2004 (5) TMI 44

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.... the specific direction that in each donee's case Rs. 8 lakhs was to form part of the corpus of the respective donees trust? 2. Whether the assessee-trust could be held to have lent the sum of Rs. 77,000 to the Delhi Cloth and General Mills Ltd. without adequate security within the meaning of section 13(2)(a) of the Act and hence the interest income of Rs. 5,200 wherefrom was rightly brought to tax by the Income-tax Officer for the assessment year 1977-78?" In I. T. R. No. 193 of 1985, the following question is raised: "Whether, on the facts and in the circumstances of the case, the assessee-trust could be held to have lent the sum of Rs. 82,000 to DCM Limited without adequate security within the meaning of section 13(2)(a) of the ....

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....              Rs.                                               1. Interest from Delhi Cloth and General Mills           5,200 2. Donation from Delhi Cloth and General Mills  24,00,000                                    &....

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.... expenses and the balance of Rs. 8,00,000 was given with the condition that it would form part of the corpus of the trusts. The Assessing Officer held that a sum of Rs. 16,00,000 which was given to the above mentioned two trusts to form a part of their corpus could not be considered to have been applied by the assessee-trust for charitable purposes within the meaning of section 11(1)(a). A copy of the resolution passed by the board of directors of Shri Ram Memorial Foundation at their meeting held on February 18,1975, is placed at page 35 of the paper book. The said resolution is as under: "I. Resolved that: (i) a lump sum grant of Rs. 16 lakhs be made to Bhartiya Kala Kendra Trust which form part of the corpus of the trust, and shall....

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....ation given by one charitable trust to another trust under the bona fide belief that the donee was a charitable trust would be covered by the provisions of section 4(3) of the Indian Income-tax Act, 1922, which is the forerunner of section 11 of the Income-tax Act, 1961. The Calcutta High Court, speaking through Sabyasachi Mukharji J., in terms, held that the assessee donor trust was entitled to exemption under section 4(3) of the Income-tax Act. It must, therefore, be held that when a donor trust which is itself a charitable and religious trust donates its income to another trust, the provisions of section 11(1)(a) can be said to have been met by such donor trust and the donor trust can be said to have applied its income for religious and ....