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TMI Blog2021 (3) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... e Commissioner of Income Tax (Appeals), who allowed the appeal holding that the amounts lent to the group trust does not amount to violation under section 13(1)(d) read with 11(5), since the objects of the assessee trust and the trust to whom the money were lent were similar. Further, it held that the amounts lent cannot be treated to have benefited any person directly or indirectly and the loan given are outside the purview of section 13(1)(c) and 13(1)(d). 2.3 Aggrieved over the order passed by the Commissioner of Income Tax (Appeals), the Revenue has filed an appeal before the Income Tax Appellate Tribunal, and the Tribunal also confirmed the order passed by the Commissioner of Income Tax (Appeals) and dismissed the appeal. Challenging the order passed by the Income Tax Appellate Tribunal, the Revenue has filed the above appeal. 3. At the time of admission of the above appeal, the following substantial question of law arose for consideration: "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is entitled for exemption u/s 11 by holding that the grant of loan by assessee trust to its group trust cannot be treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 11(5) have no application at all. On the other hand standing counsel for the Department pointed out that the decisions pertain to assessment prior to the amendment to Section 13 and, therefore, those decisions have no application. Obviously the decisions only refer to Section 11 and not to Section 13, whereas the decision of the Commissioner under challenge is based on Section 13(1)(d) of the Act. Sri P. Balachandran, appearing for the petitioner, relied on the decision of the Gujarat High Court in Orpat Charitable Trust v. CIT [2002] 256 ITR 690 and that of the Delhi High Court in Director of Income-tax (Exemption) v. Agrim Charan Foundation [2002] 253 ITR 593 and contended that even if there is violation of Section 11 or Section 13, the petitioner is entitled to registration under Section 80G(5) of the Act. 4. It is admitted and there is finding to the effect that an amount of Rs. 25,000 was deposited by the petitioner with Integrated Finance Company up to March 31, 1999, the previous year relevant to the assessment year for which renewal of exemption was claimed by the petitioner under Section 80G. This is admittedly not a permissible investment provided under Clauses (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted or deposited after the 28th day of February, 1983, otherwise than in any one or more of the forms or modes specified in Sub-section (5) of Section 11 ; or (ii) any funds of the trust or institution invested or deposited before the 1st day of March, 1983, otherwise than in any one or more of the forms or modes specified in Sub-section (5) of Section 11 continue to remain so invested or deposited after the 30th day of November, 1983 ; or (iii) any shares in a company (not being a Government company as defined in Section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act) are held by the trust or institution after the 30th day of November, 1983 . . ." Therefore, Section 13(1)(d) which has overriding effect makes it mandatory for the trust to invest the entire left over funds after meeting the expenditure in any of the modes of investments provided under Section 11(5) of the Act. Even in a case where 75 per cent. is spent by the trust and balance 25 per cent. is carried over, such 25 per cent. should be invested only in any of the modes provided under Section 11(5) of the Act and if there is a violation, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under section 11(5)/13(1)(d) ofthe Act ought to have been considered for confirming the assessment. 4. We do not agree with the said submission of the learned counsel for the Revenue.We may at the outset point out herein that the decision relied on by theCommissioner of Income-tax (Appeals) in the case of CIT v. Tuluva Vellala Association in T.C. No. 477 of 1989, dated March 16, 1999, is rentable to thedecision of this court in T.C. No. 477 of 1989 and has no relevance of the issue onhand. Leaving that aside, as far as the decision of the Bombay High Court in DIT (Exemptions) v. Sheth Mafatlal Gagalbhai Foundation Trust MANU/MH/0448/2001 :[2001] 249 ITR 533 (Bom.) is concerned, it is a similar line, which was applied by the Tribunal. The assessee therein was brought under section 164 to be assessed at the maximum marginal rate of tax on account of contravention of section 13(1)(d). The Bombay High Court held that violation of section 11(5) read with section 13(1) (d) by the assessee would result in the maximum marginal rate of tax only on the dividend income on shares, which was not the recognised mode of investment andthat the assessee would not be vested with marginal rate ..... X X X X Extracts X X X X X X X X Extracts X X X X
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