Law:

Section:

Section 11 of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under (Option under explanation 2) - Assessment year 1994-95 - Whether law does not mention any specific mode of exercising option of setting apart 25 per cent of total income for charitable purpose to be spent in succeeding year in terms of Explanation 2 to section 11 and, therefore, If such an option is exercised when return is filed, it would be treated as in conformity with provisions contained in section 11 - Held, yes [Para 7] [In favour of assessee] FACTS â–  The assessee was a public charitable trust. It filed its return for the assessment year 1994-95 declaring 'nil' taxable income. â–  In the summary of total income filed by the assessee, it had mentioned gross income of Rs. 99.41 lakhs which represented interest receipts, rental income, bus collections and miscellaneous receipts. It was further stated that out of said income the assessee had applied and spent a sum of Rs. 47,27,533 for the objects of the Trust. In the return it was also stated that assessee was setting apart a sum of Rs. 32 lakhs to be spent for charitable purposes in the following year. â–  On said basis, assessee claimed that it was entitled to have the deduction of the entire amount and for the purpose of taxation, the income was 'nil' under section 11. â–  The Assessing Officer allowed assessee's claim to extent of amount actually spent for charitable purpose. â–  The assessee filed an appeal contending that since it had set apart Rs. 32 lakhs in terms of section 11 Explanation - II, by exercising said option in the return itself that should be treated as valid option. The Commissioner (Appeals) accepted said contention, which view had been upheld by the Tribunal as well as the High Court. â–  On revenue's appeal: HELD â–  To put it in nutshell, the exemption/deduction under section 11 from the income can be taken in three stages which are as under: (i) The assessee would be entitled to have the deduction of entire amount which has actually been spent and applied for charitable purposes, i.e., in furtherance of the objects of the…

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