2002 (7) TMI 83 - HC - Income Tax

Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that even if the assessee-trust is assumed to be a valid charitable trust at the inception, in any case, it ceased to be a charitable trust, as it indirectly carried on a profit earning activity by having let out the first floor to a firm in which one of the trustees was a partner and, therefore, it was not entitled to exemption under sections 11 and 12 of the Income-tax Act, 1961? - When the consistent finding of the three authorities, i.e., the Assessing Officer, Appellate Assistant Commissioner and Tribunal, is there that the rent of that portion of the building, which has been given to a firm, in which one of the trustees is a partner, is an inadequate amount, therefore, the assessee is not entitled to exemption under section 11 of the Income-tax Act, 1961, in this view of the matter, we find no infirmity in the order of the Tribunal. - we answer the question referred in the affirmative, i.e., in favour of the Revenue and against the assessee.

Summary

The High Court of Rajasthan ruled that a trust, which let out a portion of its property to a firm where one of the trustees was a partner, was not entitled to tax exemption under sections 11 and 12 of the Income-tax Act, 1961. The court upheld the decision of the Assessing Officer, Appellate Assistant Commissioner, and Tribunal that the rent charged was inadequate, falling under the exception of section 13(2)(b) of the Act. Therefore, the court ruled in favor of the Revenue and against the assessee, denying the tax exemption claimed.