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2017 (2) TMI 1089 - AT - Income TaxExemption u/s 11 on sale of mutual funds - whether there is no violation of the provision of section 11(5) of the Act for making this investment and moreover profit derived from sale of mutual fund and dividend income, which are shown as surplus and are carried over in the balance sheet, is again reinvested into the specified mode of investment i.e. mutual funds as per section 11(5) of the Act and claimed the same as deemed application of income u/s 11(2)? - Held that:- The assessee is running a school and existing solely for the purpose of education. Due to the reasons of subsidized fee structure expenditures on the education activities always exceed receipts by way of fees from the students. The assessee trust is eligible for the deemed exemption of 15% of the Income during the year under the provisions of sec. 11(1a) of the Act. The assessee is also eligible for the specific accumulation of income under the provisions of sub-section (2) of sec. 11 of the Act. The specific accumulation is for the purpose of having an independent building premise as currently the trust is running the school in the lease premises and there is an existing dispute with the owner of the property in respect of lease premises. The fact that assessee is eligible for the accumulation u/s 11(la) of the Act. We are of the view that under the provisions of sub-sec. of sec. 11 of the Act, there is no lower limit for the lock-in period nor there is stipulation that investments so made cannot be reshuffled during the outer limit of five years’ period. In this context, the AO's observation that one set of mutual funds were divested of within the period of sixty days is untenable. The most importantly during the year, the assessee trust have reshuffled one set of investments only with the purpose of safeguarding interest of the trust and in the view of the apprehension, that value of the mutual fund was fast declining. By doing so, the trustees of the trust have acted, in the best and paramount interests of the trust and not for the purpose of any benefit or a pecuniary gain to any person specified under sub-sec. 3 of sec. 11 of the Act. Again by doing so, the trust have not violated any stipulation or conditions, as a matter of fact there is no stipulation u/s 11(5) of the Act placing restriction on the reshuffle of specified investment. The assessee trust is being assessed to tax for the several year and enjoying benefit of exemption u/s 11 and 12 of the Act and this position has been continuously accepted by the department in the form of assessments/acceptance of the return of income. Moreover, the facts of the case are exactly identical to the facts of the preceding assessment years, hence, according to us the principle of rules of consistency shall apply as laid down by the Supreme Court of India in the case of Radha Soami Satsang Vs. CIT (1991 (11) TMI 2 - SUPREME Court ). - Decided in favour of assessee.
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