9911796707
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Issues:
1. Calculation of taxable income for a charitable institution for assessment year 1986-87. 2. Application of maximum marginal rate of tax on the charitable institution. 3. Compliance with provisions of section 11(5)(iii) and section 13(1)(c) and (d) of the Income-tax Act. Issue 1: Calculation of Taxable Income The appeal by the assessee, a charitable institution, was against the assessment order for the year 1986-87. The institution received Rs. 43,608 and spent Rs. 26,651 on land purchase for charitable purposes. However, 75% of the income was not spent for charitable purposes, resulting in an unspent amount of Rs. 16,957. The Income-tax Officer assessed this unspent amount at the maximum marginal rate. The Dy. Commissioner (Appeals) held that 25% of gross receipts could be accumulated under section 11(1)(a) even if the conditions of section 11(2) were not met. Consequently, the taxable income was determined at Rs. 6,055, lower than the initial assessment of Rs. 16,957. Issue 2: Application of Maximum Marginal Rate The second appeal challenged the application of the maximum marginal rate of tax on the charitable institution. The contention was that as a public charitable institution registered under section 12A of the IT Act, the institution should be taxed only if its income exceeds the maximum non-taxable income. The taxable income found by the Dy. Commissioner (Appeals) was Rs. 6,055, below the maximum non-taxable income of Rs. 18,000 for that assessment year. Therefore, it was argued that no tax should be levied. The proviso under section 164(2) was analyzed to determine the applicability of the maximum marginal rate, concluding that since the income fell below the taxable limit and the institution complied with relevant provisions, no tax could be imposed. Issue 3: Compliance with Provisions of Section 11(5)(iii) and Section 13(1)(c) and (d) The judgment examined the compliance of the institution with section 11(5)(iii) and section 13(1)(c) and (d) of the Income-tax Act. It was established that the institution had met the requirements of section 11(5)(iii) by depositing income in a scheduled bank account. The taxable income arose not due to contravention of section 13(1)(c) or (d) but because the institution failed to spend 75% of its income for charitable purposes as required by law. As the income was below the taxable limit and the institution had substantially complied with relevant provisions, the maximum marginal rate was deemed inapplicable. The appeal was fully allowed, determining that no taxable income was earned by the institution in that year. This detailed analysis of the judgment highlights the key issues addressed regarding the calculation of taxable income, application of the maximum marginal rate, and compliance with relevant provisions of the Income-tax Act for a charitable institution in the assessment year 1986-87.
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