Law: Income Tax Act, 1922

Section: 4(3)

Law: Income Tax Act, 1922

Section: 4(3)

Section 11 of the Income-tax Act, 1961 [Corresponding to section 4(3) of the Indian Income-tax Act, 1922] - Charitable or Religious Trust - Exemption of income from property held under - Assessment year 1956-57 - Assessee company was formed to raise funds by conducting kuris, receiving donations and subscriptions - Object of assessee was to utilize its income for religious and charitable purposes - Whether fact that assessee spent very small amount in charity and transferred remaining amount to reserve fund or fact that business was carried on by directors themselves and not by trustees appointed by directors was not material considerations for deciding applicability of section 4(3)(i) of 1922 Act - Held, yes - Whether where it was no body's case that any part of income had been utilized for purposes other than those specified in memorandum or articles of association, income of assessee could be exempt under section 4(3)(i) of 1922 Act - Held, yes FACTS The assessee company was formed to raise funds by conducting kuris, receiving donations and subscriptions. The object of the assessee was to utilize its income for religious or charitable purposes. During relevant accounting years the assessee carried on the business in kuris and also derived income from shares, securities, interest on mortgage and loans. The assessee claimed that the income of the company was exempt from income-tax as the income, according to it, was applied wholly for religious or charitable purposes. The ITO rejected the contention of the assessee. He held that the income of the assessee was not being wholly applied for religious or charitable purposes for every year; 20 per cent of the profits was being set apart as reserve fund and the bulk of the balance was being invested in buildings, shares and securities, etc. On appeal, the AAC held that the assessee did not satisfy the conditions under section 4(3)(i) of the 1922 Act, and he held that the income derived by the assessee did not qualify for exemption under section 4(3)(i) of the 1922 Act. On second appeal, the Tribunal also denied exemption to the assessee. On reference : HELD The property was held at least under a legal obligation and…

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