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2013 (10) TMI 875 - AT - Income TaxCharitable trust - claiming deduction u/s 24 on account of repair from rental income - Held that:- The claim is, by all counts, without merit. This is for the simple reason that the income of a charitable trust or institution, subject to its application for charitable purposes, for which it has been in fact formed (per its constituting charter) is exempt from tax under Chapter III (ss.10 to 13B) of the Act. The said income does not form part of the total income of the entity to which it arises or accrues or is received by. It is only the income forming part of the total income u/s.2(45) of the Act, which is to be classified under the various heads of the income u/s.14 and, accordingly, subject to the computation provisions of Chapter IV (ss. 14 to 59) of the Act. The expenditure incurred in earning the same is, likewise, and only understandably, not to be taken into account in computing the total income under the Act, which represents trite law, and toward which a separate section (sec. 14A) has since been inserted by Finance Act, 2001 with retrospective effect from 01.04.1962. - Decided against the assessee. Exemption u/s 11(1)(a) of the Income Tax Act – Donation made to TEF, a charitable institution under the same management - Held that:- The law in the matter is by now well settled, so that donation by one charitable trust to another would entitle the donor fund to claim exemption qua application of income u/s. 11(1). As pointed out by the hon'ble court in Sarladevi Sarabhai Trust (No. 2) (1988 (3) TMI 53 - GUJARAT High Court), it would make no difference if the donation is toward the corpus of the donee-fund, so that it is only the income therefrom, and not the donation sum itself, that is liable to be spent for or utilized for the charitable purposes of the recipient. The word 'application' has a wider connotation than the word 'spent', so that an application of income of the donor trust could not be denied. Again, the corpus fund may not necessarily be invested in specified securities but could also be toward capital expenditure, which again qualifies as an application of income. The amount of Rs. 20.80 lacs is paid to TEF for the scholarship to students of Tolani Maritime Institute, being run by it, i.e., the payee-trust. The same is clearly an application of income to that extent and, in fact, stands reflected in the income & expenditure account - The donation is not to set up any scholarship fund, but for scholarship to be granted to the individual students, forming part of the regular expenditure of the done- trust and, as such, not a corpus donation, as stated in the relevant receipt. However, this would not materially impact; rather, only enhances the assessee's case inasmuch as one of the Revenue's objections was of the same being toward the corpus of the donee. The same would, therefore, without doubt, qualify for exemption u/s. 11(1)(a).
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