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TMI Blog2013 (9) TMI 335X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hence it resulted in violation of the nature specified in Section 13(1)(d) of the Act. Therefore, according to her, excess of income over expenditure of the Trust had to be taxed in the status of AOP. Though the assessee asserted before the A.O. that decisions of Hon'ble Bombay High Court in the case of DIT(E) v. Seth Mafatlal Gagalbhai Foundation (249 ITR 533) and that of DIT(E) v. Shardaben Baghubai Mafatlal Public Charitable Trust (247 ITR 1) were in its favour, A.O. was not impressed. According to her, these decisions on the other hand, clearly went to show that a Trust will forfeit its eligibility to claim exemption if there is a violation of the nature mentioned in Section 13(1)(d) of the Act. She therefore held that assessee was not eligible for exemption under Section 11 for the impugned assessment year and the excess of income over expenditure was accordingly assessed to tax. 3. In its appeal before CIT(Appeals), argument of the assessee was that the amounts placed with chit companies were insignificant. Such chit subscriptions totalled to Rs. 3,04,686/- only, whereas, income of the assessee on which exemption was claimed came to Rs.2,65,15,237/-. As per the assessee, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which were registered chit companies. When subscriptions were paid to a chit fund, it was not with an aim of earning interest income, but only for raising funds by prizing the chits when a need arose. Monthly subscription placed in a chit was neither investment nor deposit. These were payments essentially required to be made for participating in the chit, with a right to prize the chit during the tenure of the chit. Authorities below fell in error when they treated it as investment or deposit. According to him, Section 11(5) spelt out the requirement of investing or depositing money, which was accumulated or set apart by an assessee-Trust. Only when money was invested or deposited in a manner other than what were provided under Section 11(5) of the Act, violation specified under Section 13(1) could be fastened. According to him, subscription to chits neither being an investment nor a deposit, assessee could not have been saddled with a tax on its total income, citing violation of Section 13(1)(d) of the Act. Relying on the decision of Hon'ble Kerala High Court in the case of CIT v. Kottayam Co-operative Bank Ltd. (96 ITR 181), learned A.R. submitted that the dominant motive which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upporting the orders of authorities below, submitted that assessee had made investment in two chit companies. Though the amounts could be small when compared to the total earnings of the assessee, there was clear violation of Section 11(5) of the Act. Once the funds were employed in a mode other than what where specified under Section 11(5) of the Act, there was a violation of the nature mentioned in Section 13(1)(d) of the Act. Even if a chit fund is not considered as a banker, the subscription given by the assessee to the chit companies were intended to finance the prized amounts of chits every month. Therefore, it was only an indirect way of investment. Even a single violation of the investment pattern specified under Section 11(5), will result in forfeiture of exemption under Section 11 of the Act. For this, reliance was placed on the decision of co-ordinate Bench of this Tribunal in the case of ITO (OSD) Exemptions v. KAS Foundation [2012] 52 SOT 195. 8. We have perused the orders and heard the rival submissions. There is no dispute that assessee had, during the relevant previous year, subscribed to two chits, one conducted by M/s Tern Credits & Chits Private Limited and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... say that persons, who are subscribers to a chit, are making any investment in the concern running the chit fund. We cannot say that subscriber to a chit fund is placing any deposit in the concern running the chit fund. Pooling of money by a group of persons for the benefit of one of them, through chits, cannot be equated with investments or deposits. 10. A look at Section 11(5) of the Act would clearly show that said Section applies only to investments and deposits of money which are accumulated or set apart by an assessee-Trust. Section 11(2) and Section 11(5) of the Act are reproduced hereunder:- "11(2) [Where [eighty-five] per cent of the income referred to in clause (a) or clause (b) of sub-section (1) read with the Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during the previous year but is accumulated or set apart, either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in the total income of the previous year of the person in receipt of the income, provided the following conditions are complied with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank or a co-operative land development bank). Explanation.-In this clause, "scheduled bank" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934); (iv) investment in units of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963); (v) investment in any security for money created and issued by the Central Government or a State Government; (vi ) investment in debentures i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (b) "public company" shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956); (c) "urban infrastructure" means a project for providing potable water supply, sanitation and sewerage, drainage, solid waste management, roads, bridges and flyovers or urban transport;] (x) investment in immovable property. Explanation.-"Immovable property" does not include any machinery or plant (other than machinery or plant installed in a building for the convenient occupation of the building) even though attached to, or permanently fastened to, anything attached to the earth;] [(xi) deposits with the Industrial Development Bank of India established under the Industrial Development Bank of India Act, 1964 (18 of 1964);] [(xii) any other form or mode of investment or deposit as may be prescribed.]" It is clear from the above Sections that the intention of the Legislature i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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