The appellant-society, a charitable trust registered under section 12A of the Act, runs a school in a building owned by another trust. The appellant-society incurred expenditure on repairs/renovation of the school building and certain amount towards payment of property taxes. The AO disallowed the expenditure and the property tax on the ground that the building does not belong to the appellant-society. The CIT(A) upheld the disallowance on the ground that the appellant-society did not provide any agreement or MOU with the owner of the building regarding the maintenance of the building.

The Tribunal allowed the appeal of the appellant-society and set aside the impugned order of the CIT(A). The Tribunal held that the expenditure incurred by the appellant-society on the repairs of the school building and the property tax paid was for the purpose of carrying out the objects of the charitable trust, which is to impart education to the poor and needy children. The Tribunal relied on the decisions of the Gujarat High Court in Satya Vijay Patel Hindu Dharmashala Trust v. CIT [1972] 86 ITR 683 (Gujarat) and the Supreme Court in S.R.M.CT.M Triuppani Trust v. CIT [1998] 230 ITR 636 (SC), which held that the purchase or construction of a capital asset for the charitable purpose is also an application of income for the charitable purpose under section 11(1)(a) of the Act. (AY. 2016-17)