Charitable trust exemption and revisional limits preserved where estate duty was paid from acquisition compensation

Estate duty recovered from compensation for compulsory acquisition was treated as subject to a prior statutory charge under the Estate Duty Act, so the sum appropriated before the trust received any benefit was not regarded as income or property applied for the benefit of the settlor or a specified person under the Income-tax Act. On that basis, the charitable trust remained entitled to exemption under Section 11. The text also notes that revisional power under Section 263 could not be used merely because the Commissioner preferred a different view where the assessment had already been made after due consideration of the facts and law.

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Issues: Whether the recovery of estate duty from the compensation amount received on compulsory acquisition attracted the bar under Section 13(1)(c) read with Section 13(3) of the Income-tax Act, 1961, and whether the Commissioner could revise the assessment under Section 263 of the Income-tax Act, 1961.

Analysis: The compensation was received subject to a prior statutory charge created by Section 74(1) of the Estate Duty Act, and the estate duty was appropriated from the compensation before any benefit could accrue to the trust. On these facts, the amount recovered towards estate duty could not be treated as income or property of the trust applied for the benefit of the settler or any specified person within the meaning of Section 13(1)(c) read with Section 13(3) of the Income-tax Act, 1961. The trust, being charitable, remained entitled to exemption under Section 11. The assessment had also been framed after due consideration of the relevant facts and law, so the revisional power under Section 263 could not be invoked merely because the Commissioner held a different view.

Conclusion: The trust succeeded; the order under Section 263 was rightly set aside and the exemption under Section 11 was held applicable, so the Revenue's reference was answered against it.

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