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TMI Blog1993 (12) TMI 226X X X X Extracts X X X X X X X X Extracts X X X X ..... ee trusts is correctly set out in detail in consolidated order dated 8-12-1972 passed by the Tribunal in IT Appeal Nos. 3529, 3539, 4092-4099/70-7 land judgment of this Court in reference arising therefrom in the case of CIT v. State Bank of India (1988) 169 ITR 298. Both the learned counsels agree that the narration of the facts set out in the order of the Tribunal and the judgment of this Court referred to hereinabove may be considered for purpose of this reference. This reference pertains to Trust Nos. 307 and 217. This reference pertains to the assessment year 1973-74. The above-referred order dated 8-12-1972 was passed by the Tribunal in appeals relating to the assessment years 1965-66 to 1969-70. It is an accepted position now that the shares were held by the assessee-trusts wholly for charitable or religious purposes. The State Bank of India is the trustee of the assessee-trusts herein. The Trust No. 217 was created on 11-6-1947. The Trust No. 307 was created on 12-6-1953. The Settlor settled 6,000 ordinary shares of Raptakos Brett & Co. Ltd. on trust known as Trust No. 307. The settlor settled 6,000 ordinary shares of the said company on the trust known as Trust No. 217. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1(1)(a) of the Act. During the assessment years 1965-66 to 1969-70 which were the subject-matter of reference decided by this Court by its judgment in State Bank of India's case (supra), there was neither any enforceable demand in respect of estate duty payable by the trusts nor any actual payment. During the previous year the assessee-trusts have discharged estate duty liability as aforesaid. 5. Section 11(1)(a ) reads as under: "(a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated or set apart for application to such purposes in India, to the extent to which the income so accumulated or set apart is not in excess of twenty-five per cent of the income from such property;" There is no dispute between the parties that the shares in question from which income was derived during the relevant assessment year prior to sale of the shares were 'held under trust wholly for charitable purposes'. Section 11(1)(a) grants exemption of such income from income-tax to the extent it was applied to such purposes in Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tee of the said trust filed its return for the assessment year 1973-74 declaring a deficit of ₹ 20,92,532. The assessee made a similar claim for exemption of its income under section 11(1)(a) . The ITO rejected the claim of the assessee for exemption and assessed total taxable income at ₹ 12,18,810. By a consolidated order dated 30-11-1977, the AAC directed the ITO to allow exemption on the entire income of the assessee in respect of both the trusts for the assessment year 1973-74. The AAC followed the consolidated order of the Tribunal dated 8-12-1972 passed by it while deciding the appeals in respect of the assessment years 1965-66 to 1969-70. The Tribunal dismissed the department's appeal against the above-referred order of the AAC. We have gone through the copy of the Tribunal's order dated 8-12-1972 referred to hereinabove and the judgment of the Court delivered in the State Bank of India's case (supra) reference arising therefrom and considered all the facts and subsequent events summarised therein and the reasoning and conclusion of this Court in respect of Question No. 3 which is almost identical with the question referred to us in this reference and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case (supra), our High Court followed the principle and ratio of the judgment of the High Court of Madras in the case of CIT v. Janaki Ammal Ayya Nadar Trust (1985) 153 ITR 159. In the Madras case referred to hereinabove, it was held by the High Court of Madras that for the purpose of determining as to whether the assessee was entitled to exemption under section 11(1)(a) or as to whether the assessee had applied the income to charitable purpose or not, the Court must first find out as to whether the trust had available income with it during the relevant assessment year for being spent as charitable purpose. If it can be shown by the assessee that there was no available surplus in the hands of the trust for application thereof to charitable or religious purposes during the relevant year, income of the trust was entitled to exemption under the Act and it could not be taxed on the ground that the trust had failed to apply the income to charitable or religious purposes. In this case, the trust had no available or surplus income at all which could be applied to charitable or religious purposes. It is of considerable significance that the trusts could pay only a sum of ₹ 10,46,791 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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