INCOME TAX ACT, 1961

Section 13(1)(c) Section 13(1)(d) and Section 11

Charitable trust - Exemption under section 11 - Allowability in case of violation of section 13 - AO taxed entire surplus at maximum marginal rate (MMR)

Assessee society claimed exemption under section 11. AO noticed that assessee made payments to Rambagh Polo Club for corporate membership which had nothing to do with objects of the society and thereby funds of the society had been diverted and misutilized for personal benefits of specified person. Accordingly, AO invoked section 13(1)(c)/(d) and denied exemption under section 11 and taxed entire surplus at maximum marginal rate (MMR). Assessee submitted that where whole or any part of relevant income was not exempt under section 11 or 12 because of section 13(1)(c) or 13(1)(d), tax was chargeable on the relevant income or part of the relevant income. Held: In view of proviso to section 164(2) where whole or any part of the relevant income was not exempt under section 11 or 12 because of section 13(1)(c) or 13(1)(d), then tax was chargeable on the relevant income or part of the relevant income at maximum marginal rate (MMR). Thus, in such eventuality, exemption under section 11 or 12 could not be denied nor surplus as such could be charged to tax at maximum marginal rate.

Relied:Dy. CIT v. Working Women's Form (2015) 235 Taxman 516 (SC) : 2015 TaxPub(DT) 5509 (SC) and CIT v. Fr. Mullers Charitable Institutions (2014) 227 Taxman 369 (SC) : 2018 TaxPub(DT) 3191 (SC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2015-16

INCOME TAX ACT, 1961

Section 11

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