1987 (12) TMI 60

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....rust are of charitable nature The assessment year is 1980-81 and the relevant previous year ended on 31st March, 1980. 3. While framing the assessment under s. 143 (3) of the Act, the ITO taxed the income of the assessee trust at maximum marginal rate as per the provisions of s. 164 (1) of the Act in the following manner:- "The trust has come into being in 1965 for the benefit of Gurjar Pushkarana Community As the trust is for a particular religious community, it is hit by the provisions of s. 13(1)(b) Benefit of s. 11 shall not therefore be allowed. From data made available total income is computed as under; Income as per statement Rs. 4,805 . Less; Administrative expenses . . Contribution to Charity comm. Rs.281 . Audit fees ....

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....e to the facts of the case Admittedly, sub-s. 3 of s. 164 was not applicable because the trust was wholly a charitable trust. Sub s 2 of s 164 staters that in the case of relevant income which is derived from property held under trust wholly for charitable or religious purposes, tax shall be taxed on so much of the relevant income as is not exempt under s. 11. or s. 12 as if the relevant income was the income of an AOP. In view of this section mandatory provisions of sub s. 2 of s. 164 were applicable the tax was to be charged treating the appellant trust an AOP and the tax should not have been charged at the maximum marginal rate. Shri Thgakkar further submitted that by Finance Act 1984 a proviso was added to sub s. 2 of s.164 providing th....

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.... The learned representative for the Dept. on the other hand strongly relied on the order of the ITO and vehemently argued the AAC was not justified in accepting the submissions made on behalf of the assessee. He, therefore urged that the order of the AAC should be reversed. 8. We have carefully considered the rival submissions of the parties and we find considerable force in the submissions made on behalf of the assessee At this stage, it would be necessary to advert to the relevant provisions of s. 164 and s.13 of the Act. "164 Charge of tax where share of beneficiaries unknown (1) Subject to the provisions of sub ss (2) and (3) where any income in respect of which the persons mentioned in cls.(iii) and (iv) of sub s. (1) of s. 160 are l....

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.................. (b) in the case of a trust for a charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste. 9. On the plain reading of the aforesaid provisions, we entirely agree with the submissions made on behalf of the assessee that sub s. (1) of s. 164 has to be read subject to the provisions of sub-ss. (2) and (3)..... It may be mentioned that sub s. (1) of s. 164 of assessee the Act applies to a private trust. Since the assessee is not a private trust, we have to refer to sub s (2) of that section. If we read sub s. (2) of that section without referen....