1984 (2) TMI 38 - HC - Income Tax

Court grants tax exemption to trust emphasizing charitable activities. Trustees cautioned against non-charitable pursuits.

The court ruled in favor of the respondent-trust, holding that it was entitled to exemption under section 11 of the Income Tax Act. Despite a clause in ... Charitable Trust, Exemptions Issues:1. Whether the respondent-trust is entitled to exemption under section 11 of the Income Tax Act, 1961 based on the nature of its activities and clauses in the trust deedRs.Analysis:The case involved a charitable trust for the assessment year 1972-73 that claimed exemption from tax on the ground of being a charitable trust. The trust had shown receipts from donations in its return, but the Income Tax Officer (ITO) denied the exemption based on a specific clause in the trust deed that allowed monetary help to individuals. The Appellate Authority Commission (AAC) allowed the trust's appeal, stating that the clause in question was of a subsidiary nature and did not override the main charitable purpose of the trust. However, the Income Tax Appellate Tribunal partially allowed the Department's appeal, referring the case back to the AAC regarding the unspent amount from the contributions. The key question referred to the court was whether the trust was entitled to exemption under section 11 of the Income Tax Act.Upon analyzing the trust deed's clauses, the court emphasized that all clauses must be read together to determine the trust's true nature. The court cited precedents to highlight that if any object of the trust is found non-charitable, the trustees should not carry out such object, but it does not affect the overall charitable nature of the trust. The court noted that no amount was spent on the clause allowing monetary help to individuals. Referring to legal principles and previous judgments, the court concluded that the trust, despite having a clause for monetary help, was primarily engaged in charitable activities as per the trust deed. Therefore, the court ruled in favor of the respondent-trust, holding that it was entitled to exemption under section 11 of the Income Tax Act.