Section 13(1)(d) Violation Cannot Deny Section 11 Exemption on Entire Income: ITAT Delhi

DCIT Vs Energy and Resources Institute (ITAT Delhi)

Wrong Investment by a Trust: Does the Entire Exemption Disappear?

Holding shares outside the modes permitted by Section 11(5) may violate Section 13(1)(d), but it does not necessarily make the trust’s entire income taxable. The Delhi Bench of the ITAT has applied this principle in the case of The Energy and Resources Institute (TERI). Since the disputed investments produced no income in the relevant years, the Tribunal upheld the availability of exemption on TERI’s other income.

The decision is DCIT (Exemption) v. The Energy and Resources Institute, ITA Nos. 5991 and 5992/Del/2026, concerning AYs 2016–17 and 2017–18, pronounced on 28 September 2026.

Investments made earlier, but held during the assessment years

TERI is a society registered under Section 12A. Its activities include preservation of the environment, a recognised charitable purpose under Section 2(15). During scrutiny, the AO noticed that TERI held shares in certain joint ventures, including foreign entities. The investments totalled ₹2,44,39,291.

The AO considered these shares to be outside the permitted investment modes under Section 11(5). Although TERI stated that it had made no fresh investment and received no income from these shares during the year, the AO held that their continued holding attracted Section 13(1)(d). He consequently denied exemption under Sections 11 and 12 on the entire income. For AY 2017–18, the assessment was completed at taxable income of ₹16,19,74,743.