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TMI Blog2021 (8) TMI 1363X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that there is no violation within the meaning of Section 13(1)(c) read with Section 13 (2) and Section 13 (3) of the Income Tax Act when the building contract work was awarded to the Managing Trustee, thereby allowing him to earn profit from the said contract and the assessee is entitled for exemption under Section 11? 3. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in denying the exemption under Section 11 of the Act on the entire income of the assessee, even though it held that the "investment" in gold bullion is in violation of the provisions of Section 11 (5) read with Section 13 (10) (d) of the Act, more so when the Supreme Court in the case of CIT v. Dawoodi Bohra Jamat (2014) 364 ITR 31 (SC) at para 15 has clearly held that Section 13 enacts a complete bar to the availability of exemption under Section 11?" 3. We have elaborately heard Mr.J. Narayanaswamy, Learned Senior Standing Counsel appearing for the Appellant / Revenue and Mrs.T.C.A. Sangeetha, Learned Counsel appearing for the Respondent / Trust. 4. It is not disputed r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han specified in Sec.11(5) of the Act. 5.2. The ld CIT(A) failed to appreciate the fact that the Assessing Officer had categorically analysed the issue and observed that the investment in gold bullion amounting to Rs.26.85 lakhs in M/s.Prince gem & Jewellery P. Ltd. for the purpose of distribution of prizes and awards to meritorious students could not be substantiated with evidence by the Trust by way of name of student, address, etc. 5.3. The ld CIT(A) failed to appreciate that similar investment in Joyalukkas in the form of 26 gold coins weighing 50 gms each and the assessee could not substantiate with evidence that the said investments were utilised for the purpose of gold metals either in the current year or in the subsequent year (Asst. Year 2011-12). 5.4. The ld CIT(A) ought to have appreciated that in the final accounts of Asst. Year 2011-12, the said investment in gold towards purchase of gold medals were not shown as application of income. 5.5. The ld CIT(A) ought to have appreciated the fact that purchase of gold bullion and gold coins cannot be considered as a transaction connected with the educational activity." 6. On a perusal of the above grounds raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sri Vekkaliamman Builders which is a partnership firm in which the Managing Trustee of the assessee Trust was a partner. The question was whether this payment would be hit by Section 13 (1) (c) read with Section 13 (2) and Section 13 (3) of the Act. 7. The Assessing Authority, while completing the assessment by order dated 25.02.2013, held that that transactions of the Trust for the year have clearly violated the provisions of law as per Section 13(1)(c) and 13(1)(d) of the Act and therefore, the provisions of Section 11 become inoperative and the surplus gained by the Trust for the year needs to be brought to taxation. The Assessee filed Appeal to the Commissioner of Income Tax (Appeals) - VII ['the CIT(A)' for brevity]. The Appeal was allowed by order dated 27.12.2013 wherein, the CIT(A) after noting that the Builder was paid a sum of Rs.5.02 crores by the Assessee in the assessment year under consideration and the firm has earned a net profit of Rs.21.51 lakhs, but yet granted relief to the Assessee on the ground that contract was given to the said Builder on a competitive basis and they were the persons who quoted lowest rate and profit earned was only 5.8% which is v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... understood in the context of situations of exception provided under section 13(1) of the Act. In fact the said statutory provision (section 13) enumerates situations in regard to which it can be said that those situations would take out the items of income covered thereby from the benefit provided by section 11 of the Act. Illustratively section 13(1)(c) provides one such situation. The said provision enacts that any income of a trust for charitable and religious purposes will not get the benefit of section 11 if such income is found directly or indirectly for the benefit of any person referred to in section 13(3) of the Act. In other words, if the concerned income in regard to which exemption is sought for under Section 11 of the Act is seen to have any connection, direct or indirect, for the benefit of any person referred to under section 13(3), with regard to that income no benefit under section 11, would be available. In this connection section 13(3) specifies who such persons would be. It is obvious that such person is not only the author of the trust or the founder of the institution, but also any person who has made a substantial contribution to the trust or institution, one ..... X X X X Extracts X X X X X X X X Extracts X X X X
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