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Issues involved:
The judgment addresses the issue of whether the income of the assessee-trust was derived from property held on trust wholly for charitable purposes under section 11 of the Income-tax Act, 1961. Details of the Judgment: The High Court of Rajasthan considered the appeal of the assessee, a charitable trust, regarding the disallowance of accumulation claim by the Income-tax Officer for the assessment years 1972-73 and 1973-74. The Appellate Assistant Commissioner and the Tribunal had ruled against the assessee, stating that the trust was not for charitable purposes as its activities involved profit-making. The Tribunal referred the question to the High Court for decision. Upon review of the trust deed and the Tribunal's order, the High Court analyzed the relevant clauses of the trust deed and the provisions of the Income-tax Act. It noted that the trust's sole purpose was to run a dharmshala for general public utility. The Court referred to legal precedents and the definition of "charitable purpose" under section 2(15) of the Act. The Court emphasized that the predominant object of the trust's activities should be to serve charitable purposes, even if some profit is generated incidental to those activities. It cited previous judgments to support its interpretation of the law, highlighting the importance of the genuineness of the charitable purpose in determining the trust's eligibility for tax exemption. By applying the principles established in relevant case laws, including the Surat Art Silk Cloth Manufacturers' case, the Court concluded that the trust in question was indeed charitable and its income from the dharmshala was exempt under section 11 of the Act. The Court disagreed with the Tribunal's finding that the trust did not fall within the charitable purpose provisions. In conclusion, the High Court ruled in favor of the assessee, holding that the trust was charitable and its income derived from the dharmshala was eligible for exemption under the Income-tax Act. The Court directed that the Tribunal be informed of its decision as per the statutory requirement. Judge(s): S. K. MAL LODHA., SOBHAG MAL JAIN
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