Commissioner of Income Tax vs Aurobindo Memorial Fund Society

A. Subbulakshmy, J.—At the instance of the Revenue, the following questions of law have been referred to us for our consideration :

(a) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the donations of Rs. 7,25,000

made by the assessee to other institutions would tantamount to application of income for charitable purposes, thus, satisfying the requirements of

Section 11 of the Income Tax Act, 1961 ? and

(b) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the capital gains of Rs. 28,000

arising out of sale of Bhagalpur garden should be exempted u/s 11(1A) ?

During the assessment year 1984-85, the assessee-trust has donated funds amounting to Rs. 7,25,000 to Matriseva Trust, Aurobindo Action

and Service Trust. The assessee-trust claimed deduction. The Income Tax Officer rejected the claim of the assessee-trust. On appeal, the

Commissioner of Income Tax (Appeals) allowed the claim of the assessee-trust holding that the donations made by the assessee-trust were for

charitable purposes. The Tribunal confirmed the order of the Commissioner of Income Tax (Appeals).

This court in the case of Commissioner of Income Tax Vs. Thanthi Trust, has held that the trust which has applied the money for charitable

purposes was entitled to exemption u/s 11 of the Act. So, the assessee was entitled to claim exemption u/s 11 of the Act.

Following the aforesaid decision of this court and for the reasons stated therein, we answer the first question referred to us in favour of the

asses-see and against the Revenue.

With regard to the second question, the assessee-trust during the assessment year 1984-85 sold the garden at Bhagalpur and obtained a sum of

Rs. 28,000 and claimed exemption u/s 11(1A) of the Act. The Income Tax Officer rejected the claim of the assessee-trust. The appeal preferred

by the assessee-trust was also dismissed by the Commissioner of Income Tax (Appeals). On further appeal, the Tribunal directed the Income Tax

Officer to extend the benefit of exemption u/s 11(1A) of the Act to the assessee with regard to the amount of sale proceeds.

In the decision reported in Commissioner of Income Tax Vs. Ambalal Sarabhai Trust No. 3, , the Gujarat High Court has held that the

assessee, being a charitable trust, was entitled to exemption from tax on the capital gains arising on the sale of the shares, as the provisions of

Section 11(1A) of the Act were fully satisfied.

Following the aforesaid decision of the Gujarat High Court and for the reasons stated therein, we answer the second question in favour of the

assessee and against the Revenue.