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2014 (11) TMI 444 - AT - Income TaxViolation of section 13(1)(d) r/w Section 111(2) and 11(5) - Benefits on the portion of the income attributable to impermissible securities to be taxed at maximum marginal rates - Whether the trust was obliged to convert its TISCO share holding into specified securities by the due date or thereafter – Held that:- The trust should had converted the TISCO share into investment of permissible securities in this behalf - the provisions of secs. 11, 12, 13 and 16(2) are to be conjointly read and the CBDT circular referred to above being a beneficial circular is to be also applied - A combined reading leads to a harmonious construction, proviso to section 164(2) is very important, Legislature has clearly contemplated that in a case where the whole or part of the relevant income is not exempt under section 11, by virtue of violation of section 13 (1) (d), tax shall be charged on the relevant income or part of the relevant income at the maximum marginal rate - Section 164 (2) refers to the relevant income which is derived from property held under trust wholly for charitable or religious purposes - This is subject to application of other provisions of Act like exemptions, deduction etc. - a proviso was inserted by the Finance Act, 1984, with effect from April 1, 1985, under which in cases where the whole or any part of the relevant income is not exempt u/s 11 or section 12, because of the contravention of section 13(1)(d), then tax shall be charged on such income or part at the maximum marginal rate - only non-exempt income portion would fall in the net of tax, as if it was the income of an association of persons. The dividend income being exempt from income by express provisions of sec 10(34), the dividend income is exempt from Income Tax - This being so, in the result there remains no tax liability on the trust - even department has not been taking any particular stand and allowing the benefits of sec 11 and 12 in some of the years, then rethinking and refusing the benefits by reopening the assessments - even the department has its own share of interpretations, leading to repetitive proceedings – Decided in favour of assessee.
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