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2. The Board has decided that repayment of the loan originally taken to fulfil one of the objects of the trust will amount to an application of the income for charitable and religious purposes. As regards the loans advanced for higher studies, if the only object of the trust is to give interest-bearing loans for higher studies, it will amount to carrying on of money-lending business. If, however, the object of the trust is advancement of education and granting of scholarship loans as only one of the activities carried on for the fulfilment of the objectives of the trust, granting of loans, even if interest-bearing, will amount to the application of income for charitable purposes. As and when the loan is returned to the trust, it will be treated as income of that year.

8. Viewing the question from a different angle also, we are of the opinion that the claim made by the assessee was well-

founded. In the case of CIT v. Ganga Chanty Trust Fund [1986] 162 ITR 612, this court considered the question as to whether deduction of income-tax liability must be taken as an outgoing before the surplus could be ascertained in order to give meaning to the expression "income". The court also considered the question as to whether for the purpose of determining the income or surplus available to the trust for the purpose of application of its income towards charitable or religious objects, the surplus realised or available on commercial principles should be taken into consideration or not. After reviewing the case law on the subject, it has been held that income derived from the trust property must be determined on commercial principles and in doing so, all outgoings including outgoings by way of income-tax paid by the assessee-trust must be deducted and it is only from the surplus income in the hands of the trustees that the question of application or accumulation or setting apart of income arises. While holding that the income derived from the trust property must be determined on commercial principles, this court has noted that if such an interpretation is not placed on Section 11(1)(a) of the Act, it would render the benevolent provisions found in Clause (a) of Section 11 (1) of the Act nugatory."