1986 (7) TMI 210

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....he AAC relating to the assessment year 1978-79. 2. The assessee is a trust assessed in the status of AOP. In the course of assessment proceedings, the ITO found that the assessee's net income was Rs. 74,748 which was kept as a deposit with the State Bank of India. A sum of Rs. 75,500 was spent during the previous year under consideration out of the income of the earlier year. There is no disput....

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....h the bank, the ITO held that the income which was received during the previous year was not spent within the previous year. In this view of the matter, the ITO held that the assessee was not entitled to the exemption under section 11. Deducting 25 per cent of Rs. 74,748 as the permissible amount which could be accumulated, the ITO arrived at a taxable income of Rs. 56,060 which he brought to tax.....

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....resentative for the department, urged before us that section 11(1) clearly states that the amount that had to be spent must come out of the income of the previous year and not out of any other fund. Hence, he urged that the action of the ITO deserved to be upheld. 5. We have considered the contentions of both the parties as well as the facts on record. Section 11(1)(a) states that income derive....

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.... charitable trust cannot be accumulated beyond a limit. The section requires that the income of the trust should be substantially spent during the previous year in which it was earned. In our opinion, the emphasis is on the spending of the income and not on confining the source of the amount spent to the income earned during the previous year. In this view of the matter, we hold that the assessee ....