2001 (8) TMI 78 - HC - Income Tax

Charitable trust's deposits with misrepresented entities under s. 11(5) investment rules; tax exemption under ss. 11-12 upheld

Denial of exemption under ss. 11 and 12 was challenged on the ground that the assessee-trust had made deposits with entities later found to be non-public ... Denial of exemption u/s 11 and 12 - Charitable trust due to deposits made with non-public undertakings - HELD THAT:- The Tribunal noted that this was a case where the two concerns may have flouted the Government rules and the assessee in the absence of any mala fides and being not linked with the concerns, should not be denied the benefits. The Tribunal, keeping in view the objects for which section 11(5) has been enacted and the factual background, more particularly, the mention made in the forms of the two concerns, and the act of the assessee in immediately withdrawing the amounts on being made aware that the two concerns were not permitted to receive deposits, allowed the assessee's appeal. Revenue submitted that there has been a breach of the statutory provisions and, therefore, the bona fides should not have weighed with the Tribunal. We find that the Tribunal has referred to various factual aspects as elaborated in coming to the conclusion that the assessee could not be faulted for the misrepresentation of those two concerns. We do not find any infirmity in the order of the Tribunal to warrant interference. The appeal is accordingly disposed of. Issues involved: Appeal u/s 260A of the Income-tax Act, 1961 regarding denial of exemption u/s 11 and 12 for assessment year 1995-96 to a charitable trust due to deposits made with non-public undertakings.Judgment Summary:The High Court of Delhi heard an appeal u/s 260A of the Income-tax Act, 1961 concerning the denial of exemption u/s 11 and 12 for the assessment year 1995-96 to a charitable trust due to deposits made with non-public undertakings. The Assessing Officer disallowed the exemption claiming violation of section 11(5) of the Act. The CIT(A) dismissed the appeal ex parte, which was then taken to the Income-tax Appellate Tribunal, Delhi Bench 'B'. The Tribunal considered the trust's charitable activities, the nature of deposits made, and the immediate withdrawal upon realizing the non-compliance of the concerns. The Tribunal allowed the appeal, emphasizing the lack of mala fides on the trust's part and the factual circumstances.The Revenue's counsel argued that statutory breaches should not be overlooked based on the trust's good faith. However, the Court upheld the Tribunal's decision, noting the factual considerations and the trust's prompt corrective action upon being informed of the concerns' lack of approval. The Court found no reason to interfere with the Tribunal's order and disposed of the appeal accordingly.