TMI Blog1996 (10) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... d be the income of the trust or should be the total income determined by the Income-tax Officer for the purpose of assessment. The questions referred for consideration are : " 1. Whether, on the facts and in the circumstances of the case, and on an interpretation of the relevant provisions of the Income-tax Act, the assessee is entitled to exemption at 25 per cent. on Rs. 2,57,376 or only on Rs. 87,010 ? 2. Whether, on the facts and in the circumstances of the case, should not the Tribunal have accepted the view of the Revenue expressed in the circular, the same being consistent with the relevant provisions of the Income-tax Act, 1961 ? 3. Whether, on the facts and in the circumstances of the case, and also considering the scope of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee had to approach the Commissioner of Income-tax (Appeals) for a limited controversy. The assessee contended that the total receipts are Rs. 2,57,376 and in accordance with the statutory provisions of section 11(1)(a), 25 per cent. thereof is not to be treated as the income of the trust and it is only after deducting 25 per cent. thereof (Rs. 64,344) one has to proceed further to determine the total taxable income. The first appellate authority considered this situation. In the process of reasoning, the authority observed that the concept of total income is of a very restricted applicability and it would only refer to that income as computed under section 2(45) of the Income-tax Act. The authority observed that the total income, a concept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of the trust. Accordingly, holding those receipts amounting to Rs. 2,57,376 and 25 per cent. thereof amounting to Rs. 64,344, the appellate authority corrected the proceedings of the Income-tax Officer by ordering him to exempt from the total income 25 per cent. of the income of the trust, the amount to be taken to be Rs. 64,344 and not Rs. 21,752 as was ordered by him. The Income-tax Appellate Tribunal, in the first instance (see paragraph 4) has taken up for consideration the statutory language of section 11(1)(a) of the Income-tax Act, 1961. For a ready reference it would be convenient to reproduce the same : " 11. (1) (a) income derived from property held under trust wholly for charitable or religious purposes, to the extent to w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the trust from and out of which 25 per cent. is set apart in accordance with the spirit of the statutory provision. Reading of the circular dated June 19, 1968, it would be a condition by way of a clarification. The circular relates to the subject in the context. It contains instructions regarding " income " required to be applied for charitable purposes. Even the Board of Revenue has understood that it would be incorrect to assign to the word " income " used in section 11(1)(a) of the Act, the same situation of understanding as is available from the expression " total income " which is used in section 2(45) of the Act. It is specified that in the case of a business undertaking held under a trust, its income disclosed by the account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference to the book income, after adding back the items stated therein. It is thereafter that we see that whatever may be the position, the amount spent or applied for the purposes, it is clarified, should not be less than 75 per cent. of the latter if the trust is to get the full benefit of the exemption under section 11(1). " In our judgment, the statutory provision makes it abundantly clear that in regard to a trust which is entitled to get the full benefit of exemption of section 11(1) of the Act, its income with reference to the head under consideration would have to be understood only at 75 per cent. thereof, leaving 25 per cent. altogether at that stage itself. In this sense of the situation, the Central Board of Revenue also has und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act the statutory language of section 11(1)(a) is more than clear and even the Central Board of Revenue has also considered the situation and the first appellate authority and the Tribunal both have considered the situation in accordance therewith. Taking into consideration all the facts and circumstances, the situation needs no disturbance of any kind. For the above reasons, we answer question No. 1 to the effect that the assessee is entitled to exemption of 25 per cent. on Rs. 2,57,376 and not on Rs. 87,010. We answer question No. 2 in the affirmative. Both the questions are answered against the Revenue and in favour of the assessee. A copy of this judgment under the seal of this court and the signature of the Registrar shall be forwa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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