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2015 (3) TMI 966 - AT - Income TaxExemption under Section 11 - whether payments made by the assessee to one M/s Sivaraja Ramalinga Trust was not hit by Section 13(1)(c)? - CIT(A) allowed the exemption - Held that - There is no dispute that M/s Sivaraja Ramalinga Trust, to which assessee had given money, was a Trust registered under Section 12AA of the Act. The A.R. has placed a copy of order under Section 12AA of the Act granting registration to such Trust. Two things are very clear. One is that M/s Sivaraja Ramalinga Trust was a Trust and second is that some of the trustees were common. However, in our opinion, trustees hold the property of the Trust in a fiduciary capacity and not as owners. The owners of the Trust property were always its beneficiaries and trustees were holding the property and income therefrom for the benefit of beneficiaries and not for themselves. We cannot say that just because two Trusts are having common trustees, they are related concerns. Trust will not fall within the concept of concern mentioned in clause (e) of sub-section (3) of Section 13 of the Act. Invocation of Section 13(1), in such a situation, was not at all warranted. CIT(Appeals) was justified holding that assessee was eligible for exemption under Sections 11 and 12 of the Act. We find no reason to interfere with the order of CIT(Appeals). - Decided against revenue.
Issues:
Revenue's grievance regarding the CIT(Appeals) allowing exemption under Section 11 of the Income-tax Act, 1961 to the assessee for payments made to M/s Sivaraja Ramalinga Trust, and the contention that the decision of a co-ordinate Bench of the Tribunal in a similar case has not been accepted. Analysis: Issue 1: Exemption under Section 11 of the Act The Revenue appealed against the CIT(Appeals) decision to grant exemption under Section 11 of the Act to the assessee for payments made to M/s Sivaraja Ramalinga Trust. The Revenue argued that since some trustees were common between the assessee and the trust, the assessee was hit by Section 13(1)(c) read with Section 13(3) of the Act. The Assessing Officer treated the assessee-Trust as an AOP and denied the exemption. However, the CIT(Appeals) held that the payments made to the trust did not violate Section 13(1) of the Act as the term "concern" in Section 13(3) did not include another charitable Trust. The CIT(Appeals) relied on a previous decision of the Tribunal in a similar case and directed the A.O. to grant the exemption. Issue 2: Interpretation of Section 13(3) of the Act The Revenue contended that any concern in which a trustee with substantial interest is involved falls under the purview of Section 13(1)(c) of the Act. They argued that since the trustees of the assessee-Trust had substantial interest in the trust to which the payments were made, they directly or indirectly derived benefits, making the exemption invalid. However, the Tribunal held that trustees hold the trust property in a fiduciary capacity for the beneficiaries and not for themselves. Common trustees between two trusts do not automatically make them related concerns under Section 13(3) of the Act. The Tribunal agreed with the CIT(Appeals) and upheld the grant of exemption under Sections 11 and 12 of the Act to the assessee. In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(Appeals) decision to grant exemption under Sections 11 and 12 of the Income-tax Act, 1961 to the assessee for the payments made to M/s Sivaraja Ramalinga Trust. The Tribunal emphasized that common trustees between two trusts do not establish a relationship that would trigger the provisions of Section 13(1)(c) of the Act. The decision was based on the fiduciary role of trustees and the beneficial interest of the beneficiaries in the trust property.
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