Charitable trust exemption under section 11 cannot be denied for loan-related Trust Act breach absent section 13 violation or cancellation.

A registered charitable trust cannot be denied exemption under section 11 merely because it took unsecured loans without prior permission of the Charity Commissioner under the Bombay Public Trust Act. The trust remained registered under section 12A, its registration had not been cancelled, and no violation under section 13 of the Income-tax Act was found. Any breach of the Trust Act was treated as a matter under that statute and not a basis for withdrawing income-tax exemption. Exemption under section 11 therefore remained available unless section 13 conditions applied or registration was cancelled under section 12AA(3).

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Issues: Whether exemption under section 11 could be denied to a registered charitable trust on the ground that it had taken unsecured loans without prior permission of the Charity Commissioner under the Bombay Public Trust Act.

Analysis: The assessee was already registered under section 12A of the Income-tax Act. The claimed breach related to non-obtaining of prior approval under the Bombay Public Trust Act for loans taken in earlier years. The registration had not been cancelled, and there was no violation found under section 13 of the Income-tax Act. The breach, if any, was held to be a matter under the Trust Act and did not justify withdrawal of exemption under section 11.

Conclusion: Exemption under section 11 could not be denied on that ground, and the issue was decided in favour of the assessee.

Ratio Decidendi: Once a trust is duly registered under section 12A, exemption under section 11 cannot be withdrawn unless the conditions of section 13 are attracted or the registration is cancelled under section 12AA(3).

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