Law: Income Tax Act, 1961

Section: 11

Income-tax-----Charitable purposes---Charitable trust---Exemption---Accumulation of income--- Condition that amount should be invested in Government securities---Condition applies only if more than 25 % of income (or Rs.10,000) is to be exempted---Trust utilising an amount of eight lakhs of rupees in purchasing building to be used as a hospital---Trust having additional income of Rs.1,64,210---Trust entitled to exemption of Rs.8 lakhs and also Rs.1,64,2)0---Indian Income Tax Act, 1961, S.11---[CIT v. S.RM. CT. M. Thiruppani Trust (1982) 134 ITR 555 reversed]. Under section 11(l)(a) of the Income Tax Act, 1961, income derived from property held under trust for charity, to the extent that such income is applied for charitable or religious purposes will be exempt from income-tax. Where the income or the entire income is not so spent, but is accumulated, it will be exempt to the extent of 25 per cent. of its total income or Rs.10,000, whichever is higher. Under section 11(2), if the trust desires to accumulate more than 25 per cent. of its income and wants to claim exemption from income-tax, it has to comply with the conditions which are laid down in section 11(2)(a) and (b). The first condition is that a notice in writing should be given to the Income-tax Officer specifying the purpose for which the income is being accumulated and the period for which the income is to be accumulated. The period should not exceed ten years. The second condition is that the amount so accumulated has to be invested in any Government security as specified in section 11(2)(b) of the Act. Under section 11(1), every charitable or religious trust, irrespective of whether it has filed a declaration under section 11(2) or not, is entitled to deduction of a certain income from its total income of the previous year. The income so exempt is the income which is applied by the charitable or religious trust to charitable or religious purposes in India. If the entire income is so applied, the entire income would be exempted. If the entire income is not applied but some income is accumulated by such a trust, then also under section 11(1)(a), such accumulated income to the extent of 25 per cent. of…

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