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Issues involved: Interpretation of section 11 of the Income-tax Act, 1961 regarding investment in Government securities for charitable trusts.
Summary: The High Court of BOMBAY delivered a judgment regarding the interpretation of section 11 of the Income-tax Act, 1961. The case involved assessment years 1966-67 and 1967-68 where the assessees, trustees of a charitable trust, claimed exemption under section 11 for investing in Government securities. The Income-tax Officer disputed their compliance with the investment requirement, leading to a refund application rejection and tax assessment. The Tribunal, after analyzing the relevant sections of the Act, concluded that the Income-tax Officer's decision was erroneous and allowed the appeals of the assessees. The Court highlighted that section 11 allows income derived from property held under trust for charitable purposes to be accumulated up to 25% of the income or Rs. 10,000, whichever is higher, for investment in Government securities. The conditions for accumulation and investment are specified in sub-section (2) of section 11. The phrase "the money so accumulated" in clause (b) of sub-section (2) refers to the excess amount over the exempted 25% that must be invested in Government securities. The Court supported its decision by referencing judgments from various High Courts, affirming the correct interpretation of section 11. Ultimately, the Court answered the question in favor of the assessees, allowing them the benefit of exemption under section 11. In conclusion, the High Court of BOMBAY upheld the Tribunal's decision, emphasizing the correct application of section 11 for charitable trusts and ruling in favor of the assessees without any order as to costs.
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