Akhey Ram Ishwari Prasad Trust vs Commissioner of Income Tax

Heard learned counsel for the revenue.

On an application filed u/s 256 of the Income Tax Act, 1961, the Tribunal has referred the following question for our opinion :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the income of the assessee-trust was not entitled to exemption u/s 11(1)(a) of the Income Tax Act ?"

The assessee is a trust. It was constituted by Shri Jeewanmal Tapadia, who was the Manager of certain religious and charitable funds. A formal declaration for creating trust in respect of the religious and charitable funds was made by the aforesaid Shri Jeewanmal Tapadia on 26-8-1957.

There were number of funds, which Shri Tapadia was managing. By the deed of indenture dated 26-8-1957, it was declared that the respective assets of the religious and charitable funds will be in favour of the trustees, who will hold the management and operate the respective asset of these funds for the purposes stated in the trust deed. The assessee claimed exemption on this ground.

The Income Tax Officer noticed that during the accounting period, the income from various funds and application thereof are as under :

Name of Institution

Income Credited to the Account

Expenses Debited

Expenses out of current income

Shri Kaliji Temple

4,826

7,998

4,826

Charity Fund

7,526

6,663

6,663

Smt. Moharidevi Sanskrit Pathshala

15,526

M/s, Jeetmal Charity Fund

1,244

M/s. Jagannath Tapadia Ayurvedic Aushdhalaya

11,239

M/s. Jagannath Tapadia Homoeopathic Aushdhalaya

9,112

29,124

35,015

11,489

A bare perusal of the aforesaid details reveal that the income in the first institution was only Rs. 4,826, whereas the expenses were at Rs. 7,998. These extra expenses are met from the accumulated fund of the earlier years. There was no income from M/s. Jagannath Tapadia Ayurvedic Aushdhalaya, but expenditure against that Aushdhalaya has been at Rs. 11,239 and Rs. 9,112 respectively. This expenditure was also incurred by withdrawing from the Charity Fund Account. In Smt. Moharidevi Sanskrit Pathshala and M/s. Jeetmal Charity Fund, there were incomes of Rs. 15,526 and Rs. 1,244 respectively, but there was no application of that income. Thus against the total income of Rs. 29,124, the expenses incurred were of Rs. 35,012. Since the expenses incurred were in excess than the income, therefore, the trustee was not entitled to exemption u/s 11(1)(a) of the Income Tax Act and exemption was refused by the assessing officer.

In appeal before the Appellate Assistant Commissioner, the Appellate Assistant Commissioner followed the decision of High Court of Mohanlal Hargovinddas Public Charitable Trust Vs. Commissioner of Income Tax, and allowed the appeal.

In appeal before the Tribunal, the Tribunal considered that the assessee has incurred more expenses than the income, therefore, not entitled for exemption u/s 11(1)(a) of the Income Tax Act, therefore, he restored the view taken by the Income Tax Officer.

Considering the specific finding of the Tribunal and the assessing officer that assessee has incurred expenses from the Charity Fund and has incurred excess expenses than the income earned, the assessee is not entitled for exemption u/s 11(1)(a) of the Income Tax Act.

In the result, we answer the question in affirmative, i.e., in favour of the revenue and against the assessee.

The reference so made stands disposed of accordingly.