Income Tax Act, 1961

--Charitable trust--Bar to exemption under section 13(1)(d) Violation of section 11(5) r/w 13(1)(d)--Assessee-trust availed loan from a co-operative bank for which it had to buy certain number of shares of the bank as a pre-condition for such loan, and while granting such loan bank had deducted subscription to such shares. Further, there was no objection in past for holding the shares of bank. Assessing officer denied exemption under section 11, applied section 13(1)(d). Held: Not justified. Purchase of shares in past which assessee continued to hold during relevant year after repayment of loan was not in violation of section 11(5) read with section 13(1)(d), especially when assessee was still having an overdraft of Rs. 13 lakhs approximate from the bank, exemption under section 11 could not be, therefore, denied on account of alleged violation of section 11(5) read with section 13(1)(d).

Submission of assessee that in the instant case the assessee had availed loan from BS Bank for which it had to buy certain number of shares of the bank as a precondition for such loan and the bank while granting such loan had deducted the subscription to such shares could not be controverted by the Departmental Representative. The further submission of the counsel for the assessee that there was no objection by the Revenue in the past for holding the shares of the bank in the scrutiny assessments and that still there is overdraft loan from the bank also could not be controverted by the Revenue. There is merit in the submission of the assessee that the purchase of shares of the bank amounting to Rs. 25,250 is very negligible considering the total assets of the trust at Rs. 23.24 crores and the same was under compulsion for obtaining loan from the bank and that the bank while disbursing the loan had deducted the amount towards such share subscription from the loan amount and therefore, the same should be considered as an application of income. Under the peculiar facts and circumstances of the case, the purchase of shares amounting to Rs. 25,250 in the past which the assessee continued to hold during this year cannot be a ground to hold the same as in violation of provisions of section 11(5) read with section 13(1)(d) especially when the assessee is still having an overdraft of Rs. 12,87,665 from the bank as mentioned by the assessing officer. Since the assessee is still enjoying overdraft facility from the bank, therefore, is set aside no logic on the part of the assessing officer and Commissioner (Appeals) to hold that there is violation of provisions of section 11(5) read with section 13(1)(d) because the assessee continues to hold the shares once the loan was repaid. Considering the totality of the facts of the case, considering the fact that the Revenue had no objection in the past for holding the shares of the bank during the tenure of loan utilised by the assessee trust and considering the fact that the assessee trust is still enjoying overdraft facilities from the bank there is no violation of provisions of section 11(5) read with section 13(1)(d) on account of holding the shares of the bank. In this view of the matter, the order of the Commissioner (Appeals) and the grounds raised by the assessee on this issue are allowed. [Para 18.2]