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TMI Blog2009 (1) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... RTHANA RAJA, JJ. Mr. S. V. Subramanian for the appellant. Mr. M. P. Senthil Kumar for Mr. Philip George for the respondent. JUDGMENT The Judgment of the Court was delivered by K.RAVIRAJA PANDIAN, J. - The revenue is on appeal against the order of the Income Tax Appellate Tribunal, Madras 'A' Bench, dated 17.9.2003 in ITA Nos.1935/Mds/95. 2. The appeal was admitted on the following question of law: "Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in holding that the repayment of loan taken from the Indian Bank for construction of commercial complex was application of income for charitable purposes and, therefore, the assessee trust was eligible for exemption under Section 11 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion had to be undertaken by obtaining loan. The subsequent letting out of the property was connected with the carrying out of the objects of the Trust and hence, the repayment of loan to Indian Bank should have been treated as eligible application. Aggrieved by the order of the Commissioner of Income-tax (Appeals), the revenue filed an appeal before the Income-tax Appellate Tribunal. The Tribunal confirmed the finding of the Commissioner of Income-tax (Appeals). Thus, the present appeal is filed by the revenue questioning the correctness of the order passed by the Tribunal. 4. Learned counsel appearing for the revenue submitted that the construction of the capital asset cannot be regarded as an application of income for the purpose of car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As far as the objects of the Trust are concerned, the application of the amount can be for revenue or capital purpose, (vide Commissioner of Income-tax Vs. Kannika Parameswari Devasthanam and Charities, (1982) 133 ITR 779). 8. In the case on hand, it is an admitted fact that the property of the assessee Trust was in a dilapidated condition and would not earn income to carry out the objects of the Trust. For the purpose of carrying out the objects of the Trust, it has become necessary to demolish and reconstruct the property so as to earn income by exploiting the property. It is also an admitted fact that the rental income in the property held in Trust amounted to 90 percent of the total income of the Trust. For the purpose of putting up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no provision in the Act, which disentitles the assessee Trust from claiming repayment of loan as application of income, especially in view of the fact that the Trust has to augment its income and for that purpose it has put up a construction with borrowed fund. If raising of loan does not stand in the way of its charitable activities, the repayment thereafter must be treated as application of its income. By repayment of the loan, the Trust wiped its liability and the income earned from the property would be available for being utilised for charitable purposes. 9. Our view has been fortified by the view taken by the Karnataka High Court in the case of Commissioner of Income-tax Vs. Janmabhumi Press Trust, (2000) 242 ITR 703, wherein th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 of the Income-tax Act has to be considered in the context in which it is stated. If the application of the income resulted in the maintenance of the property held under the Trust for charitable purpose, is for the purpose of augmenting income in order to pursue the objects of the Trust, that would amount to application of income for the purpose of the Trust. 12. In S.RM.M.CT.M. TIRUPPANI TRUST VS. COMMISSIONER OF INCOME-TAX, (1998) 230 ITR 636, the object of the assessee was to carry out Thiruppani or repairs to old Hindu temples, building new ones, giving aid to or establishing hostels, educational and industrial institutions, etc., The assessee purchased building in India, which was utilsied as a hospital. The question arose whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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