2009 (7) TMI 654 - HC - Income Tax

Charitable purpose - Exemption- The assessee is a public sector undertaking and received grants from the Central and State Governments for its various projects. On the grants of Governments received, it earned interest income. It claimed deduction on the said income under section 11(1)(a) of the Act, which was not allowed by the Assessing Officer. However, the Commissioner of Income-tax (Appeals) upheld the claim of the assessee. The Tribunal remanded the matter to examine whether there was co-relation between schemes and the amounts spent. Held that- dismissing the appeal, that the quantification for attracting section 11(1)(a) was that income should be derived from property held in trust for Charitable purpose. The Commissioner (Appeals) as well as the Tribunal held that interest income from grants was fully covered under section 11(1)(a). The interest income from property of the trust fell under section 11 of the Act.

Summary

The High Court of Punjab & Haryana delivered a judgment in 2009 regarding an appeal made by the Revenue under section 260A of the Income-tax Act, 1961. The primary issue was whether interest income earned by a public sector undertaking from grants received from the Central and State Governments could be claimed as a deduction under section 11(1)(a) of the Act. The Assessing Officer disallowed the deduction, but the Commissioner of Income-tax (Appeals) upheld the claim. The Tribunal remanded the matter to examine the correlation between the grants received and the amounts spent. The Revenue argued that the interest income was not derived from property held under a trust for charitable purposes. However, the court found that the interest income from grants was fully covered under section 11(1)(a) and that the income directly accrued on funds of the trust. The court referred to various judgments to support its decision, including Asst, CIT v. Thanthi Trust and CIT v. Pruthivi Trust. Ultimately, the court dismissed the appeal, stating that no substantial question of law arose for consideration.