TMI Blog1998 (2) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... at Madras (see [1982] 134 ITR 555) by the Income-tax Appellate Tribunal under section 256(1) of the Income-tax Act, 1961: Whether, on the facts and in the circumstances of the case, the income of the assessee is exempt from tax under section 11 of the Income-tax Act for the assessment year 1970-71 ? The assessee is a charitable trust for carrying out Thiruppani or repairs to old Hindu temples, building new ones, giving aid to or establishing hostels, educational and industrial institutions, etc. It is not in dispute that the objects of the trust are charitable. On March 1, 1963, the trustees resolved that the income of the trust should be accumulated for a period of ten years commencing from April 13, 1961, for the various charitab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 8 lakhs was an asset acquired in realisation of an outstanding due and hence, the sum of ₹ 8 lakhs cannot be included in the income of the assessee for the purposes of section 11(1). Since the balance income of ₹ 1,64,210.03 was not invested by the assessee in accordance with the declaration filed by the assessee under section 11(2), the assessee could not claim exemption from tax in respect of ₹ 1,64,210.03. The material part of section 11, at the relevant time, was as follows : 11. Income from property held for charitable or religious purposes.---(1) Subject to the provisions of sections 60 to 63, the following income shall not be included in the total income of the previous year of the person in receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he income or the entire income is not so spent, but is accumulated, it will be exempt to the extent of 25 per cent. of its total income or ₹ 10,000, whichever is higher. Under section 11(2), if the trust desires to accumulate more than 25 per cent. of its income and wants to claim exemption from income-tax, it has to comply with the conditions which are laid down in section 11(2)(a) and (b). The first condition is that a notice in writing should be given to the Income-tax Officer in the prescribed manner specifying the purpose for which the income is being accumulated and the period for which the income is to be accumulated. The period should not exceed ten years. Rule 17 of the Income-tax Rules, 1962, prescribes that the notice which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 8 lakhs does constitute the income of the assessee-trust. But this income was required to be invested in Government securities in view of the declaration filed by the assessee under section 11(2). Since the amount is not so invested, the benefit of section 11(1) cannot be extended to the assessee. This is the only submission we have to consider. A mere look at sections 11(1) and 11(2) is sufficient to dispel this argument. Under section 11(1), every charitable or religious trust, irrespective of whether it has filed a declaration under section 11(2) not, is entitled to deduction of certain income from its total income of the previous year. The income so exempt is the income which is applied by the charitable or religious trust to its c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his additional accumulated income also, the assessee is required to invest the additional accumulated income in the manner laid down in section 11(2) after following the procedure laid down therein. In the present case, the assessee is not claiming any benefit under section 11(2) as it cannot ; because in respect of this assessment year, the assessee has not complied with the conditions laid down in section 11(2). The assessee, however, is entitled to claim the benefit of section 11(1)(a). In the present case, the assessee has applied ₹ 8 lakhs for charitable purposes in India by purchasing a building which is to be utilised as a hospital. This income, therefore, is entitled to an exemption under section 11(1). In addition, under s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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