2009 (2) TMI 162 - HC - Income Tax

Exemption u/s 11 Charitable Trust - as per the trust deed, the trust is involved in the activities of maintenance of the existing dharamshalas for help of members of the Agarwal community and other widows and children. The objects of the trust are charitable and religious and the activities of the trust are in conformity with the aims and objects of the trust. It has been registered with the Charity Commissioner, Government of Rajasthan Held that - sole purpose of the trust was to run a dharamshala which is an object of general public utility and so when this was the sole object, the income derived therefrom in the shape of the rent from the dharamshala is exempt under section 11 read with section 2(15) of the Act reference answered in favor of assessee and against the revenue.

Summary

Issues:
Interpretation of section 11 of the Income-tax Act, 1961 regarding exemption for a charitable trust.

Analysis:
The High Court was tasked with providing an opinion on whether the Tribunal was justified in upholding the decision that the assessee is a public charitable and religious trust entitled to exemption under section 11 of the Income-tax Act, 1961. The assessee had declared its trust as charitable and exempt under section 11 for the assessment years 1973-74, 1974-75, and 1975-76. The Income-tax Officer initially rejected this claim, but the Appellate Assistant Commissioner reversed this decision, granting the benefit of section 11. The Tribunal, upon appeal, upheld the findings of the Appellate Assistant Commissioner.

Upon reviewing the trust deed and the activities of the trust, the High Court found that the trust was involved in maintaining dharamshalas for the Agarwal community members, widows, and children, which aligned with its charitable and religious objectives. The trust had been registered with the Charity Commissioner, Government of Rajasthan, further supporting its charitable nature.

The High Court referred to a similar case involving the same parties for assessment years 1970-71, 1971-72, 1976-77, and 1977-78, where the court had previously held that a trust with objects of general public utility, such as maintenance of dharamshalas, help for widows and children, and feeding of mendicants, qualifies as a public charitable trust. The court emphasized that such trusts aim to benefit the public at large rather than specific individuals or groups, making them eligible for exemption under section 11 of the Income-tax Act.

Citing the precedent set in CIT v. Paramhans Ashram Trust [1993] 203 ITR 711, the High Court concurred with the Division Bench's interpretation that trusts with objectives of general public utility, like helping widows, children, and destitutes, qualify as public charitable trusts. Therefore, the High Court upheld the Tribunal's decision and ruled in favor of the assessee, affirming its status as a public charitable and religious trust entitled to exemption under section 11 of the Income-tax Act, 1961.