2002 (11) TMI 44 - HC - Income Tax

Charitable Trust - None of the authorities including the Tribunal had considered the question as to whether the assessee-trust is an institution so as to fall within the ambit of section 11(4A)(b) of the Act. All the authorities including the Tribunal proceeded on the assumption that a trust, irrespective of being an institution, will be entitled to exemption provided the other conditions stipulated in clause (b) are satisfied. It would also appear from the facts found by the Tribunal that if an exemption is available to a trust under section 11(4A)(b) all the other three conditions stipulated therein are satisfied by the assessee. In the absence of a finding as to whether the assessee-trust can be treated as an institution we will not be in a position to decide as to whether the assessee trust is entitled to get the benefit of exemption under section 11 in the light of sub-section (4A) of the Act. Since there is no such finding we are of the view that the matter must be remitted to the assessing authority

Summary

Issues:
Appeal against Income-tax Appellate Tribunal's order for assessment year 1984-85 - Exemption under section 11 claimed by charitable trust - Interpretation of section 11(4A)(b) - Whether trust qualifies as an institution for exemption.

Analysis:
The case involved an appeal by the Income-tax Department against the Income-tax Appellate Tribunal's decision regarding the assessment year 1984-85. The respondent was a charitable trust conducting chitty business, claiming exemption under section 11 of the Income-tax Act, 1961. The assessing authority rejected the claim based on the amendment in 1983, introducing section 11(4A). The Tribunal allowed the exemption, citing a previous court decision.

Senior counsel for the department argued that for exemption under section 11 from 1984-85, the business must be conducted solely for charitable purposes by an institution. Referring to the Supreme Court's decision in a similar case, it was contended that the trust did not qualify as an institution under section 11(4A)(b), thus challenging the Tribunal's reliance on a previous court decision.

Upon reviewing the Supreme Court's judgment, it was clarified that section 11(4A) restricts exemption for income derived from business to trusts conducted solely for public religious purposes or institutions primarily engaged in charitable work by their beneficiaries. The court noted that the authorities had not determined whether the trust in question qualified as an institution under section 11(4A)(b), as assumed. Hence, the matter was remitted to the assessing authority for a fresh decision in light of the Supreme Court's ruling.

The court set aside the previous orders and directed the assessing officer to reconsider the matter, allowing the assessee to present evidence and refer to relevant legal precedents. The decision emphasized the need to establish whether the trust could be classified as an institution to determine its eligibility for exemption under section 11.