CIT Vs Indian Institute of Engineering Technology (Madras High Court)
No violation in payment to persons specified u/s 13(3) if Trust formed before commencement of the Act & payment is as per the Trust Deed
Assessee is a charitable trust/educational institution established on 01.02.1961 that is before the commencement of the Income Tax Act, 1961 & registered u/s 12A(a). Memorandum of Association contains provisions to pay honorarium to the trust members/family members.
During the previous year relevant to AY 2010-2011, the revenue of the Trust was Rs.6,11,56,935. The assessee trust had spent Rs.1,13,400/- towards honorarium, ex-gratia and medical expenses of the wife of the founder of the trust. AO considered it as a violation of Section 13(1)(c) & denied exemption u/s 11 treating the income of Rs.6,11,56,935/- as taxable.
On appeal CIT confirmed the order of the AO.
On further appeal, the Tribunal has held that for getting exemption u/s 11 payment of Rs.1,13,400/- to the said wife of founder trustee cannot be construed as a violation of Sec 13(1)(c) because the trust was established well before the Act came into force & the Memorandum of Association of the trust had paved the way for making this amount of honorarium to the trustees.
