Tata Education Trust Vs DCIT (Exemptions) (ITAT Mumbai)
Conclusion: Assessee, being a charitable trust registered under Section 12A, was entitled to exemption under Sections 10(34) and 10(35) for dividend and mutual fund income therefore, denial of exemption by invoking Sections 13(1)(d) and 13(2)(h) was unjustified, as these provisions did not override independent exemptions under Section 10.
Held: Assessee, a charitable trust registered u/s 12A, claimed exemption u/s 10(34) and 10(35) in respect of dividend income and income from mutual fund units. AO denied the exemption on the ground that the trust had violated provisions of Sections 13(1)(d) and 13(2)(h) by investing in shares of Tata Sons Ltd., where one of its trustees held an interest, and thus taxed the income at the maximum marginal rate. CIT(A) upheld the AO’s view. On appeal. Tribunal held that exemption under Sections 10(34) and 10(35) could not be denied merely because assessee was a charitable trust registered u/s 12A, and violation of Section 13 did not affect the independent operation of Section 10 exemptions. Relying on the coordinate bench decision in Tata Education Trust v. ITO (Exemption) and Jasubhai Foundation (374 ITR 315), Tribunal observed that Section 10 and Section 11 both fall under Chapter III (“Incomes not forming part of total income”) and operate independently. Further, since the amendment by Finance (No.2) Act, 2014 inserting Section 11(7) is prospective from A.Y. 2015–16, it does not apply to the year under consideration. Assessee’s claim of exemption u/s 10(34) and 10(35) in respect of dividend and mutual fund income was allowable.
