1981 (4) TMI 121 - AT - Income Tax

Summary

Issues:
Challenge to first appellate order regarding taxes paid for charitable purposes under section 11 of the IT Act, 1961.

Analysis:
The appellant challenged the first appellate order regarding the taxes paid for the relevant previous year of income for charitable purposes under section 11 of the IT Act, 1961. The appellant argued that the payment of wealth and income tax was essential for the existence of the assessee and should be considered utilized for charitable purposes. They pointed out that in the subsequent assessment year, such payments were deleted by the AAC. The appellant also cited a Tribunal order and a High Court judgment supporting their claim. The Departmental Representative supported the impugned order. The Tribunal noted that the ITO disallowed the taxes paid as application of income for charitable purposes. The AAC confirmed this finding based on a Tribunal order from Jaipur. However, the Tribunal disagreed with this view, citing a High Court judgment that expenses like income tax and wealth tax were incidental to carrying out charitable purposes and should be excluded from the income of the trust. Therefore, the Tribunal set aside the impugned order and directed the taxes to be considered as application of income for charitable purposes.

Conclusion:
The Tribunal allowed the appellant's appeal, ruling in favor of considering the wealth and income taxes paid as application of income for charitable purposes. The decision was based on the principle that such expenses were essential for carrying out charitable activities and should be excluded from the income of the trust.