The High Court held that where an assessee-trust violates the provisions of section 13, the denial of exemption under section 11 does not apply to the entire income of the trust. The disallowance must be restricted only to that part of the income which was applied, directly or indirectly, for the benefit of prohibited persons. The Court observed that interpreting the law otherwise would lead to grave injustice, as a minor infringement could cause the denial of exemption for the entire income, including amounts properly used for charitable purposes. The Court followed its own earlier decision in CIT (E) Pune v. Audyogik Shikshan Mandal (2009) 101 taxmqnn.com 247 (Bom)(HC)  and distinguished the Supreme Court’s ruling in DIT(E) v. Bharat Diamond Bourse (2003) 126 Taxman 365(SC)  (AY. 2001-02)