1999 (3) TMI 34 - HC - Income Tax

Charitable trust tax exemption for donated funds and inter-year set-off of excess income application upheld against Revenue

A charitable trust's entitlement to exemption for donations applied to charitable purposes turned on whether it must prove the end-use by the recipient ... Income for charitable purposes - Charitable Trust - set-off of - deficiency of funds - Exemption on donation - HELD THAT:- This court in the decision reported in CIT v. Thanthi Trust [1981 (1) TMI 26 - MADRAS HIGH COURT], had held that the trust which has applied the money for charitable purposes was entitled to exemption without having to show how the money had been dealt with by the transferee institution. This court has answered the question referred there in favour of the assessee and against the Revenue. Following the aforesaid decision of this court and for the reasons stated therein, we answer the first question referred to us in favour of the assessee and against the Revenue. Entitlement to set off the amount of excess application of the last year against the deficiency of the present assessment year - When similar questions came up before the Rajasthan High Court and the Gujarat High Court in the case of CIT v. Maharana of Mewar Charitable Foundation [1986 (7) TMI 56 - RAJASTHAN HIGH COURT] and CIT v. Shri Plot Swetamber Murti Pujak Jain Mandal [1993 (11) TMI 17 - GUJARAT HIGH COURT], respectively, both the High Court have answered the questions in favour of the assessee and against the Revenue. Following the same, we answer the second question referred to us in favour of the assessee and against the Revenue. Issues involved: Interpretation of u/s 11 for exemption on donation and set-off of funds deficiency u/r earlier year's surplus.Interpretation of u/s 11 for exemption on donation: The assessee-trust donated Rs. 31,050 to another charitable trust during the assessment year 1984-85, seeking exemption u/s 11 of the Act. The Income-tax Officer initially rejected the claim, but the Commissioner (Appeals) allowed it. The Tribunal upheld the Commissioner's decision. Citing a previous case, the court emphasized that a trust applying money for charitable purposes is eligible for exemption under u/s 11, regardless of how the transferee institution handles the funds. Consequently, the court ruled in favor of the assessee against the Revenue.Set-off of funds deficiency u/r earlier year's surplus: The Tribunal determined that the trust could offset the excess application amount from the previous year against the Rs. 82,516 deficiency in the current assessment year. Referring to similar cases in Rajasthan and Gujarat High Courts, where the questions were resolved in favor of the assessee, the court followed suit. Consequently, the court ruled in favor of the assessee against the Revenue based on the precedents set by the Rajasthan and Gujarat High Courts.