Charitable trust exemption under section 11 upheld where alleged scheme breach did not affect charitable status.

Exemption under section 11 could not be denied to a registered charitable trust merely for alleged non-compliance with a Bombay High Court scheme on Indigent Patient Fund contributions. The Tribunal noted that the trust had substantially applied its income to its charitable objects, that issues of breach under the scheme were for the Charity Commissioner and State authorities, and that the Assessing Officer could not treat the alleged breach as making the trust non-charitable. It also accepted that doctors' fees were collected only as a collecting agent and did not form part of the trust's income in the same sense as hospital receipts. In the absence of any adverse finding revoking charitable status, the Revenue's challenge failed.

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Issues: Whether exemption under section 11 of the Income-tax Act, 1961 could be denied to a charitable trust for alleged non-compliance with the Bombay High Court scheme relating to Indigent Patient Fund contributions, and whether the Assessing Officer could treat such alleged breach as rendering the trust non-charitable.

Analysis: The Trust was registered under section 12A and the material showed that it had substantially applied its income towards its charitable objects. The scheme framed by the Bombay High Court was intended to regulate contributions for indigent patient welfare and, on its terms, questions of breach and consequential action were matters for the Charity Commissioner and the State authorities. The Assessing Officer could not assume that role or deny exemption under section 11 merely because the contribution was computed after excluding doctors' fees. The Tribunal also noted that doctors' fees were collected by the hospital as a collecting agent and did not form part of its income in the same sense as hospital receipts, and that there was no adverse finding from the Charity Commissioner revoking the Trust's charitable character.

Conclusion: Denial of exemption under section 11 was unjustified and the Revenue's challenge failed.

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