2001 (5) TMI 13 - HC - Income Tax

Charitable trust loan/investment and staff pay challenged as s.13 violations affecting s.11 exemption; appeal dismissed, exemption stands

The dominant issue was whether a charitable entity's exemption under s.11 was unavailable due to alleged violations of s.13(1)(c) and s.13(1)(d) arising ... Exemption u/s 11 - violation of the provisions of section 13(5) in giving the loan - Whether, the Tribunal was correct in allowing the benefit u/s 11 of the Income-tax Act, 1961, without appreciating that the assessee had violated the provisions of section 13(1)(c) and 13(1)(d) of the Act? - HELD THAT:- We find that the Commissioner of Income-tax (Appeals) (in short 'the CIT(A)'), decided in favour of the assessee on all aspects in the Revenue's appeal for the assessment year 1995-96. For the assessment year 1996-97, the assessee primarily challenged the question as to the reasonableness of salary. That plea was accepted in view of the conclusions for 1995-96. As the extracted portion of the order passed by the Tribunal goes to show the conclusions are essentially factual giving rise to no question of law. Accordingly, we do not entertain this appeal. Dismissed. Issues: Whether the Tribunal was correct in allowing exemption under section 11 of the Income-tax Act, 1961, despite allegations that the assessee violated sections 13(1)(c) and 13(1)(d) of the Act.Analysis: The Tribunal and the Commissioner of Income-tax (Appeals) made factual findings that (i) the assessee is a registered society under section 12A(a) engaged in family planning and welfare activities and historically allowed exemption; (ii) payments of salary and rent to individuals related to the society were reasonable and for valuable services rendered; (iii) the loan to Tyagi Foundation was to a separately registered body engaged in similar charitable activities, was secured by mortgage, was applied for charitable purposes and ultimately protected the assessee's interest when the property reverted on default; and (iv) expenses on conferences, clinics and claimed depreciation were part of charitable activities. Those factual conclusions gave rise to no substantial question of law under section 260A and supported allowing exemption under section 11.Conclusion: In favour of the assessee; the Tribunal was correct in allowing the benefit under section 11 and there was no sustained violation of sections 13(1)(c)/(d) affecting exemption.