1984 (8) TMI 28

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..... is a trust existing for charitable purpose. The objects of the trust are to help widows or persons whose financial condition is poor. In pursuance of these objects, the trust sometimes gives loans to needy persons without interest and those loans are subsequently repaid. During the assessment year 1973-74, the trust received back such interest free loans in a sum of Rs. 14,400 and during the assessment year 1974-75, it received Rs. 6,575. The ITO treated a sum of Rs. 12,000 out of Rs. 14,400 as income of the trust for the year 1973-74, and Rs. 6,000 out of Rs. 6,575 as its income for 1974-75. Being aggrieved by the assessment orders, the assessee appealed to the AAC, who held that the repayments of the loans did not constitute taxable in .....

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..... " actually expended " on such objects as are mentioned in the deed of trust. In respect of income accumulated or set apart for application, the section also permits exclusion up to a limit of 25 per cent. of the income of the trust from the total income. Thus, the scheme under the Act permits exclusion only in respect of income applied or accumulated up to the permissible extent as aforesaid for charitable or religious purpose. Mr. Sarangan, learned counsel for the assessee, indeed has nothing to say on the benefit extended to the trust on the income actually applied for charitable purposes. He, however, urged that, if the income applied in one year is returned by the beneficiaries in another year, the receipts thereof cannot again be .....

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..... f the trust, then it might as well defeat the very purpose of the trust. The trust, in that event, is not under an obligation to apply the money for the objects of the trust since by implication it ceases to be income of the trust. On the other hand, if the income is re-cycled by the trust for charitable or religious purposes, it is again and again entitled to the benefit of s. 11. This is also the tenor of the circular dated January 24, 1973, issued by the Central Board of Direct Taxes. The Tribunal, in our opinion, was not justified in ignoring the contention of the Department based on the said circular. In the result, we answer the question in the negative and in favour of the Revenue. In the circumstances of the case, we make no ord .....

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