Law:

Section:

Section 45(e) of Gift-tax Act, 1958 - Act not to apply in certain cases - Assessment year 1985-86 - Assessee was a trust - In view of certain offending clauses in trust deed, assessee was denied exemption under section 11 of Income-tax Act, 1961 - Thereafter, assessee moved civil court and got a declaratory decree dated 29-4-1981 whereunder said offending clauses were got deleted - Thereafter, assessee was held entitled to exemption under section 11 of 1961 Act - During relevant year, assessee made certain gift and claimed exemption of amount thereof under section 45(e) - Whether since after declaratory decree of civil court, assessee was held entitled to exemption under section 11 of 1961 Act, gift made by it in relevant year was exempt under section 45(e) - Held, yes FACTS The assessee-trust was denied exemption under section 11 of the Income-tax Act for various years taking notice of certain offending clauses in the trust deed. It necessitated the assessee-trust to move the civil court under section 92 of the Civil Procedure Code where the trust got a declaratory decree dated 29-4-1981, where under the said offending clauses were got deleted with effect from 25-6-1968. In its return for the assessment year 1985-86, the assessee claimed exemption of a gift of Rs. 89,615 made by it. The Assessing Officer refused to grant exemption under section 45(e). On appeal, the Commissioner (Appeals) upheld the decision of the Assessing Officer holding that the amendment had only prospective effect and not retrospective effect. On further appeal, the Tribunal, following its own order in ITA Nos. 3838 and 3839/Mds/89, in the assessee's own case, held that the assessee was exempt under section 45(e). On revenue' appeal: HELD The apex court in the case of CIT v. Kamla Town Trust reported in [1996] 217 ITR 699, held that since the decree was passed by the civil court permitting rectification of the trust deed, the same would have only prospective operation and would not affect the assessment year in question of the charitable trust and the income of the trust was not entitled to exemption under sections 11 and 12 of the Income-tax Act for the assessment years prior to the…

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