S.C : Whether, on the facts and in the circumstances of the case and on an interpretation of the relevant provisions of the IT Act, the assessee is entitled to exemption at 25 per cent on Rs. 2,57,376 or only on Rs. 87,010 ?

Supreme Court Of India

CIT vs. Programme For Community Organisation

Section 11(1)(a)

Asst. Year 1978-79

S.P. Bharucha & Mrs. Ruma Pal, JJ.

Civil Appeal No. 2658 of 1998

28th November, 2000

ORDER

By the court :

The questions that were referred to the High Court for consideration, at the instance of the Revenue, read thus:

“(1) Whether, on the facts and in the circumstances of the case and on an interpretation of the relevant provisions of the IT Act, the assessee is entitled to exemption at 25 per cent on Rs. 2,57,376 or only on Rs. 87,010 ?

(2) Whether, on the facts and in the circumstances of the case, should not the Tribunal have accepted the view of the Revenue expressed in the circular, the same being consistent with the relevant provisions of the IT Act, 1961 ?

(3) Whether, on the facts and in the circumstances of the case, and also considering the scope of the earlier order of the CIT(A), dt. 18th Nov., 1983, the Tribunal is right in law in holding that the CIT(A) has rightly interfered with the order of the ITO ?” The answers being in favour of the assessee, the Revenue is in appeal by special leave.

2. The question that really requires consideration is whether, for the purpose of s. 11(1)(a) of the IT Act, 1961, the amount for the grant of exemption of twenty-five per cent should be the income of the trust or it should be its total income as determined for the purposes of assessment to income-tax. This question has to be answered in the light of these facts : The assessee-trust received donations in the aggregate sum of Rs. 2,57,376. It applied thereout for its charitable purposes the aggregate sum of Rs. 1,70,369 leaving a balance of Rs. 87,010. The question is whether the assessee is entitled to accumulate twenty-five per cent of Rs. 2,57,376 as it contends, or twenty-five per cent of Rs. 87,010, as the Revenue appeared to contend. Sec. 11(1)(a) reads thus : “11. (1)(a) Income derived fromproperty held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes inIndia, to the extent to which the income so accumulated or set apart is not in excess of twenty-five per cent of the income from such property.”

3. Having regard to the plain language of the above provisions it is clear that a charitable or religious trust is entitled to accumulate twenty-five per cent of its income derived from property held under trust. For the present purposes, the donations the assessee received, in the sum of Rs. 2,57,376, would constitute its property and it is entitled to accumulate twenty-five per cent thereout. It is unclear on what basis the Revenue contended that it was entitled to accumulate only twenty-five per cent of Rs. 87,010. For the aforesaid reasons, the civil appeal is dismissed. No order as to costs.

[Citation : 248 ITR 1]

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