TaxTMI 
TaxTMI 
1986 (7) TMI 56
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....puting the taxable income of the latter assessment year ? " The facts briefly stated as set out in the statement of the case are that the Maharana of Mewar Charitable Foundation (hereinafter referred to as " the assessee ") is a public charitable trust, constituted by the Maharaja of Mewar through a deed executed on October 20, 1969. The Maharaja of Mewar had donated a sum of Rs. 11 lakhs to the assessee which formed the corpus of the trust. During the previous year relevant to the assessment year 1970-71, the assessee spent a sum of Rs. 95,863 towards the aims and objects of the trust and the income of the assessee during the said year was only Rs. 36,093 and thus a sum of Rs. 59,770 was spent in excess of the income during the period relevant to the assessment year 1970-71. In the previous year relevant to the assessment year 1971-72, the assessee claimed adjustment of the sum of Rs. 59,770 against the surplus of income over expenditure during the assessment year 1971-72. The Income-tax Officer, Udaipur, disallowed the claim of the assessee. The Appellate Assistant Commissioner of Income-tax, Udaipur, allowed the said claim of the assessee for the deduction of the amount of Rs....
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....table or religious purposes, to the extent to which such income is applied to such purposes in India; ... " A perusal of the aforesaid provision would show that the income derived from property held under trust wholly for charitable or religious purposes to the extent to which such income is applied to such purposes in India is to be excluded for the purposes of computing the income of the trust for the purposes of assessment. There are no words of limitation in this section explaining that the income should have been applied for charitable or religious purposes only in the year in which the income had arisen. Shri Arora has urged that the aforesaid provisions, as it stood at the relevant time, provided that only that income would be excluded which was applied for charitable and religious purposes during the relevant assessment year in which the income was earned and any expenditure incurred for religious and charitable purposes in the earlier year could not be adjusted against the income of the succeeding year. We are unable to accept the aforesaid contention of Shri Arora. In our view, there is nothing in the language of section 1 l(1)(a) which lends support to the conte....
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....ntention of Shri Arora is accepted, it would lead to an anomalous situation, namely, if the trust takes a loan for the purposes of incurring expenses for charitable and religious purposes in a particular year and the said loan is repaid out of the income of the subsequent year, the said repayment would be entitled to exemption from tax under section 1 l(1)(a) of the Act. But if the trust, instead of taking a loan, incurs expenditure for charitable and religious purposes out of the corpus of the trust and seeks to reimburse the said amount out of the income of the subsequent year, the trust would not be entitled to claim exemption in respect of such reimbursement under section 11(1)(a) of the Act. In our opinion, a construction which leads to such an anomaly must be avoided. We are, therefore, of the opinion that the adjustment of the expenses incurred by the trust for charitable and religious purposes in the earlier year against the income earned by the trust in the subsequent year would amount to applying the income of the trust for charitable and religious purposes in the subsequent year in which such adjustment has been made and will have to be excluded from the income of the....
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....he said claim of the assessee was disallowed by the Income-tax Appellate Tribunal as well as the Income-tax Authorities below on the ground that the said sum of Rs. 25,000 is from the funds of the assessee and not from the income of the relevant accounting year as on the first day of the accounting year there were no profits available from which the funds could be donated. The Mysore High Court agreed with the said view and held that the benefit of section 11 (1)(a) was available provided the trust earned profits in the previous year relevant to the assessment year and the profit and loss account showed that the donation of Rs. 25,000 formed part of the profits for the year in which the payment was made. The said decision lends no assistance to the contention of Shri Arora. According to this decision, in order to avail of the benefit of section 11(1)(a) of the Act, it is necessary that the expenditure for charitable and religious purposes must be incurred out of the income of the trust. In the present case also, the expenditure incurred for charitable and religious purposes is being claimed out of the income of the trust in the assessment year 1971-72. Shri Arora has also relied....