [1994] 206 ITR 152 (Cal.).
Time-limit
for filing Form 10 before completion of assessment is mandatory - It is mandatory for the person claiming the
benefit of section 11 to intimate to the assessing authority the particulars
required, under rule 17 in Form No. 10 of the Rules. Even assuming that there
is no valid limitation prescribed under the Act and the Rules even then, it is
reasonable to presume that the intimation required under section 11 about
accumulation of income has to be furnished before the assessing authority
completes the concerned assessment because such requirement is mandatory and
without the particulars of this income, the assessing authority cannot
entertain the claim of the assessee under section 11 of the Act - CIT v.
Nagpur Hotel Owners’ Association [2001]
247 ITR 201 (SC).
Only
additional accumulated income is required to be invested in government securities -
The accumulated income prescribed percentage which is exempt under section
11(1)(a) need not be invested in government
securities. It is only in respect
of any additional accumulated income beyond prescribed percentage that, if the
assessee wants exemption of the additional accumulated income also, the
assessee is required to invest the additional accumulated income in the manner
laid down in section 11(2) after following the procedure laid down therein - S.RM.M.CT.M.
Tiruppani Trust v. CIT [1998]
96 Taxman 635/230 ITR 636 (SC).
Investment
must necessarily come out of current year’s income - In order to satisfy the requirement of section
11(2)(b), the investment must necessarily come out of the current
year’s income. An investment made in the past obviously cannot satisfy this requirement
- CIT v. Indian National Theatre Trust [2008] 169 Taxman 42/305
ITR 149 (Delhi).
Agricultural
income - Agricultural income
will not form part of total income for purpose of computing accumulation of
income in excess of prescribed percentage of total income as laid down under
section 11 - CIT v. Nabhinandan Digamber Jain [2002] 257 ITR 91 (MP).
Partial
trusts
Expression
‘in part’ applies to purpose and not to property - The expression ‘in part’ does not refer to
an aliquot part; if half a house is held in trust wholly for religious and
charitable purposes, the subject-matter of the trust is only the said half of
the house, and that half is held wholly for religious and charitable purposes.
The expression ‘in part’ therefore must apply to a case other than a property,
a part of which is held wholly for religious or charitable purposes. The
dichotomy between the two expressions ‘wholly’ and ‘in part’ is not based upon
the dedication of the said property wholly for religious or charitable purposes
or in part for such purposes. So construed, the first limb of section 11(1)(a)
deals with a property or a part of it held in trust wholly for religious or
charitable purposes, while the second limb of that provision provides for such
a property held in trust partly for religious or charitable purposes - CIT v.
P. Krishna Warrier [1964] 53 ITR 176
(SC).
Investment
of capital gains
Deposit in
public sector company is an eligible investment - The contention of the revenue that the investment
by way of deposit in the public sector company cannot be treated as a new asset
acquired with the net consideration, in terms of section 11(1A), is not tenable
- CIT v. East India Charitable Trust [1994] 206 ITR 152/73 Taxman 380 (Cal.).
Investment
of sale proceeds of shares in fixed deposits is permissible - Investment in fixed deposit made in previous
year relevant to the assessment year 1981-82 out of sale proceeds of shares of companies,
amounted to acquiring of another capital assets in terms of section 11(1A) - CIT
v. Hindusthan Welfare Trust [1993] 70 Taxman 93/[1994] 206 ITR 138
(Cal.).
Reinvestment
in fixed deposits of any duration is permissible - CBDT Circular dated 24-9-1975, declaring
that deposits for a period of six months or more could be considered as capital
assets for the purpose of section 11(1A), is not in consonance with the general
principles of law and it cannot hold the field. Once a deposit is accepted to be
an asset, the larger or lesser duration of the term is an immaterial
consideration - CIT v. Hindusthan Welfare Trust [1993] 70 Taxman
93/[1994] 206 ITR 138 (Cal.).
Business
held in trust
Income for
purposes of section 11(4) means gross income - The income spoken of in sub-section (4) appears to be the gross income
and not the net income of the business undertaking. - CIT v. Birla
Education Trust [1985] 153 ITR 579
(Cal.).
ITO has to
scrutinise accounts to detect undisclosed or unaccounted income - The ITO has to scrutinise the accounts and
see if there is suppression of income or manipulation of accounts with a view
to conceal income - CIT v. Birla Education Trust [1985] 153 ITR 579 (Cal.).
Investment
in specified securities
Investment
made in unapproved concern due to misrepresentation by concern - Where the assessee-trust invested its funds
in two concerns on the basis of the assurance of the said concerns that they
had been authorised to accept deposits from charitable trusts as well as on the
basis of advice obtained from a chartered accountant, but later when the
Assessing Officer pointed out that the two concerns did not have the necessary
approval of the Government to accept deposits from charitable trusts the
assessee promptly withdrew the deposits made in the two concerns, exemption
need not be denied for violation of section 11(5) since the assessee could not
be faulted for the misrepresentation of the two concerns - Director of
Income-tax (Exemption) v. Agrim Charan Foundation [2002] 253 ITR 593 (Delhi).
Deposit
made in current account with a scheduled bank is also covered - Words ‘any account’ in section 11(5)(iii)
include current account also and, hence, deposit made in the current account
with a scheduled bank will come within the meaning of the words ‘deposit in any
account with a scheduled bank’. It is a classified investment, as contemplated
under the provisions of the Act and the same is covered by section 11(5)(iii)
- Asstt. DIT (Exemption) v. Murugappa
Chettiar Trust [2008] 303 ITR 360 (Mad.).