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2007 (9) TMI 446 - AT - Income TaxPending the registration under section 10(23C)(vi ), the assessee claimed exemption under sections 11 and 12 of the Act - Charitable Or religious trust - Profit earning activity and not entirely for educational purposes - violation of the provisions of section 13(1)(c) restrict to claim exemption of section 11 or 12? - denial of benefit of accumulation for delayed filing of Form No.10 - HELD THAT:- The first thing to be noted is that all along the assessee has been claiming and being allowed exemption under section 10(22) of the Act which can be allowed only when the assessee is an educational institution and existing solely for educational purposes and not for the purpose of profit. Thus, the contention of Assessing Officer that huge surplus is accruing to the assessee and exemption u/s 11 and 12 is not admissible, is devoid of merits. So long as the objects are charitable purposes, merely because there is some surplus in the activities carried out by the assessee will not disentitle it to claim exemption u/s 11 and 12 of the Act. Such exemption u/s 11 and 12 can be denied provided there is violation as contemplated in section 13 of the Act. Under section 13(1)(c) only where the income or property is used for applying directly or indirectly for the benefit of any person like author of the trust or the person who has made substantial contribution or any trustee or manager or any relative of such aforesaid person etc. is given. As found by learned CIT(A), the payments made to person referred to in sub-section (3) of section 13 are for the services rendered by those persons and which is commensurate with the nature of services rendered. There is no prohibition in the Act to remunerate the interested person but such remuneration should be commensurate with the services rendered by them. If so found, it cannot be said that provisions of section 13(1)(c) are attracted so as to deny benefit of exemption u/s 11 and 12 of the Act. Since it is found by learned CIT(A) that payment is not undue or unreasonable, the exemption u/s 11 and 12 cannot be denied. Accordingly, there is no ground to deny the benefit of sections 11 and 12 of the Act. We are in agreement with the submissions of learned counsel for assessee. The assessee could not envisaged that application for registration u/s 10(23)(vi) would be delayed. Thus, the assessee was required to make alternate claim u/s 11 and 12 of the Act. As held by Hon’ble’ Gujarat High Court in the case of Mayur Foundation [2004 (12) TMI 48 - GUJARAT HIGH COURT], assessment proceedings are complete when appeal against order of assessment is decided by the Tribunal. Various courts have time and again held that though filing of Form No. 10 is mandatory to claim exemption u/s 11 and 12 of the Act, the same can be filed at any time during the pendency of assessment proceedings. If so filed the benefit of accumulation of income for charitable purpose cannot be denied. We accordingly direct the Assessing Officer to compute the income after allowing exemption u/s 11 and 12 of the Act and also considering the application in Form No. 10 regarding accumulation of surplus income for the purpose of objects of trust. In the result, the appeal is dismissed and cross-objection is treated as allowed.
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