1983 (7) TMI 79 - AT - Income Tax

Summary

Issues:
- Disallowance of relief claimed under section 80K of the Income-tax Act, 1961 by a charitable trust.
- Interpretation of provisions of section 80K in relation to charitable trusts.
- Application of High Court decisions in determining the availability of relief under section 80K to charitable trusts.

Analysis:
1. The appeal was filed against the disallowance of relief claimed under section 80K by a charitable trust holding shares in a company. The Income Tax Officer (ITO) initially allowed the claim, but the Assistant Commissioner of Income Tax (AAC) proposed to withdraw the relief after referring to High Court decisions. The AAC concluded that provisions of the Act dealing with income computation would not apply to charitable trusts governed by section 11, leading to the withdrawal of relief under section 80K. The AAC's decision was based on the belief that as long as income remains tax-exempt under section 11, no deductions should be allowed beyond what section 11 contemplates.

2. The appeal against the AAC's order argued that the deduction under section 80K should be allowed if total income is computed before any deductions under Chapter VI-A of the Act. The appellant contended that section 11 specifically deals with income not to be included in total income for charitable or religious purposes. The appellant highlighted section 80A(1) allowing deductions specified in Chapter VI-A and pointed out that exemptions were provided uniformly unless specified otherwise. The appellant also mentioned the historical provision under section 85 and the continued relevance of relief under section 80K for trusts.

3. Upon review, the tribunal disagreed with the AAC's interpretation of the High Court decisions. The tribunal clarified that the High Courts did not preclude charitable trusts from claiming relief under section 80K. It emphasized that relief under section 80K is granted after determining gross total income, as per the Act's provisions. The tribunal noted that nowhere in the Act does it state that charitable trusts are ineligible for section 80K deductions. Therefore, the tribunal reversed the AAC's decision and reinstated the relief granted by the ITO.

4. The tribunal allowed the appeal, emphasizing that relief under section 80K should be available to charitable trusts as per the provisions of the Act. The decision clarified that charitable trusts are not excluded from claiming deductions under section 80K and reinstated the relief initially granted by the ITO.