DCIT Vs Tata Social Welfare Trust (ITAT Mumbai)
Sec. 11 Denied? No Problem – Sec. 10(34)/(35) Still Saves the Day, Rules ITAT- ITAT Mumbai grants massive relief to Tata Social Welfare Trust – Sec. 10(34)/10(35) exemption allowed despite Sec. 13 allegations, bonus shares not “prohibited investment”, 80G/80GGA
This consolidated order covers seven appeals relating to Tata Social Welfare Trust for AYs 2008-09, 2010-11, 2013-14, 2014-15 (Revenue appeals), AY 2015-16 (assessee appeal), & AYs 2016-17 & 2017-18 (Revenue appeals).
The core issues were: (i) Whether dividend & mutual fund income is exempt u/s 10(34)/10(35) even if Sec 11 is denied, (ii) whether investment in Tata Sons bonus shares violates Sec. 13(1)(d), (iii) effect of 12A registration cancellation date, (iv) availability of 80G & 80GGA deduction.
For earlier years (AY 2008-09, 2010-11, 2013-14, 2014-15), AO reopened assessments, denied exemption u/s 10(34)/10(35) & Sec. 11 citing violation of Sec. 13(1)(d)/(2)(h) due to investment in shares of Tata Sons, & tried to tax the trust at maximum marginal rate. CIT(A) allowed both Sec. 10 & Sec. 11 exemption by holding that Sec. 11(7), which bars dual benefit of Sec. 10 & 11, was inserted only from AY 2015-16. He also held that the “investment” in Tata Sons was merely bonus shares, which fall under the statutory exception in the proviso to Sec. 13(1)(d). Tribunal fully agreed. It held that prior to AY 2015-16, Sec. 10(34)/(35) exemption was independently available to trusts. It also held that bonus shares are not fresh prohibited investments, hence no violation of Sec. 13. Consequently, all four Revenue appeals were dismissed.
