Income Tax Act, 1961

--Charitable trust--Exemption under section 11 Raising of unsecured loan without prior approval of Charity Commissioner--Assessee was engaged in the charitable activities and had been granted registration under section 12A. Revenue denied the benefit of exemption under section 11 inter alia by disallowing the repayment of the interest free unsecured loan taken from the managing trustees in earlier years without obtaining prior approval from the Charity Commissioner under the Bombay Public Trust Act, 1950 (the Trust Act). Commissioner (Appeals) as well as Tribunal upheld the order of assessing officer. Being aggrieved, assessee preferred an appeal before the High Court. Held: There was no bar in the Trust Deed to take unsecured loans. The breach, if any, was in failing to comply with the provisions of the Trust Act in an earlier year. Moreover, it was not in dispute that the unsecured loans taken in earlier years were duly reflected in the books maintained by the assessee and though prior approval was not obtained, the assessee had, in fact, subsequently applied for approval from the Charity Commissioner and he had neither granted approval nor initiated any proceedings under the Trust Act for the alleged violation of obtaining unsecured loan without prior permission. In these circumstances, assessee could not be denied the benefit of exemption under section 11.

Income Tax Act, 1961, Section 11

Income Tax Act, 1961

--Charitable trust--Exemption under section 11 Allowability of depreciation --The issue under consideration was whether Tribunal was justified in allowing depreciation on the assets, the cost of which had already been allowed as a deduction on account of application of income and the same would not amount to double deduction. Held: Thus, Tribunal was justified in holding that depreciation was allowable on capital assets, the cost of which had already been allowed as application of income under section 11.