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| The Tax Publishers2020 TaxPub(DT) 0407 (Chen-Trib) : (2020) 181 ITD 0572 INCOME TAX ACT, 1961
Section 11
Where assessee trust had subscribed to chit and undisputedly, investment in chit was not one of the prescribed modes of investments and explanation of the assessee that subscription to the chits was made in order to mobilize the resource to meet repayment of loans availed of from same party, had no bearing on the issue, therefore, assessee-trust was not entitled for exemption under section 11.
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Charitable trust - Exemption under section 11 - Assessee violated the provisions of section 11(5) -
Assessee was engaged in running educational institutions. AO denied exemption under section 11 on the ground that assessee had violated the provisions of section 11(5) as it invested surplus funds other than in the mode prescribed under the Act as assessee had subscribed to chits with M/s. G and also transferred the fund to a private trust. Accordingly, AO held that assessee had violated the provisions of section 11(5) and denied exemption under section 11 and brought to tax excess of income over expenditure and taxed at maximum marginal rate. Held: Admittedly, assessee trust was duly registered under section 12AA. It was mandatory in order to avail exemption under section 11, the funds of the trust should be invested in one of the modes prescribed under section 11(5). Assessee trust had subscribed to chit and undisputedly, investment in chit was not one of prescribed mode of investments. The explanation of assessee that subscription to chits was made in order to mobilize the resource to meet repayment of loans availed from same party, had no bearing on the issue. Subscription to the chits is nothing but the investment which is not one of the prescribed modes of investment under section 11(5). Therefore, it was a clear case of violation of provisions of section 11(5), hence assessee-trust was not entitled for exemption under section 11.
REFERRED : CIT v. Working Women's Forum (2015) 53 taxmann.com 85 (Mad) : (2015) 365 ITR 353 (Mad.) : 2014 TaxPub(DT) 2841 (Mad-HC) Priyadarshini Educational Academy v. DGIT (Investigation) (2011) taxmann.com 211 (AP) : (2011) 199 Taxman 385 (AP) : (2011) 333 ITR 347 (AP) : 2011 TaxPub(DT) 0742 (AP-HC) Rabindranath Educational Trust v. UOI [2010] 191 Taxman 379 (Ori) : 2010 TaxPub(DT) 0353 (Ori-HC) Kanahya Lal Punj Charitable Trust v. DIT (Exemption) (2008) 171 Taxman 134 (Del) : (2008) 297 ITR 66 (Del) : 2008 TaxPub(DT) 0676 (Del-HC) Mundakapadam Mandirams Society v. CIT (2002) 258 ITR 395) (Kerala) : 2002 TaxPub(DT) 1646 (Ker-HC)
FAVOUR : Against the assessee
A.Y. :
IN THE ITAT, CHENNAI BENCH
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