Charitable trust exemption upheld where a new rule-based objection was barred and section 13(1)(bb) did not apply.

A new objection to exemption under section 11 based on alleged contravention of rule 17 was not entertained because it had not been raised before the assessing authorities or the Tribunal, and reference jurisdiction could not be used to introduce it for the first time; the assessee therefore retained exemption on that ground. The trust's activities were held to be charitable, directed to the welfare of affected families and the poor and destitute, with no intention to carry on business, so the conditions for denying exemption under section 13(1)(bb) were absent. Both issues were answered in favour of the assessee.

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Issues: (i) Whether exemption under section 11 of the Income-tax Act, 1961 could be denied on the ground that the declaration was filed in contravention of rule 17 of the Income-tax Rules, 1962; (ii) Whether section 13(1)(bb) of the Income-tax Act, 1961 applied to the assessee-trust.

Issue (i): Whether exemption under section 11 of the Income-tax Act, 1961 could be denied on the ground that the declaration was filed in contravention of rule 17 of the Income-tax Rules, 1962.

Analysis: The objection based on rule 17 had not been raised before the Assessing Officer, the Appellate Assistant Commissioner, or the Tribunal. The reference jurisdiction could not be used to raise a new contention for the first time. On the facts, the trust had already been treated as a charitable trust entitled to exemption under section 11.

Conclusion: The objection under rule 17 was not entertained and the issue was decided against the Revenue and in favour of the assessee.

Issue (ii): Whether section 13(1)(bb) of the Income-tax Act, 1961 applied to the assessee-trust.

Analysis: The income of the trust was found to be used for the welfare of the affected families of the Bhilai Steel Plant, and the trust's activities were held to be charitable in nature, directed towards helping the poor and destitute. The authorities found no intention of carrying on business, and the statutory condition for attracting section 13(1)(bb) was held to be absent.

Conclusion: Section 13(1)(bb) did not apply and the issue was decided against the Revenue and in favour of the assessee.

Final Conclusion: Both referred questions were answered in favour of the assessee, and the assessment did not lose exemption on either ground.

Ratio Decidendi: A new contention cannot be raised for the first time in a reference, and a charitable trust remains entitled to exemption where its income is applied to welfare purposes and the conditions for denial under section 13(1)(bb) are not satisfied.

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