Law: Income Tax Act, 1961

Section: 11,2(15),12

(a) Income-tax----Charitable purposes---Charitable trust---Trust established for benefit of employees of a public sector company---Trust was not established for charitable purposes within the meaning of S..2(15) Not entitled to exemption under S.11---Indian Income Tax Act, 1961 Ss. 2 (15)& 11. (b) Income-tax-- ---Income Mutual concern-- General ''principle Trust established for benefit of employees of a public sector company---Trust fund's to consist of contributions front employees, contribution front employer, contribution from employer donation etc.--­Trust empowered to invest funds---interest' on investments would riot be covered by principle of mutuality---Not entitled to exemption -Indian Income Tax Act, 1961: " The essence of mutuality lies in the return for what one has contributed to a common fund. The fund should fulfil the essential requirements, that all the contributors to the common fund must be entitled to participate in the ,surplus, and that all the participators in the surplus. It does not mean that each member should contribute to the common fund or that each member should participate in the surplus or get back from the surplus'-precisely what he had paid.- The principle of mutuality is not destroyed by the presence of transactions which are non-­mutual in character and the principle of mutuality can, tit such cases," be confined to transactions with members. The two activities in appropriate cases can be separated and the profits derived from non-members can be brought to tax. The assessee-trust styled The Indian Telephone Industries Employees Death and Superannuation Relief Fund" was created by a deed, dated December 19, 1983,by 'the employees of the Indian Telephone Industries called the settlers for the :btef,of:abpu1,120,000 employees of ITI in various towns in the country. As per clause 2 of the Trust deed, the trust funds consisted of (i) monthly contributions "by employees; (ii) contributions if any made by the, ITI management, (iii) donations;. (iv) interest or other income earned from the funds or any investments thereof, (v) securities and investments made out of the funds, and (vi) money or other assets vested in any manner in…

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