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 1948-49 to 1958-59 - Whether where object of charity instead of being channelised in one direction namely towards non relations of wakif was also channelised to become all pervasive so as to include even relations of wakif, that portion of charity, which had thereby gone to poor relations of wakif did not cease to be charity of general nature - Held, yes - Whether, therefore, even such charities were exempt under section 4(3)(i) of Act, 1922 - Held, yes FACTS The deceased, executed a deed of wakf and thereby created a charitable trust. In the income-tax returns filed for the assessment years 1948-49 to 1958-59, the mutawallis offered a portion of the income of the wakf estate, in some of the assessment years, for taxation under the Act. The ITO however, made his own calculations and taxed a major portion of such income at the lower rate applicable under the first proviso to section 41(1) of Act 1922. The exemption granted by the ITO related only to such portion of the income as had been actually applied to religious and charitable purposes, which only, according to the ITO went towards the objects mentioned in the wakfnamah. On appeal, the AAC while confirming the orders passed by the ITO modified them to the extent that the income of the wakf estate was directed to be taxed under the first part of the proviso under section 41(1) of Act, 1922, at the maximum rate. Thereafter, the appeals were taken by the assessee before the Appellate Tribunal and were allowed. On reference: HELD The object of charity as laid down under the deed was valid even under the general law and if incidentally that object instead of being channelised in one direction only, namely, towards the non-relations of the wakif, was also channelised to become all-pervasive so as to include even the relations of the wakif, that portion of the charity, which had thereby gone to the poor relations of the wakif, did not cease to be a charity of a general nature. In that view of the matter, it was…

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