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TMI Blog2004 (3) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... amount was held to be not eligible for deduction under s. 11 as according to the AO the additions and alterations to the trust property do not amount to application of income for objects of the trust. The CIT(A) has confirmed the addition made by the AO against which the assessee is in appeal. The learned counsel for assessee contended that one of the objects of the trust is to make additions and alterations of buildings and other immovable property attached to the Holy Darbar. Since the boundary wall was constructed on the land attached to the Holy Darbar, as per the objects of the trust, the Revenue was not justified in treating the amount spent on the construction as not having been applied for the objects of the trust. The learned coun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Their Lordships further held that as the expenditure has to be incurred out of the income earned by the trust, even if such expenditure is for capital purposes on the objects of the trust, the income would be exempt. Considering objects of the trust in the case before Madras High Court, their Lordships, on the facts of that case, held that the mere fact that the application of the income resulted in the maintenance or improvement of property held under trusts for charitable purposes would not entitle the trust to exemption of such income under s. 11. 5. The Revenue in the present case has relied upon the aforementioned decision of the Court on the basis of facts of that case. The legal observations of the Hon'ble Court that so long as t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in directing the AO to allow exemption to the trust under s. 11 of the IT Act holding that exemption under s. 11 is available to the trust even in a case where the sale proceeds of the capital asset are utilised for the purposes for which the trust is created." 9. The facts relating to this ground, briefly stated, are that the assessee had sold land situated at Karabara of Rs. 22,58,000. The book value of the land was Rs. 9,600 only. The assessee treated the sale consideration minus the cost, i.e., Rs. 22,48,395 as income of the trust. Exemption was claimed in respect of the amount spent for the objects of the trust out of the said income. The AO denied the exemption on the ground that the capital gains derived from the land was eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xemption, so as to enable the charitable trust to purchase capital asset in lieu of capital gains derived from the sale of trust property. The CIT(A) was, therefore, justified in allowing the relief to the assessee, it was contended. 11. We have given our careful consideration to the rival contentions and have also perused the records including the decision of the AO as well as that of the CIT(A). On perusal of the records, following facts are established: (i) That the assessee is a public trust since its inception in the year 1950. (ii) That the trust has always enjoyed exemption under s. 11 of the IT Act, 1961. (iii) That as a result of sale of immovable property, the income of the trust for the previous year was Rs. 24,09,370 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion as application of income for charitable purposes. This view is supported by the following decisions: (i) CIT vs. Sarladevi Sarabhai Trust (1988) 70 CTR (Guj) 185 : (1988) 172 ITR 698 (Guj); (ii) CIT vs. Trustees of the Jadi Trust (1982) 133 ITR 494 (Bom); (iii) CIT vs. Hindustan Charity Trust (1982) 29 CTR (Cal) 43 : (1983) 139 ITR 913 (Cal); and (iv) CIT vs. J.K. Charitable Trust (1992) 196 ITR 31 (All). 12. The other expenses were incurred on the maintenance of trust property attached to Holy Darbar. Since it is not disputed that the buildings for the maintenance of which expenditure has been incurred by the assessee are attached to the said Holy Darbar and the same are being utilised for charitable purposes, the CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X
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