Trust's Property Lease with Trustee's Firm: Tax Exemption Denied

The High Court of Rajasthan held that a trust leasing property to a firm involving one of its trustees as a partner was not eligible for tax exemption under sections 11 and 12 of the Income-tax Act, 1961. The court agreed with the lower authorities that the rent charged was insufficient, falling within the exception of section 13(2)(b) of the Act. Consequently, the court ruled in favor of the Revenue, denying the claimed tax exemption to the trust.

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The High Court of Rajasthan ruled that a trust, which let out a portion of its property to a firm where one of the trustees was a partner, was not entitled to tax exemption under sections 11 and 12 of the Income-tax Act, 1961. The court upheld the decision of the Assessing Officer, Appellate Assistant Commissioner, and Tribunal that the rent charged was inadequate, falling under the exception of section 13(2)(b) of the Act. Therefore, the court ruled in favor of the Revenue and against the assessee, denying the tax exemption claimed.

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