Subscription to chit amount - violation u/s 13(1)(d) read with section u/s 11(5)

[GOVINDASAMY RADHAKRISHNAN]

One of our client Trust Subscribed Registered chit. The A.O. viewed as violation u/s 13(1)(d) read with section u/s 11(5) of the IT Act,1961.and diallowing exemption claimed under section 11. whether subscription of chit amount to violation and any case law refernce. and advice

[Surender Gupta]

As per section 13(1)(d) read with section 1(5) of the Income Tax Act, only the eligible investment is allowed for exemption. You have to satisfy the condition. If the registered chit is eligible investment, AO can not disallow the same.

AI Summary

Eligible investment requirement may render trust subscription to chit ineligible, risking denial of charitable exemption. Subscription of trust funds to a registered chit is assessed against the trust exemption regime's investment eligibility requirement; an assessing officer may disallow exemption if the registered chit does not meet statutory eligibility criteria. If the registered chit qualifies as an eligible investment, the assessing officer cannot disallow the exemption; otherwise the exemption may be denied, so trusts must document and establish the chit's eligibility.