Application of benefit-test and connected-persons rejected where no direct or indirect benefit; disallowance limited to the short-applied year.

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....Application of the rule excluding tax-exempt status where specified persons derive benefit must be read with the provision defining persons connected to the trust; here the signatories did not derive direct or indirect benefit from the sub-grant and the foreign university was not a connected person, so the provision invoking denial of exemption is not justified. On applicability of tax exemption for application of funds to charitable purposes, only assessment year 2010-11 showed under-application below the prescribed percentage, and the Assessing Officer is directed to restrict disallowance to the short application amount for that year.....