2022 (8) TMI 1598 - HC - Income Tax

Violation of s.13(1)(c)(ii) alone does not revoke s.11 exemption for all trust income; narrow, proportional application upheld

HC held that violation of s.13(1)(c)(ii) does not automatically deny exemption under s.11 for the trust's entire income. Relying on earlier HC precedent, ... Violation of sec.13(1)(c)(ii) lead to denial of exemption u/s 11 or not? - Whether ITAT is right in holding that the violation of sec.13(1)(c)(ii) does not lead to denial of exemption u/s 11 as against the principle laid down in the case of DIT Vs Bharat Diamond Bourse [2002 (12) TMI 8 - SUPREME COURT]? - HELD THAT:- After arguing for some time, learned counsel for the parties submit that the issue is covered by a judgment of this Court in the case of Audyogik Shikshan Mandal [2018 (12) TMI 1344 - BOMBAY HIGH COURT] held that on a plain reading of Sections 11 and 13 of the Act, it is clear that the legislature did not contemplate the denial the benefit of Section 11 of the Act to the entire income of the Trust. If the interpretation sought to be advanced by the Revenue is accepted, it would lead to grave injustice as any mistake minor and/or misdemnour involving a small amount takes place by the Trust, the consequence would be denial of the benefit of exemption to the entire income otherwise admittedly used for charitable purposes. In this view of the matter, no substantial question of law arises. Appeal under section 260A of the Income Tax Act, 1961 challenged ITAT's order allowing the assessee for assessment year 2010-2011. Central legal question framed: 'Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT is right in holding that the violation fo sec.13(1)(c)(ii) does not lead to denial of exemption u/s 11 as against the principle laid down by the Hon'ble Apex Court in the case of DIT Vs Bharat Diamond Bourse...?' Parties conceded the issue is covered by this Court's decision in Commissioner of Income Tax (Exemptions), Pune v. Audyogik Shikshan Mandal reported in (2019) 101 taxmann.com 247. Relying on that precedent, the Court held no substantial question of law arises and dismissed the appeal. No order as to costs.