[2018] 194 TTJ (Del) 715
ITO vs. The Times Centre for Media and Management Studies
ITA No.: 1389/Del/2015
A. Y.: 2010-11 Dated: 31st May, 2018
Section 11 & 13(1)(d) – It is only the income from such investment or deposit which has been made in violation of section 11(5), that is liable to be taxed; violation of section 13(1)(d) does not result in the denial of exemption u/s. 11 to the total income of the assessee.
FACTS
The assessee was a charitable institution in terms of section 25 of the Companies Act, 1956 and also registered u/s. 12AA(1) of the Income-tax Act, 1961. During the year under consideration the assessee had received a donation of 50,000 shares worth Rs.2,00,000 from Angelo Rhodes Ltd. (United Kingdom) way back in 1996 and had received dividend income of Rs.2,36,000.
The AO proceeded to deny the exemption u/s. 11(1) of the Income-tax Act, 1961 for violation of provision of section 13(1)(d) r.w s. 11(5) of the Income-tax Act, 1961 pertaining to mode of investment.
Aggrieved by the assessment order, the assessee preferred an appeal to the CIT(A). The CIT(A) granted the assessee the benefit of exemption on all income except the impugned amount of Rs.2,36,000.
HELD
The Tribunal held that it was well settled that where investments or deposits had been made by a charitable trust which were in violation of section 11(5), the benefit of exemption u/s. 11 would not be denied on the entire income of the assessee and only the investments/deposits made in violation of provisions of section 11(5) would attract maximum marginal rate of tax.
The Tribunal followed the ratio of the Hon’ble High Court decision in the case of CIT vs. Fr. Mullers Charitable Institutions (2014) 102 DTR (Kal) 386 wherein while dealing with an identical issue it was held that a reading of section 13(1)(d) made it clear that it was only the income from such investment or deposit which had been made in violation of section 11(5) that was liable to be taxed and that the violation u/s. 13(1)(d) did not tantamount to denial of exemption u/s. 11 on the total income of the assessee.
The Tribunal relying upon the judgement of the Hon’ble High Court, held that in the present case the maximum marginal rate of tax would apply only to the dividend income from shares held in contravention of section 13(1)(d) and not to the entire income.