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Section 11 of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under - Objects of assessee, a public charitable trust, were education, relief of poor, medical relief and other objects of general public utility - In pursuance of its objects, assessee had granted loan scholarship amounts to various students who returned said amounts of loan scholarship to assessee in due course - Whether receipts from scholars of loan scholarship amounts granted by assessee-trust in earlier years constituted assessee's income in terms of rule 12(2) for purposes of section 11 - Held, no. FACTS The objects of the assessee, a public charitable trust, were education, relief of the poor, medical relief and other objects of general public utility. In pursuance of its objects, the assessee had granted loan scholarship amounts to various students who returned the said amounts of loan scholarship to the assessee-trust in due course. The Tribunal accepting the assessee's claim held that the receipts from scholars of the loan scholarship amounts did not constitute assessee's income in terms of rule 12(2) for the purposes of section 11. On reference, the revenue relying upon rule 12(2) contended that since loans were granted in past out of the income exempted under section 11, the return of the said amounts of loans should be construed as income of the assessee. HELD Return of the loan by the debtor to the creditor can never constitute income. There was no dispute about the fact that the said amounts were received by the assessee towards repayment of the loans advanced by it. Further, rule 12(2) is applicable only when contribution is made by the trust or a charitable or a institution to which section 11 applies to another trust. On the face of it rule 12(2) had no application to this case. Therefore, the receipts from scholars of the loan scholarship amounts granted by the assessee-trust in the earlier years did not constitute assessee's income in terms of rule 12(2) for the purposes of section 11. CASE REFERRED TO Trustees of Kilachand Devchand Foundation v. CIT [1988] 172 ITR 382 (Bom.). EDITOR'S NOTE The High Court following the decision…

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