Saturday, 26 May 2018

No automatic denial of exemption u/s. 11 for violating Sec. 13(1) conditio


ITAT: No denial of exemption u/s. 11 for Trust advancing loan in violation of sec.13(1)(d)
Delhi ITAT deletes disallowance of loan advanced by assessee-trust to other charitable institution u/s 10(23C) and u/s 11 during AY 2007-08, rules that only the loan amount advanced by assessee-trust in violation of sec.11(5) is liable to be taxed and that violation u/s 13(1)(d) and sec.13(1)(c) does not automatically result in the denial of benefit u/s 10(23C) or Sec.11 ; During relevant AY, Revenue treated the amount of loan advanced out of corpus fund to other charitable trust as ineligible for deduction and subsequently denied exemption u/s 11 and Sec.10(23C) ; States that assessee has not received any securities or interest by advancement of loan to other trust, further notes that the said sum was returned by other trust during FY 2007-08 ; On Revenue’s allegation that there are common trustees involved due to which sec.13(1)(d) comes into play, ITAT remarks that, “ .. nothing has been brought on record to establish that the common trustees have substantial interest in the other trust.”; Relies on plethora of rulings including Karnataka HC ruling in Fr.Mullers Charitable Institutions, Bombay HC ruling in Sheth Mafatlal Gagalbhai Foundation Trust and Allahabad HC ruling in Red Rose School

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