The AO observed that the Assessee charitable trust gave interest free Advances to related parties in violation of the S. 11 and S. 13 of the Act and Computed Notional Interest on the interest free advances. The AO also made addition for application of funds towards charitable activities even though it had surplus funds. The ITAT held that surplus funds of a charitable Institution who enjoys benefit of S. 11 and 12, are not akin to surplus funds of a business house. The Trust is not enjoying those funds as its own funds. It is being held in a fiduciary capacity In other words, in a representative capacity of charitable Institution. If it is surplus, then it is to be accumulated under S. 11(5) in a prescribed mode and if not applied in future years, it has to suffer tax. Although, the ITAT observed that the status of the Institution cannot be changed from ‘charitable’ to ‘non-charitable’ Institution if a minor violation is present. Sub-clause (3) of S. 13 would provide that if undue benefit is being provided to any Institution or individual because of its proximity to the Management, then that undue benefit is to be brought to tax, but S. 11 and 12 would not be denied to the overall Society/Institution. Therefore, the Id. CIT(A) has erred in not analytically examining the issue, and the AO has erred in denying the exemption as a whole to the Assessee. The ITAT remanded both matters for fresh consideration. (AY. 2014-15)