Law:

Section:

Section 11 of the Income-tax Act, 1961 [Corresponding to section 4(3)(i) of the Indian Income-tax Act, 1922] - Charitable or religious trust - Exemption of income from property held under - Assessment years 1956-57, 1957-58 and 1959-60 - Assessee was registered as company under Indian Companies Act, 1913 with objects mainly to support protect, maintain, increase and promote export of cloth of all varieties - Assessee was financed mainly from Government grants and subscription from members - ITO brought to charge excess of income over expenditure under section 12 of 1922 Act as in his view there was no mutuality; declaration and payment of dividend being prohibited, Government grant based on actual expenditure incurred should be considered as income as it came regularly from a definite source and as requirement of mutual association were not fulfilled, and as income was not exempt under section 4(3)(i) or (ii), as it was not a charitable organization - Since object of assessee was an object of general public utility and intended to benefit public in country as a whole, and it was not an association for profit, income of assessee was thus entitled to exemption under section 43(i) - Held, yes FACTS The assessee-company was established with a view to promote, support, protect, maintain and increase the export of cloth and yarn,inter alia, to promote the export of cotton textiles from this country. As regards its income and property, it was provided in clause (2) of the licence that the income and property would be applied solely towards the promotion of the objects of the association and that no portion thereof would be paid or transferred, directly or indirectly, by way of dividend, bonus or otherwise by way of profit... the remuneration to any of its officers or servants being excepted. It was also provided in the licence that the licence granted and the registration of the assessee would cease on violation of any of the conditions thereof. So far as its finances were concerned, the assessee received its funds from two sources, namely, from the grants made by the Central Government and from subscriptions of its members. The grants which were made by the Central…

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