2008 (11) TMI 37

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....ritable trust. It purchased certain land. Thereafter, it constructed a building out of borrowed funds as well as out of the corpus. The building was rented out. According to the revenue since the building was rented out to concerns in which some of the trustees were directors, it implied that the income derived out of the renting out of the building was not applied towards charitable purposes but that the renting out of the property was for such interested persons. On behalf of the assessee it has throughout been contended that the income derived from the renting out of the building was used in re-paying the loans with the ultimate object of applying the income, after the loans had been fully repaid, towards charitable objects. It was, ther....

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.... of the assessee. The Tribunal noted that if the argument of the revenue was to be accepted, then it would amount to concluding that the assessee could not utilize the rental incomes received by it from the lease of the property for charitable purposes.  The Tribunal noted that as and when the loans are discharged and the assessee becomes free to utilize the rental income, it would apply the same for charitable purposes set out in the trust deed and that it is at that juncture that the Assessing Officer could insist that the application of the income be for the purposes mentioned in the trust deed. The Tribunal concluded that the repayment of the funds borrowed for construction of the building was to be treated as application of income....