The Tax Publishers2019 TaxPub(DT) 6535 (Ahd-Trib) INCOME TAX ACT, 1961
Section 11 Section 13(1)(c)(ii) Section 13(2)(d), 13(3)(9)
Charitable trust - Exemption under section 11 - -
Assessee-charitable trust engaged in providing healthcare facilities and imparting medical education and training claimed exemption under section 11. AO noticed that assessee had transferred all assets and liabilities as appearing in balance-sheet of SHMI. (hospital run by assessee) to SCPL and key management personnel and director of SCPL was the son of managing trustee of assessee. Accordingly, AO took the view that SCPL being covered under definition of specified person as per section 13(3)(e) read with Explanation 1 & 3 thereto by entering into agreement with SCPL, eligibility conditions for claiming deduction under section 11, 13(1)(c)(ii) and 13(2)(b), 13(2)(d) and 13(2)(g) stood violated and, therefore, assessee was not eligible for exemption.Held: As evident object of transfer agreement with SCPL was to ensure that hospital i.e. SHMI was managed professional, and in doing so the purpose of charity was not violated as a reputed hospital of such huge size required professionally handling. Further, concerned agreement was not entered into to derive profit from transfer of movable to SCPL but to counter huge losses incurred in running two big hospitals. Further, section 13(1)(c)(ii) could apply only if any part of charitable income of trust had been used or applied for benefits of specified persons during the previous year. But, no portion of income of assessee had been applied for such person, therefore, case of assessee fell outside the scope of this section. Further, trust was in receipt of income by way of management charges from SCPL and also all of its liabilities had been taken over by the same, therefore, it was a fact that no undue benefits of use of trust property had been taken by any other persons. Similarly, there was no diversion of income of trust as per Explanation of section 13(2)(d) and 13(2)(g) as trust had benefitted greatly and its deficit duly reduced to a great extent. Accordingly, activity of the trust was carried on in accordance with its objects and in the best interest of charity and, therefore, exemption under section 11(1)(a) was allowable to assessee.
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2009-10
INCOME TAX ACT, 1961
Section 11
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