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2019 (12) TMI 151

..... stee offers the vehicles of his own transport business to ferry the students - HELD THAT:- AO was of the view that Bharat Shah was a person belonging to the prohibited category within the meaning of section 13(3)(a) and section 13(3)(cc) and since the income or property of the institution had been lent to such a person for any time during the previous year relevant to AY 1989-90 and 1990-91, without adequate security and adequate interest, the legal fiction in Sub-section (2) of section 13 of the Act would come into play and the income or property of the institution shall, for the purpose of Clause (d) of sub-section (1) of section 13 of the Act, be deemed to have been applied for the benefit of the prohibited category of persons under Sub- .....

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..... 17, Chennai dated 12.12.2018 relevant to the assessment year 2011-12. The effective ground raised in the appeal of the Revenue is that the ld. CIT(A) erroneously allowed the exemption under section 11 of the Income Tax Act, 1961 [ Act in short]. 2. Brief facts of the case are that the assessee is a public charitable trust registered under section 12AA of the Act filed its return of income on 12.09.2011 for the assessment year 2011-12 declaring NIL income. The case was selected for scrutiny and the assessee filed particulars and records as called under statutory notices. On verification of details filed by the assessee and considering the submissions, by denying the exemption under section 11 of the Act, the Assessing Officer held that the .....

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..... ning a transport business by name M/s. Sri Renugambal Travels, whose vehicles are being used by the assessee trust. By observing that some extraneous expenditure incurred by the managing trustee in the transport business has also been claimed by the assessee in their books of accounts, the Assessing Officer invoked the provisions of section 13(1)(c) of the Act and denied the exemption claimed under section 11 of the Act. It was the submission before the ld. CIT(A) that the assessee had not claimed any expenditure pertaining to M/s. Sri Renugambal Travels. It was further submission that the trust is operating buses to transport the students at free of cost. In case of breakdown, the Managing Trustee offers the vehicles of his own transport b .....

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..... e benefit of section 11 and 12 of the Act cannot be denied to a trust that has been registered under section 12AA of the Act and accordingly directed the Assessing Officer to compute the value of the benefits extended to the trustee to the extent of violation and the same may be brought to tax at the maximum marginal rate. 7. The Department has contended that while directing to allow the exemption under section 11 of the Act, the ld. CIT(A) has failed to consider the decision of the ITAT, Chennai in the case of DDIT(E) v. Paramasiva Naidu Muthuvel Raj Education Trust (supra), wherein the Tribunal has considered the decision in the case of CIT v. Fr. Mullers Charitable Institutions [2014] 363 ITR 230 (Kar.) and in the case of CIT v. Working .....

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..... e unrelated vouchers pertaining to M/s. Renugambal Travels, which were wrongly mixed up with the vouchers of the assessee trust alone cannot be held to be endured benefit to the trustee indirectly/directly and thereby the Assessing Officer invoked the provisions of section 13(1)(c) of the Act is not correct. 8. Further, the decision in the case of DIT v. Bharat Diamond Bourse (supra) is also similar to that of the case of DDIT(E) v. Paramasiva Naidu Muthuvel Raj Education Trust (supra). In the case of DIT v. Bharat Diamond Bourse (supra), in the previous year relevant to the assessment year 1989- 90, the assessee had advanced an amount of ₹. 70 lakhs to one Bharat Shah without interest and security and even without entering into a wri .....

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