S. 13 : Denial of exemption-Trust or institution-Investment restrictions-Rent charged to trustee less than market rate-Violation of section 13 exemption cannot be denied- Only the income to the extent of violation is liable to tax at maximum marginal rate. [S. 11, 12, 12A, 13(1)(c)(ii)]
The AO held that rent charged from one of the Trustee is less than the market rent and rent charged from other tenants in the same premises. The AO denied the exemption u/s. 11 on entire income of the Trust on the ground that the assessee has violated the provision of the section 13(1)(c)(ii) of the Act. CIT(A) affirmed the order of the AO. On appeal the Tribunal held that exemption u/s 11 cannot be denied for violation of section 13 of the Act and the disallowance should be restricted to the extent of violation of provisions of section 13(1)(c)(ii) and 13(b) of the Act and the matter was remanded for verification.
On appeal by the Revenue the question raised before the High Court is “Whether on the facts and circumstances of the case and in law the Honourable ITAT is right in holding that the violation of section 13(1)( c) (ii) does not lead to denial of exemption u/s. 11 as against the principle laid down by the Hon’ble Apex Court in the case of DIT v. Bharat Diamond Bourse dt. 1 December 2002 (2003) 179 CTR 225 ?”
Following the judgement in CIT(E) v. Audyogik Shikhan Mndal (2019) 101 taxmann.com 247 / 261 Taxman 12 (Bom.)(HC), the question of law raised by the Revenue was dismissed. Order of Tribunal is affirmed. (ITA No. 683 of 2018 dt. 5-8-2022). (AY. 2010-11). (ITA No. 223/Pun/2014 dt. 28-6-2017)
CIT v. Mukund Bhavan Trust (Bom.)(HC)(UR)
[Coram : Hon’ble Shri Justice Dhiraj Singh Thakur and Hon’ble Shri Justice Abhay Ahuja]