Case Law Details
CIT Vs IILM Foundation (Delhi High Court)
The explanation appended after Section 11(2) is nothing but an additional condition attached to accumulation in excess of 15% permitted under Section 11(2). We are unable to hold it as a condition on accumulation up to 15% as provided for in Section 11(1)(a) also. We are unable to find any rational classification for imposing the restriction as contained in the “explanation” to the accumulation of up to 15% also when there is no such restriction to donating the entire income of a year to another charitable trust. If the legislature intended to completely ban/discourage inter se donation between trusts, it would have changed the position as existing in law as noticed in the Division Bench judgment of this Court in Shri Ram Memorial Foundation aforesaid. The legislature did not do so. Even after the insertion of the “explanation”, if a trust donates its entire income for a year to another charitable trust, it would still be entitled to exemption under Section 11(1)(a). It defies logic as to why such donations cannot be permitted out of 15% accumulation permitted under Section 11(1)(a) itself. There is however rationale for imposing the restriction as contained in the “explanation” (supra) to accumulations in excess of 15%. Such accumulations, but for the conditions imposed in Section 11(2) and in the explanation aforesaid, would have been eligible to be taxed. One of the conditions in Section 11(2)(a) is that the purpose for which accumulation in excess of 15% is being made is to be notified; another condition is of the accumulation being permitted for a period not exceeding 10 years; yet another condition is as to the modes in which the accumulation can be invested. There are no such restrictions on accumulation under Section 11(1)(a). The scheme of the section indicates that the additional condition by way of the aforesaid “explanation” is also intended to apply only to accumulations in excess of 15% under Section 11(2) and not to accumulations upto 15% under Section 11(1)(a). The explanation is not found to be intended to take away something from the accumulation upto 15% permitted without any conditions whatsoever under Section 11(1)(a).
FULL TEXT OF THE HIGH COURT ORDER / JUDGEMENT
1. This is an appeal by the Revenue against an order dated 8th November 2017 passed by the Income Tax Appellate („ITAT‟) in ITA 1214/Del/2011 of the Assessment Year (AY) 2007-08.
2. The question sought to be urged by the Revenue was whether the interest-free loan advanced by the Assessee in the sum of Rs.2.19 crores to the Ram Krishan & Sons Charitable Trust („RKSCT‟) constituted a violation of Section 13(3) of Income Tax Act, 1951 („Act‟)?
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