Law:

Section:

Section 11 of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under - Assessment year 2003-04 - Whether additional condition by way of Explanation to section 11(2) inserted with effect from 1-4-2003 is intended to apply only to accumulations in excess of 15 per cent under section 11(2) and not to accumulations up to 15 per cent under section 11(1)(a) - Held, yes - Whether, therefore, even if donations are made by assessee-trust out of accumulations from previous years and not out of surplus reserves, same would still not be liable to be included in income of assessee so far as said accumulations are not beyond accumulation of 15 per cent permitted by section 11(1)(a) - Held, yes FACTS The assessee was a trust duly registered under section 12AA and duly recognized under section 80G(5)(vi). For the relevant assessment year, the assessee had shown certain gross income and deducted therefrom the amount applied for charitable purposes by way of donation to another charitable trust, BLB, as corpus donation and to others. The source of the amount over and above the income of the year was the accumulation of income of the past. The Assessing Officer added the amount of donations to the income of the assessee holding that owing to the Explanation appended to section 11(2) with effect from the assessment year 2003-04, any donation made out of income accumulation or set apart during the period of accumulation or thereafter to any trust or institution registered under section 12AA was liable to be added in the income of the donor-trust. On appeal, the Commissioner (Appeals) deleted the addition holding the donation by the assessee to BLB trust was made out of excess of income over expenditure and not out of amount accumulated under section 11(1)(a). The Tribunal affirmed the order of the Commissioner (Appeals). On the revenue's appeal : HELD It is clear from section 11(1)(a ) that the income applied for charitable purposes is not to be included in the total income for the relevant year. In CIT v. Shri Ram Memorial Foundation [2004] 269 ITR 35 / 140 Taxman 263 (Delhi), the Court has held that when a donor-trust, which is…

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