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2013 (9) TMI 335 - AT - Income TaxDisallowance of Exemption u/s 11 - Charitable purpose 2(15) - Subscription paid to Chit Fund company - Violation of the nature specified in Section 13(1)(d) - As per the assessee, subscriptions paid to chit funds were not deposits nor investments and it could not have been a reason for denying it the exemption claimed under Section 11 of the Act. - Held that:- Subscription to chit funds itself will be utilization of the funds of the assessee since right of the assessee is only to prize a chit or participate in a draw of lots. It is not an investment or deposit of a money which is available as surplus with assessee. Lower authorities fell in error in concluding that such subscriptions were investments which violated the modes specified under Section 11(5) of the Act. - The question of denial of exemption under Section 11 would arise only if investments were there. - assessee could not have been denied exemption claimed by it under Section 11of the Act, for a reason that it had subscribed to the chit funds. There is no case for the Revenue that any of the Trustees, Managers, contributors of relatives of such persons were having interest in the two chit companies. - assessee was eligible for exemption under Section 11 of the Act and its claim was denied unjustly. Relying upon CIT v. Kottayam Co-operative Bank Ltd. [1974 (4) TMI 2 - KERALA High Court] - The annual income of the Trust against which, utilization for charitable purpose which was well above the limit of 85% prescribed u/d 11(1)(a) of the Act - As per the assessee, subscriptions paid to chit funds were not deposits nor investments and it could not have been a reason for denying it the exemption claimed u/s 11 of the Act - Subscription paid by a subscriber of a chit to a chit company acting as the foreman of the chit, in our opinion, cannot be considered as an investment. Subscribing to a chit fund is not with an intention to earn interest or dividend.
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