TaxTMI 
TaxTMI 
1979 (9) TMI 45
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....on the facts and in the circumstances of the case, the exemption from tax granted under section 11(2) of the Income-tax Act, 1961, in respect of the sum of Rs. 2,20,000 is valid in law ? " The assessee in this case is Mohanlal Hargovinddas Public Charitable Trust. There is no dispute that the trust is a public charitable trust and that the charitable activities of the trust are limited to charities within India. The relevant assessment year is 1966-67 for which the previous year ended on 31st December, 1965. In the return, the assessee claimed that the entire " total income " of Rs. 3,62,242 was derived from property held under trust for a charitable or religious purpose and that it was either applied for such purposes or was accumulated....
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.... accumulations over and above 25% exempted under s. 11(1)(a) and that s, 11(2) referred to the entire accumulation inclusive of those referred to in s.11(1)(a). The Tribunal held that out of the total accumulations of Rs. 2,57,018, only a sum of Rs. 2,20,000 which was invested in Government securities was exempt while the balance of Rs. 37,018 which was not so invested and was not earmarked for any specific public charitable purpose was not exempt either under s.11(1)(a) or under s. 11(2). The Tribunal on this reasoning allowed the department's appeal in part by holding that the sum of Rs. 37,018 had to be assessed as taxable income of the assessee. Section 11, as in force at the relevant time, read as follows : " (1) Subject to the p....
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....s, the restriction specified in clause (a) or clause (b) of subsection (1) as respects accumulation or setting apart shall not apply for the period during which the said conditions remain complied with-- (a) such persons have, by notice in writing given to the Income-tax Officer in the prescribed manner, specified the purpose for which the income is being accumulated or set apart, and the period for which the income is to be accumulated or set apart, which shall in no case exceed ten years ; (b) the money so accumulated or set apart is invested in any Government security as defined in clause (2) of section 2 of the Public Debt Act, 1944 (XVIII of 1944), or in any other security which may be approved by the Central Government in this b....
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....1)(a). In so far as the income is actually applied or expended in India for charitable purposes there can be no dispute that it is wholly exempt. As regards accumulations, the scheme is that if the accumulations are in excess of 25% of the income or Rs.10,000, whichever is higher, they are covered by sub-s. (1)(a) but for the excess accumulations, the assessee cannot be given any exemption or benefit unless he complies with the requirements of sub-s. (2)(a) and (b). Sub-section (2), in our opinion, does not cover the accumulations which are not included in the total income under sub-s. (1)(a). The words " the restriction specified in clause (a) ...... of sub-section (1) as respects accumulation..... shall not apply " as used in sub-s. (2), ....
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....dia ". Such purposes here refer to charitable and religious purposes. Now, we are here dealing with a case where the income derived from property is held under trust wholly for charitable and religious purposes and the activities of the trust are limited to charities within India. In this background, any income of the trust which is not actually applied and is carried forward is accumulated for application to such purposes in India within the meaning of sub-s. (1)(a). A comparison of the language of sub-s. (1)(a) with the language in sub-s. (2)(a) shows that whereas for the applicability of sub-s. (2)(a) the purpose for which the income is accumulated or set apart has to be specified, this condition is not necessary for the applicability of....