Law:

Section:

Section 11 of the Income-tax Act, 1961 - Charitable or religious trust - Exemption of income from property held under - Assessment years 1961-62 to 1963-64 - An association of persons, chiefly engaged in horse racing, declared and made a trust - As per said trust deed, surplus funds were to be disposed of, (i) by making improvements to racing facilities, and/or (ii) by making donations at discretion of trustees to any recognised institution for social, cultural and physical benefits of people - Whether surplus funds really emanated from a property which was not a subject-matter of trust and as such in absence of any legal obligation fastened thereto, no exemption could be allowed under section 11 - Held, yes - Whether further, since trustees had indefeasible alternative right to apply funds to other purposes, without making any donation to charitable purposes no part of its income was exempt from tax - Held, yes FACTS The assessee was the Vice-president of the Jorhat Races, an association of persons, chiefly engaged in horse-racing and similar equestrian activities. The association declared and made a trust on 4-3-1959, by execution of a trust deed. Clause (3) of the deed laid down that the surplus funds may be disposed of, (a) by making improvements to the racing facilities available at Jorhat by way of increased stake money, by increasing the facilities available to members of the public or in such other manner connected with the races as the trustees shall consider desirable, and/or (b) by making donations at the discretion of the trustees to any recognised institutions for social, cultural and physical benefit of the people. For the assessment years 1961-62 to 1963-64, the Income-tax Officer assessed the surplus funds of the association under section 143(3). The assessee claimed exemption from tax under section 11(1) on the ground that the trust created under the said deed provided for the disposal of the surplus funds for charitable purposes. Such a claim was negatived both by the Income-tax Officer and the Appellate Assistant Commissioner. On second appeal, the Tribunal held that the first of the above objects, was an object of general public utility and,…

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