TaxTMI 
TaxTMI 
2009 (1) TMI 114
X X X X Extracts X X X X
X X X X Extracts X X X X
....d on the following question of law: "Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the repayment of loan taken from the Indian Bank for construction of commercial complex was application of income for charitable purposes and, therefore, the assessee trust was eligible for exemption under Section 11 of the Income-tax Act? 3. The facts of the case are as follows: The assessee is a charitable trust. The relevant assessment year is 1993-04. The original assessment under Section 143(3) of the Income-tax Act was completed on 21.3.1994 on a total income of Rs.5,69,830/-. The assessing officer noted that during the year ended 31.3.1993, the Trust had paid a sum ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ome-tax Appellate Tribunal. The Tribunal confirmed the finding of the Commissioner of Income-tax (Appeals). Thus, the present appeal is filed by the revenue questioning the correctness of the order passed by the Tribunal. 4. Learned counsel appearing for the revenue submitted that the construction of the capital asset cannot be regarded as an application of income for the purpose of carrying out the objects of the Trust. Hence the order of the Tribunal as well as the first appellate authority have to be set aside and that of the assessing officer has to be restored. 5. However, learned counsel appearing for the assessee submitted that the issue similar to the one has been considered by this Court in the case of Commissioner of Income-....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uld not earn income to carry out the objects of the Trust. For the purpose of carrying out the objects of the Trust, it has become necessary to demolish and reconstruct the property so as to earn income by exploiting the property. It is also an admitted fact that the rental income in the property held in Trust amounted to 90 percent of the total income of the Trust. For the purpose of putting up the construction of the property held in Trust, the Trust borrowed fund from Indian Bank. Thus, the capital asset so put up by the borrowed fund is only for the purpose of augmenting income in order to carry out the object of the Trust as envisaged. It is clear from the order of the Commissioner of Income-tax (Appeals) that neither the assessing off....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ent thereafter must be treated as application of its income. By repayment of the loan, the Trust wiped its liability and the income earned from the property would be available for being utilised for charitable purposes. 9. Our view has been fortified by the view taken by the Karnataka High Court in the case of Commissioner of Income-tax Vs. Janmabhumi Press Trust, (2000) 242 ITR 703, wherein the Karnataka High Court held that the repayment of the debt incurred by the trust for construction of the building for the purpose of augmenting its funds should be treated as application of the income of the assessee's trust for charitable purposes. While holding so, the Karnataka High Court followed its earlier judgment in respect of the same asse....