Section 11 exemption cannot be denied on a technical audit-report objection where audited books and factual conditions are satisfied.

Exemption under section 11 could not be denied merely for want of an audit report where the assessee had produced audited books and relevant details, and the corpus donations received were lower than the year's expenditure. On the material on record, the addition of corpus receipts was unjustified, and prior-year assessment treatment also showed exemption had been allowed on satisfaction of the conditions. The denial of exemption was therefore not sustainable and relief to the assessee was upheld.

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Issues: Whether exemption under section 11 of the Income-tax Act, 1961 could be denied for want of audit report under section 12A when the assessee had produced audited books and the corpus donations received were less than the expenditure incurred during the year.

Analysis: The assessee had furnished audited books and relevant details, and the corpus donations received during the year were lower than the expenditure incurred. On the material on record, the addition of the corpus receipts was not justified. The earlier year's assessment also showed that exemption under section 11 had been allowed on fulfillment of the conditions.

Conclusion: The denial of exemption was not sustainable and the order granting relief to the assessee was upheld.

Ratio Decidendi: Where the factual material shows that corpus donations received are fully absorbed by expenditure and the conditions for exemption are otherwise satisfied, exemption under section 11 cannot be denied merely on a technical objection regarding the audit report.

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