TMI Blog2005 (1) TMI 613X X X X Extracts X X X X X X X X Extracts X X X X ..... the Income-tax Act, 1961. It filed the returns for the years under consideration showing certain losses. The returns were processed under section 143(1)( a ) of the Act and subsequently, the assessments were reopened by issue of notice under section 148 on 10-2-1996. While completing the assessment, the Assessing Officer withdrew the benefit under sections 11 and 12 of the Act, on the ground that certain advances were made by the trustee viz., Shri S. Jayaprakash Mady (hereinafter referred to as S.J. Mady ) without adequate security in violation of the provisions of section 13(2)( a ) and there was diversion of income/property of the Trust in favour of the said S.J. Mady within the meaning of section 13(2)( g ). With these observations, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... drawn the benefit of sections 11 and 12 of the Act. It was contended that in view of the Karnataka Land Reforms Act, 1961, the land could not be registered in the name of the trust hence, the same was registered in the name of S.J. Mady, as per the legal advice. The assessee was also advised to obtain an affidavit from the trustee, S.J. Mady affirming that the agricultural lands are held by him on behalf of the trust. It was contended that the lease rentals in respect of the said land have also been credited in the accounts of the trust. In March, 1983 on a payment of Rs. 5 lakhs received from S.J. Mady, the land was handed over to S.J. Mady. It was pleaded before the Assessing Officer that the possession of the purchase documents of the la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trust Act where the trust can hold the property only in the name of the trustees. The entire transaction is accounted in the books of account of the trust and the rental income received by the trust is also duly accounted in the books of account of the trust. The assessee intended to purchase the property to set up an agricultural college- cum -research centre. A statement recorded from all the trustees clearly evidenced this fact. It is not the case of the department that the property in question was appropriated by S.J. Mady for his personal benefit. All the incomes are properly accounted in the books of the trust. It is also not the case of the department that the terms of the lease does not reflect the market conditions. The income acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of S.J. Mady. The Minutes of the meeting and the filing of the affidavit by S.J. Mady are only an afterthought. The learned DR contended that there was no clear prohibition under the Karnataka Land Reforms Act, 1961 for the trust to hold the property in its name. He strongly justified the action of Assessing Officer in determining the taxable income and subjecting the said income to tax at maximum marginal rate. 6. I have carefully considered the rival contentions and gone through the records. In my view, denial of exemption is totally uncalled for. It is evident that the purchase price has been paid from out of the trust funds and the property is registered in the name of the individual and the individual has not appropriated the tru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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