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2022 (8) TMI 20 - AT - Income TaxExemption claimed u/s 10(34) on the dividend income received by the assessee trust - HELD THAT - Respectfully following the ratio of the decision of this Tribunal in Group Trust case i.e. M/s. Navajbhai Ratan Trust 2022 (3) TMI 565 - ITAT MUMBAI we are inclined to follow it since the department could not point out any change in facts or law. So on the same reasoning mutandis mutandis, we concur with the action of the Ld. CIT(A) allowing the claim of exemption u/s 10(34) of the Act and dismiss the ground nos. 1, 2 4 of the revenue appeal. Exemption u/s 11 - interest income and other income - main purpose of the trust is defeated as there is violation to the provision of section 13(1)(d) and 13(2)(h) - HELD THAT - As we note that the Ld. CIT(A) s impugned action is in conformity with para no. 6.8 (supra) wherein the Tribunal has directed the AO to grant the exemption u/s 11 of the Act on interest income and other income earned from non-prohibited investments by the assessee trust. Therefore, we are inclined to dismiss the appeal of the revenue on the same reasoning mutatis mutandis. Therefore, the revenue stands dismissed.
Issues Involved:
1. Exemption under Section 10(34) of the Income Tax Act on dividend income. 2. Denial of exemption under Section 11 with respect to interest income and other income due to alleged violation of Sections 13(1)(d) and 13(2)(h) of the Income Tax Act. Detailed Analysis: 1. Exemption under Section 10(34) of the Income Tax Act on Dividend Income: The Revenue's appeal primarily contested the allowance of exemption under Section 10(34) of the Income Tax Act on the dividend income received by the assessee trust. The Revenue argued that the income derived by the trust from properties held under the trust should be governed exclusively by Section 11, and any violation of Section 13 would disqualify the trust from claiming exemptions under Section 10(34). The Tribunal noted that this issue was already settled in the assessee's Group Trust case, specifically in the case of M/s. Navajbhai Ratan Trust. In that case, the Tribunal upheld the CIT(A)'s decision to grant exemption under Section 10(34), despite violations under Section 13, based on the jurisdictional High Court's ruling in DIT (Exemption) v. Jasubhai Foundation. The High Court had clarified that Section 10 and Section 11 fall under Chapter III of the Act, which deals with incomes not forming part of total income, and that Section 10(34) deals with dividend income which should not be included in total income irrespective of the trust's status under Section 11. The Tribunal reiterated that the amendment brought by the Finance (No.2) Act, 2014, which disallowed benefits of exemptions under Section 10 for trusts registered under Section 11, was applicable only from the assessment year 2015-16 onwards. Therefore, for the assessment year 2012-13, the Tribunal upheld the CIT(A)'s decision to allow the exemption under Section 10(34) for the dividend income received by the trust. 2. Denial of Exemption under Section 11 with Respect to Interest Income and Other Income: The Revenue also appealed against the CIT(A)'s decision to allow exemption under Section 11 for interest income and other income, arguing that the trust violated Sections 13(1)(d) and 13(2)(h) of the Act. The Tribunal referred to its earlier decision in the Group Trust case, where it was held that only the income derived from prohibited investments should be denied exemption under Section 11, not the entire income of the trust. The Tribunal cited the jurisdictional High Court's ruling in DIT (Exemption) v. Sheth Mafatlal Gagalbhai Foundation Trust, which stated that the forfeiture of exemption due to violation of Section 13 should apply only to the income from prohibited investments and not to the entire income of the trust. Following this precedent, the Tribunal directed the AO to grant exemption under Section 11 for interest income and income from non-prohibited investments, while denying exemption only for income from prohibited investments. Conclusion: The Tribunal dismissed both the Revenue's and the assessee's cross-appeals, affirming the CIT(A)'s decisions. The Tribunal's rulings were based on established precedents and consistent interpretations of Sections 10, 11, and 13 of the Income Tax Act, ensuring that only the income from prohibited investments was subject to tax, while other incomes continued to enjoy exemptions under the relevant sections.
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