CPT V24P7-Art1 (Content).pmd - Taxmann

of income as declared by the assessee was
liable for further enhancement to that extent.
DECISIONS OF THE APPELLATE FORUMS
3. While as the learned CIT(A) upheld the
view of the Assessing Officer, the Hon’ble
Delhi Tribunal reversed the order of the lower
authorities.
The Tribunal focused on the words “is applied
to such purposes in India” used in section
11(1)(a) of the Act. The Tribunal was of the
view that the Legislature had put the words
“to such purposes” between “is applied” and
“in India” to mean that the application need
not be in India but needs only to result in,
and should be for the purposes of a charitable
activity in India.
The Tribunal further went on to state that the
expenditure incurred by the assessee in Germany
was for the purpose of attaining charitable
objects in India. Hence, the assessee rightly
claimed the expenditure as application of income
in terms of section 11(1)(a) of the Act.
To conclude its decision, the Tribunal also relied
upon the decision of the Hon’ble Mumbai Tribunal
in the case of Gem & Jewellery Export Promotion
Council v. Sixth, ITO [1999] 68 ITD 95 and
distinguished the ratio laid down by the Hon’ble
High Court of Andhra Pradesh in the case of
Trustees of H.E.H The Nizam’s Pilgrimage Money
Trust v. CIT [1988] 36 Taxman 154.
DECISION OF THE HIGH COURT
4. The Revenue challenged the decision of the
Tribunal before the Delhi High Court on the
same grounds that were raised before the
appellate forums.
The High Court reversed the decision of the
Tribunal stating that such an expenditure could
not be considered as an application of income
in India as same had been incurred in Germany.
Once again before the High Court, the contentious
issue between the Revenue and the assessee
boiled down to the meaning of the words “is
applied to such purposes in India” appearing
in section 11(1)(a) of the Act.
The High Court discussed the meaning of these
words in the light of the mandate for which
it had been enacted. The Court compared section
11 of the Act with that of section 4(3)(i) of the
erstwhile Indian Income-tax Act, 1922. The
Court observed that the object of these two
Sections in their respective Acts are same and,
therefore, the ratio laid down by the Hon’ble
Supreme Court in the case of H.E.H. Nizam’s
Religious Endowment Trust v. CIT [1966] 59 ITR
582 in the context of section 4(3)(i) of the
Indian Income-tax Act, 1922 was equally
applicable to section 11(1)(a) of the Act. The
High Court observed that the Supreme Court
in the case of H.E.H. Nizam’s Religious Endowment
Trust (supra) laid out that “application of income
of the Trust to such religious or charitable
purpose as relate to anything done within taxable
territories” only qualifies for exemption under
the old Act.
Since the basic object of both, the old Act and
new Act was same, the High Court held that
the ratio laid out in the Supreme Court’s decision
was equally applicable to the present case
also. The High Court observed that as the
assessee had incurred the expenditure in
Germany, and, as such, this expenditure was
not related to anything done within the taxable
territories of India, it could not be considered
as application of income for charitable purposes
in India.
The High Court did not find any merit in the
argument of the assessee that the words “as
relate to anything done within the taxable
territories” mean that the charitable purposes
must be executed within the taxable territories
and that it was immaterial where the income
was actually applied. The assessee contended
that the words “is applied to such purpose in
India” used in section 11(1)(a) of the Act also
conveyed the same meaning. However, the
High Court could not conceive of a situation
under which the charitable purposes are executed
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