1989 (12) TMI 135 - AT - Income Tax

Summary

Issues:
1. Claim for exemption under section 11 in respect of income derived from business held in trust.
2. Eligibility for exemption under section 11 for income derived from business.
3. Interpretation of sub-section 4A of section 11 regarding profits and gains of business for charitable trusts.
4. Claim for deduction under section 80L and status of the assessee.

Detailed Analysis:
1. The judgment revolved around the claim for exemption under section 11 concerning income derived from a business held in trust. The trust in question was established for handicraft business with the objective of supporting educational activities through profits transferred to recognized educational institutions. The issue was whether the income from business held by the trust qualified for exemption under section 11.

2. The judgment referred to the Supreme Court's ruling in Dharmadeepti v. CIT, emphasizing that income from a business could be exempt under section 11 if it benefits a charity. However, a subsequent amendment introduced by the Finance Act, 1983, specified conditions under sub-section 4A that limited the exemption for profits and gains of business for charitable trusts. The Income Tax Officer (ITO) and the Appellate Assistant Commissioner held that the income from the handicraft business did not meet the conditions of sub-section 4A for exemption under section 11.

3. The appellate tribunal rejected the assessee's argument that the trust concept of feeding the trust was not abandoned by the amendment. It highlighted that sub-section 4A imposed a general embargo on all profits and gains from business, with exceptions only for specific cases like income from printing and publication of books by religious trusts or business carried out by beneficiaries of charitable institutions. The tribunal concluded that the income not falling within these exceptions would not be eligible for exemptions under section 11.

4. Another issue addressed in the judgment was the claim for deduction under section 80L and the status of the assessee as an Association of Persons. The assessee contended that they should be treated as an individual for claiming the deduction under section 80L, citing a relevant decision. The tribunal agreed with the assessee, directing the ITO to grant the exemption under section 80L and modify the assessment accordingly.