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Commissioner of Income-tax Vs. Lucknow Diocesan Trust Association - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtAllahabad High Court
Decided On
Case NumberIncome-tax Reference No. 1148 of 1976
Judge
Reported in(1980)17CTR(All)94; [1980]123ITR38(All); [1980]4TAXMAN90(All)
ActsIncome Tax Act, 1961 - Sections 11; Charitable and Religious Trusts Act, 1922; Indian Trusts Act, 1882
AppellantCommissioner of Income-tax
RespondentLucknow Diocesan Trust Association
Appellant AdvocateR.K. Gulati and ;A. Gupta, Advs.
Respondent AdvocateA.B.L. Agnihotri and ;S.C. Tripathi, Advs.
Excerpt:
- - on further appeal, the income-tax appellate tribunal found that the assessee's claim was well-founded. on merits as well, the tribunal accepted the assessee's contention and held that when admittedly the association had been looking after and managing the affairs of the assessee-trust, the payment made to the association by the assessee as management charges could not but be for the purpose of the trust. it was further found and it is not disputed that the lucknow diocesan trust association manages the affairs of the assessee and this payment was made to them for the services rendered and that it was clearly for the purpose of the trust......meaning of section 11 of the act. the affairs of the assessee are managed by the lucknow diocesan trust association, hereafter the association. in the previous year relevant to the year under consideration the assessee had paid rs. 10,000 to the association as management charges and it claimed deduction of the same. the ito did not accept the claim for the reason that it was not ascertainable what amount had actually been incurred by the association for the management of the assessee-trust. from the income and expenditure account of the assessee the ito found that the assessee had claimed expenses on account of salaries, allowances, legal charges, postage and other incidental charges, necessary for its management and hence there was no necessity for any other expenditure on the.....
Judgment:

R.R. Rastogi, J.

1. This reference under Section 256(1) of the Income-tax Act, 1961, hereafter 'the Act', relates to the assessment year 1972-73. The assessee is a company incorporated under Section 25 of the Companies Act. It is the trustee of a trust known as B.I.G. Mission, Kanpur Trust, which is a religious and charitable trust within the meaning of Section 11 of the Act. The affairs of the assessee are managed by the Lucknow Diocesan Trust Association, hereafter the association. In the previous year relevant to the year under consideration the assessee had paid Rs. 10,000 to the association as management charges and it claimed deduction of the same. The ITO did not accept the claim for the reason that it was not ascertainable what amount had actually been incurred by the association for the management of the assessee-trust. From the income and expenditure account of the assessee the ITO found that the assessee had claimed expenses on account of salaries, allowances, legal charges, postage and other incidental charges, necessary for its management and hence there was no necessity for any other expenditure on the management of the assessee-trust specially when the sources of the assessee are only income from interest and rent.

2. The assessee appealed to the AAC who confirmed the disallowance for the same reasons which had been given by the ITO. On further appeal, the Income-tax Appellate Tribunal found that the assessee's claim was well-founded. According to the Tribunal, the assessee is a charitable and religious trust governed by the Charitable & Religious Trusts Act, 1922, and not by the Indian Trusts Act, 1882, and that there is no restriction placed in the aforesaid Act in regard to payment to the trustees for managing the affairs of the trust. On merits as well, the Tribunal accepted the assessee's contention and held that when admittedly the association had been looking after and managing the affairs of the assessee-trust, the payment made to the association by the assessee as management charges could not but be for the purpose of the trust. On that view, the Tribunal treated the aforesaid amount as permissible deduction from the income of the year. Hence, at the instance of the Commissioner, the following question of law has been referred for the opinion of this court:

' Whether, on the facts and in the circumstances of the case, the Tribunal was correct in allowing the payment of Rs. 10,000 made by the trust to its trustees as an admissible deduction '

3. As noted above, the facts, found by the Tribunal were that the assessee is a charitable and religious trust and is governed by the Charitable and Religious Trusts Act, 1922, and not by the Indian Trusts Act, 1882. It could not be shown to us that there is any restriction placed in the Charitable and Religious Trusts Act, 1922, in the matter of payment of remuneration by the trust to the trustees. It was further found and it is not disputed that the Lucknow Diocesan Trust Association manages the affairs of the assessee and this payment was made to them for the services rendered and that it was clearly for the purpose of the trust. On these facts, the Tribunal was right in holding that this amount of Rs. 10,000 was an admissible deduction.

4. We, therefore, answer the question in the affirmative, in favour of the assessee and against the department. There shall, however, be no order as to costs since nobody appeared for the respondent-assessee.


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