Law:

Section:

Section 11 of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under - Assessment year 1965-66 to 1968-69 - Certain income arising out of donations made to trust was specifically earmarked for charitable purposes - Some other donations were not so earmarked - Revenue disallowed exemption in respect of donations not so earmarked on ground that such donations were liable to be spent on non-charitable objects - Whether in view of clause (6) section 11(1) it is immaterial whether donor of property had specifically earmarked manner in which income from property was to be spent by trustees - Held, yes - Whether if condition, namely, that property held under trust only in part for charitable purposes is satisfied, clause (b) of section 11(1) becomes applicable and income to extent to which it is utilised for wholly charitable purposes is exempt - Held, yes - Whether since question referred proceeded on basis that entire income from both categories of donations was actually spent for charitable purposes only, all such income would be exempt from being included in total income - Held, yes FACTS Four companies donated Rs. 11,61,775 on the express condition that the income arising out of these moneys would be spent for the would objects mentioned in paragraph 2(A) of the trust deed. The objects mentioned in paragraph 2(A) were wholly charitable in nature. The companies made additional donations to the trust amounting to Rs. 60,250. But these donations were not earmarked to be spent for any specific object with the result that the income from these donations could be utilised by the trust for one or more of the objects mentioned in the trust deed, and in accordance with its provisions. The ITO held that one-third of the income derived from these donations was not entitled to be exempted from income-tax because the said income was liable to be spent on the objects which were not charitable. This view was affirmed by the AAC. The Tribunal construed the document constituting the trust as not laying down any particular obligation upon the assessee to apportion the income arising out of the donations received by the trust…

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