2018 (12) TMI 1344

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....lowing question of law for our consideration: "Whether on the facts and in the circumstance of the case and in law, the Tribunal was correct in law in holding that the denial of benefit under section 11 of the IT Act will be restricted only to that income of the Trust which was used/applied directly or indirectly for the benefit of the prohibited persons?" 3. It is an undisputed position that the Respondent-Assessee is a Trust, engaged in the activity of running educational institution. It is a registered Trust under Section 12AA of the Act. The Respondent in its return of income filed on 29th October, 2004 for the Assessment Year 2004-05, declared its income as "Nil". During the Assessment Proceedings, the Assessing Officer noted tha....

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....bsequent decision of the Karnataka High Court in CIT v/s. Fr. Mullers Charitable Institutions 366 ITR 378, held that denial of exemption under Section 11 of the Act should be limited to the amount which had been diverted to purchase the car in the name of prohibited person under Section 13 of the Act. In view of the above, the Regular Bench of the Tribunal by the impugned order dated 25th February, 2015 denied the benefit of Section 11 of the Act only to the extent the income is diverted/ used to purchase a car in the name of the trustee i.e. in view of Section 13(2)(b) read with Section 13(3) of the Act. 6. Before us, Mr. Suresh Kumar in support of the appeal, places reliance upon the decision of the Apex Court in Bharat Diamond Bourse ....

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....s the denial restricted only to the quantum of diverted funds. This, as it is hit by Section 13 of the Act. The Court held that the benefit of Section 11 of the Act will not be available only in respect of the diverted income. The above decision of Karnataka High Court was the basis for the view in the impugned order of the Tribunal. Moreover, we note that the order of Karnataka High Court in case of Fr. Mullers Charitable Institutions (supra) inter alia, places reliance upon the decision of this Court in DIT v/s. Sheth Mafatlal Gagalbahai Foundation Trust 249 ITR 533 and the Delhi High Court in the case of IT (Exemption) v/s. Agrim Charan Foundation 253 ITR 593. Moreover, on a plain reading of Sections 11 and 13 of the Act, it is clear tha....