TMI Blog1979 (7) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the fresh assessments to be made for each of the assessment years 1965-66, 1966-67 and 1967-68, capital expenditure on improving the property of the trust or maintaining such property, which would result in the income of the trust being maintained or increased would constitute application of amounts for charitable purposes within the meaning of section I I of the Income-tax Act, 1961 ? " The assessee is a charitable trust founded about two centuries ago. Unfortunately, we do not have before us any idea of the objects for which the trust had been established. It appears to be governed by a scheme sanctioned by this court in C.S. No. 222 of 1895 dated 5th October, 1896, as modified by the judgment dated December 13, 1929, in C.S. No./ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r sources ". Depreciation was disallowed for 1965-66, and for the other two years, the assessee had not made any claim therefor before the ITO. The AAC did not accept the contention of the assessee relating to the depreciation. The assessee appealed to the Tribunal. It was contended before it that the computation of accumulation of profits and determination of the income for the purpose of taxation, were in any event wrong and that with reference to the assessment years 1966-67 and 1967-68, certain amounts spent for the improvement of the Kothwal Market, etc., should have been considered as income applied for the purpose of the trust. The Tribunal, after obtaining a report from the AAC, considered the matter, and ultimately came to the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rposes, to the extent to which such income is applied to such purposes in India; and, where any such income is accumulated for application to such purposes in India, to the extent to which the income so accumulated is not in excess of twenty-five per cent. of the income from the property or rupees ten thousand, whichever is higher." Sub-section (4) of s. 11 runs- as follows: " For the purposes of this section 'property held under trust' includes a business undertaking so held, and where a claim is made that the income of any such undertaking shall not be included in the total income of the persons in receipt thereof, the Income-tax Officer shall have power to determine the income of such undertaking in accordance with the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clusion, the Tribunal has mixed up two things relevant under the section. The section requires consideration of the objects of the trust and also of the income derived from the property held in trust. The income from the trust properties has to be applied on the objects of the trust. As far as the objects of the trust are concerned, the application of the amount can be for revenue or capital purposes. This was the conclusion arrived at by the Gujarat High Court in Satya Vijay Patel Hindu Dharamshala Trust v. CIT [1972] 86 ITR 683. In that case, a trust was created and certain immovable properties were transferred to it to be administered as a Hindu Dharamshala. During the relevant years, the trustees spent the entire surplus income in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd restored to his file. The result is that the question referred to us would have to be answered as follows: So long as the income derived from the property held under trust had been expended on the objects of the trust, the income would be exempt under s. 11 of the Act. If this was not done, then the income would not be exempt. The matter will have to be considered only by the ITO in reassessment proceedings arising from the setting aside of the assessment by the Appellate Tribunal. We shall now turn to T.C. Nos. 350 to 355 of 1977. The reference appears to have arisen out of the six reference applications made to the Tribunal, viz., R. A. Nos. 946 to 951 (Mds) of 1974-75. R. A. Nos. 946 to 948 (Mds) 1974-75, related to the question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o go into the computation of the income in the light of the appropriate provisions of the Act applicable to the income derived from the property held under trust. We do not, therefore, think it proper to answer this question as it does not arise out of the Tribunal's order. In the reference in pursuance of the direction against R.A. Nos. 946 to 948 (Mds) 74-75, the following question has been referred : " Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in cancelling the penalty imposed under the provisions of section 271 (1)(a) of the Income-tax Act, 1961, in this case? " The Tribunal, in cancelling the penalty, has observed in its order as follows: " As the assessments in question have b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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