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2012 (10) TMI 668 - AT - Income TaxDenial of claim of exemption u/s 11 & 12 on ground that it was carrying on business activity which was distinctly separate from its charitable activities - due to frequent transactions in various schemes of mutual funds and buying/selling of units by the assessee with the objective of earning profit, the AO concluded that the society carried on business activities - Held that:- Indisputably, the assessee is a society registered u/s 12A. It is seen that undeniably, the investments made by the assessee in units of mutual funds were covered u/s 10(23D). These investments are- within the prescribed modes of investment u/s 11(5) (xii) read with Rule 17 C of the I.T. Rules. The investments were made with the intention of getting a better yield upon appreciation/dividends from such mutual funds, in order to augment the resources of the trust. The proceeds of the mutual funds were applied by the assessee for charitable purposes, in compliance of the provisions of sections 11 & 12. The assessee had been making such investments in the past. Separate identifiable accounts had been maintained for each of the mutual fund investments. In these facts, there was no justification in holding, merely due to the frequency of the transactions, that the assessee had been carrying on business activity which was not incidental to its charitable activities and that such business activity was being carried on with the sole objective of earning profits. It was also erroneous to hold that the units were held by the assessee as stock in trade and not investment. Hence, CIT(A) righly allowed the exemption - Decided in favor of assessee
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