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2002 (2) TMI 87

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..... a concern in which the persons referred to in section 13(3) of the Income-tax Act, 1961, have substantial interest and hence dividend income from the shares of that company is exempt under section 11 of the Act? 2. Whether the Tribunal has been right in law in holding that section 13(3) is not applicable to the funds diverted to Smt. Saraladevi Sarabhai or Karamchand Premchand Pvt. Ltd., to the extent of Rs. 68,942 and hence exemption under section 11 of the Income-tax Act, 1961, cannot be denied? 3. Whether, on the facts and in the circumstances of the case, the Income tax Appellate Tribunal has been right in law in holding that since exemption under section 11 of the Income-tax Act, 1961, was available to the assessee, the assessee w .....

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..... er 21, 2000, in I.T.R. No. 142 of 1985, along with the paper book of the present reference, from which it appears that the attention of this court was not drawn to the pendency of this reference and hence it was not decided along with I.T.R. No. 142 of 1985 (CIT v. Ambalal Sarabhai Charity Trust [2001] 252 ITR 610). At the time of hearing of this reference, neither party is having with them the copy of the paper book of disposed Reference No. 142 of 1985 (CIT v. Ambalal Sarabhai Charity Trust [2001] 252 ITR 610) nor necessary annexures and hence we proceed to dispose of the present reference on the basis of the paper book which only contains the statement of case dated February 5, 1987, drawn by the Tribunal and also on the basis of a copy .....

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..... 85 (see [2001] 252 ITR 610 (Guj)). As far as question No. 1 in the present reference is concerned, it was submitted before us that while confirming the order of the Appellate Assistant Commissioner on this point, the Tribunal had followed its own order passed in the case of Sarabhai Foundation (I.T.A. No. 93/Ahd of 1977-78, dated December 15, 1979). At the time of hearing of reference of Sarabhai Foundation, being I.T.R. No. 557 of 1980-([1994] 209 ITR 390), as is observed in the judgment dated September 16, 1993, that "in view of the decision of this court in the case of CIT v. Insaniyat Trust [1988] 173 ITR 248, if a trust received as donation some shares, then the provisions of section 13(2)(h) would not be applicable and the dividend .....

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..... question No. 1 deals with the dividend income received by the assessee from the shares of Calico Mills Company. The third question referred to in I.T.R. No. 142 of 1985-[2001] 252 ITR 610 is also in respect of the dividend income amounting to Rs. 1,777 received from the shares of Calico Mills Company. The said question is answered by this court in the following terms: "A. The dividend, which was received by the assessee on the shares which were donated to the assessee and shares which were received by the assessee by way of bonus, the provisions of section 13(2)(h) would not apply and, therefore, the said amount of dividend would be exempted from tax. B. So far as shares which were purchased by the assessee are concerned, the dividend .....

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..... rge the liability of Rs. 68,942 in favour of Karamchand Premchand Pvt. Ltd. It was only on this condition that the shares were donated by Smt. Saraladevi Sarabhai to the assessee-trust and the assessee-trust had to pay the said amount to the firm of Karamchand Premchand Pvt. Ltd. By no stretch of imagination, can it be said that the assessee has voluntarily diverted its funds and in this view of the matter, the provisions of section 13(3) of the Act cannot be applied. We are, therefore, of the view that the provisions of section 13(3) are not applicable to the funds said to have been diverted to Smt. Saraladevi Sarabhai or Karamchand Premchand Pvt. Ltd. to the extent of Rs. 68,942, and hence the exemption under section 11 of the Act cannot .....

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