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2018 (5) TMI 630 - AT - Income TaxDenying registration granted u/s 10(23C) - Denying the exemption u/s 11 & 12 - violation of mode of investment in terms of section 11(5) by advancing a loan to another charitable trust - Held that:- As per provisions of section 13(1)(d), it is only the income from such investment or deposit which has been made in violation of section 11(5) of the Act, that is liable to be taxed and violation under section 13(1)(d) does not result in the denial of exemption under section 11 to the total income of the trust - Similarly, as per the provisions of section 13(1)(c), it is only the income or value of the property misused by trustee that is liable to be taxed and violation under section 13(1)(c) will not automatically result in denial of exemption under section 11 of total income of the trust. - As regards the provisions of section 13(2), the same being an extension of the provisions of section 13(1)(c) / 13(1)(d), the violations there under will be dealt with on similar lines as the violations under section 13(1)(c) / 13(1)(d) of the Act. On the basis of the above discussions and plethora decisions referred to hereinabove, we are of the considered opinion that Ld.CIT(A) erred in denying benefit available to assessee and registration granted u/s 10(23C) of the Act. For withdrawal of exemption u/s 11 on such funds advanced as loan to another trust sum of ₹ 1,54,40,000/- was a loan given to another Trust. Neither the object of assessee before us has been disputed, nor that of the recipient trust by authorities below. CIT(A) has overlooked the applicability of Sec.13(2)(a) to the facts of present case. Admittedly the money has been advanced as a loan to other trust for which assessee has not received any securities or interest. The said sum has been returned by the other trust during financial year ending on 31.03.2008 to assessee. Authorities below are alleging that these are common trustees and therefore s.13(1)(d) of the Act comes into play. But nothing has been brought on record to establish that the common trustees have substantial interest in the other trust. Thus the amount advanced cannot be held to be in violation of Sec.13(1)(d). Sec.11(5) cannot be applied to present facts as the money advanced is not an investment but a loan. - Decided in favour of assessee.
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