Law:

Section:

Rules 4 and 5 of the Post Office Savings Certificates Rules, 1960 - Plaintiffs, trustees of a registered charitable trust, passed a resolution for investment of Rs. 1 lakh in 7-year National Savings Certificates and purchased aforesaid certificates - Whether public charitable trust registered under law would come within meaning of an association or an institution or a body registered as a society defined under rule 4 and thus, was entitled to interest on aforesaid investment - Held, yes - Whether plaintiffs could be denied payment of interest on 7-year National Savings Certificates merely on ground that they were exempt from payment of income-tax - Held, no FACTS The Union of India, the defendant, issued 7-year National Savings Certificate under the powers conferred on them by the Government Savings Certificates Act, 1960. The plaintiffs, the trustees of a registered public charitable trust, passed a resolution for the purchase of 7-year National Savings Certificates (II Issue) in the name of the trust of the value of Rs. 1 lakh. Thereafter the certificates were purchased. On maturity, when the plaintiffs approached the Post Master for the encashment of these certificates, on maturity, the Post Master stated that the certificates were issued in contravention of rule 5 as the trust whose donations were free from income-tax could not purchase these certificates. He, therefore, paid only the face value of the certificates and refused to pay any interest. On a suit filed by the plaintiff for recovery of the interest amount due on the certificates together with further interest on that amount: HELD As far as section 80G of the Income-tax Act, 1961 is concerned, the benefit with regard to payment of income-tax goes to the donor and not to the charitable trust as such. As far as the charitable trust is concerned, under section 11 of the Income-tax Act, it gets exemption from payment of income-tax because it is a charity under section 11. Therefore, there can be no rule which can deny them the right to save in any savings scheme just because they are exempted from payment of income-tax under the provisions of the Income-tax Act. Under rule 4, it has been set out as to…

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