Property held for Charitable Purpose.

Property held for charitable purposes–Investment in specified securities-Shares of cooperative

banks were subscribed only for purposes of obtaining loan for furtherance of objects of trust, section 11/12 exemption could not be denied.[S.12, 13]

 

The assessee claimed exemption u/s 11. The Assessing Officer held that the assessee was not entitled /

eligible to claim exemption under section 11 on the basis that the assessee had purchased shares of certain

amount in two co-operative banks which were shown as investments in its balance sheet. Investment in

shares of a co-operative bank was not a mode of investment specified in section 11(5) and the assessee

had committed breach of the conditions of exemption under section 13(1)(d). Thus, benefit of exemption

was not granted. On appeal, the Commissioner (Appeals) upheld the order of the Assessing Officer. On

appeal, the Tribunal held that the lower authorities erred in denying exemption to the assessee under

section 11. The court held that the only basis of the revenue seeking to deny the benefit of exemption

under section 11 is that the share subscription amount is shown as investments in the balance sheet and

investments in shares not being a specified mode, the benefit of exemption cannot be granted. It is well

settled that the depiction in Books of Account is not a determinative test but the factual nature of the

transaction which has to be considered for the purpose of taxation. In this case, the investment in shares of

co-operative banks was a pre-condition for raising of loans and it was therefore not an investment as

normally understood. The Tribunal has recorded a finding of fact that the shares were subscribed to only

for purposes of obtaining the loan and the amounts so obtained were used for furtherance of the objects of

the trust. There is also no dispute about the fact that loans taken from the said two co-operative banks

were completely repaid in the Assessment Year 2008- 09 and, therefore, the assessee would be required to

hold the shares to continue as member of the co-operative societies running the banking business. Hence,

there was no reason to deny benefit to assessee under Section 11 of the Act. (AY. 2008 – 09)

CIT .v. Dr. Vikhe Patil Foundation (2014)222 Taxman 104/42 taxmann.com 190 (Bom.)(HC)