TMI Blog1998 (8) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... g funeral expenses and providing financial help for the poor for conducting marriages of their dependants without distinction of caste, creed or community. For the assessment year 1982-83, the assessee filed its return disclosing its status as that of association of persons, declaring an excess of expenditure over income to the extent of Rs. 3,260. The assessee claimed exemption under sections 11 to 13 of the Income-tax Act, 1961. The Income-tax Officer found that the assessee made certain payments to its office bearers, who were interested persons and so the provisions of section 13(1)(c)(ii) are applicable. The assessee filed an appeal before the Commissioner of Income-tax. The assessee claimed that all the payments made were approved by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to payment of Rs. 10,001 to Shri Thatha Chettiar, president of the society, and other payments and advances to interested persons as the same fall under the first proviso to section 13(1)(c) of the Income-tax Act, 1961?" The assessee-society was registered under the Societies Registration Act on March 20, 1959, and was registered before April 1, 1962. The assessee claims exemption under section 11 of the Act. The assessee had made certain payments to its office bearers and the assessee had also incurred various expenses in education, medical relief, etc., in pursuance of the objects of the society. The assessee claims that it is entitled to exemption under section 11 of the Act. The assessee claims that all the payments were approved an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of this Act and under the terms of the trust or the rules governing the institution, any part of such income enures, or (ii) if any part of such income or any property of the trust or institution (whenever created or established) is during the previous year used or applied, directly or indirectly for the benefit of any person referred to in subsection (3) : Provided that in the case of a trust or institution created or established before the commencement of this Act, the provisions of sub-clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub-section (3), if such use or application ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the rules governing the institution and the mandate itself was made after 1962 and the mandate may be contained in a resolution framed even after April 1, 1962, and that the resolution is in accordance with the rules and the rules themselves were framed before April 1, 1962, which view was confirmed by the Tribunal. The apex court's decision in CIT v. Rattan Trust [1997] 227 ITR 356 is relevant in the context. The headnote of this report may usefully be extracted and set out below: "Section 13 of the Income-tax Act, 1961, provides for exigencies when the provisions of section 11 would not be applicable. Section 13 was amended by the Finance Act, 1970, with effect from April 1, 1971. Section 13 of the Income-tax Act was substituted by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amending the trust deed at a later stage after that crucial date, even if the trust deed authorised the trustees to amend the trust deed to bring in the mandatory condition or requirement for them to invest funds of the trust in a concern in which they might be interested. Any other interpretation would set at naught the proviso and would defeat the very purpose for which the provisos were added in section 13 of the Income-tax Act and section 21A of the Wealth-tax Act. The purport of the provisos is in no way obscure and the provisos would apply, only if the trust created before April 1, 1962, mandated at that time, that the trustees could invest the funds of the trust in a concern in which they were interested being the persons referred t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the decision of the High Court, (i) that the interest income of the assessee was not exempt from tax under section 11 of the Income-tax Act. (ii) that the assessee-trust was not entitled to exemption under section 21A of the Wealth-tax Act". In this case the claim of the assessee is that all the resolutions passed by the directors and the committee members had been ratified at the annual general body meeting on March 8, 1981, so far as payments to various office bearers are concerned, and this institution was created before April, 1, 1962, before the commencement of the Income-tax Act, 1961. In the instant case, the trust being created before April 1, 1962, and the trust did not contain any mandatory provisions with regard to thes ..... X X X X Extracts X X X X X X X X Extracts X X X X
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