1987 (5) TMI 23 - HC - Income Tax

Summary

Issues Involved:
1. Exemption u/s 11/12 of the Income-tax Act, 1961.
2. Forfeiture of exemption u/s 13(1)(c) read with the Explanation to section 13(1), section 13(2)(a), and section 13(3).
3. Application of income or property for the benefit of persons referred to in section 13(3).
4. Identification of persons u/s 13(3).
5. Lending of income or property without adequate security or interest u/s 13(2)(a).

Summary:

Issue 1: Exemption u/s 11/12 of the Income-tax Act, 1961
The Tribunal was not justified in holding that the appellant-trust could not be granted exemption u/s 11/12 for the assessment years 1972-73, 1973-74, and 1974-75. The High Court found that the trust was entitled to exemption as the security provided and the interest rate charged were adequate.

Issue 2: Forfeiture of exemption u/s 13(1)(c) read with the Explanation to section 13(1), section 13(2)(a), and section 13(3)
The High Court did not find it necessary to address this issue separately, as the main contention regarding the adequacy of security and interest was resolved in favor of the assessee.

Issue 3: Application of income or property for the benefit of persons referred to in section 13(3)
Similarly, this issue was not separately addressed as the High Court's findings on the adequacy of security and interest rendered this question moot.

Issue 4: Identification of persons u/s 13(3)
The High Court did not specifically address this issue, returning it unanswered due to the resolution of the primary contention.

Issue 5: Lending of income or property without adequate security or interest u/s 13(2)(a)
The Tribunal was not justified in holding that any part of the income or property of the appellant-trust was lent to any person referred to in sub-section (3) of section 13 without adequate security or interest. The High Court found that the security provided by the partners of Sobhagmal Gokulchand was adequate, and the interest rate of 6% was consistent with prevailing rates.

Conclusion:
Questions Nos. 1 and 5 were answered in favor of the appellant-trust, affirming that the trust was entitled to exemption u/s 11/12 and that the lending of income or property was done with adequate security and interest. Questions Nos. 2, 3, and 4 were returned unanswered. There was no order as to costs.