February 2023
Charitable purpose — Exemption under section 11 — Effect of s13 — Transactions between trustee and related party — Diversion of income of charitable institution must be proven for application of s.13 — No evidence of diversion of funds — Exemption could not be denied to the charitable institution
By K. B. Bhujle, Advocate
Reading Time 4 mins
75 CIT(Exemption) vs.
Shri Ramdoot Prasad Sewa Samiti Trust
[2022] 450 ITR 288 (Raj)
A. Y.: 2012-13
Date of order: 8th December, 2022
Sections: 11 and 13 of ITA 1961
Charitable purpose — Exemption under section 11 — Effect of s13 — Transactions between trustee and related party — Diversion of income of charitable institution must be proven for application of s.13 — No evidence of diversion of funds — Exemption could not be denied to the charitable institutionThe respondent-assessee is a trust registeredunder section 12AA of the Income-tax Act, 1961. The assessee had claimed exemption under section 11 of the Act for the A. Y. 2012-13. The AO noticed that the assessee had made total purchases of raw materials worth Rs. 12.24 crores (rounded off) out of which purchases of Rs. 9 crores were made from Pawansut Trading Company Pvt Ltd. Upon further scrutiny it was found that the one Kishorepuri Ji Maharaj was the main trustee of the assessee-trust and also the director of the said company and from whom purchases worth 75 per cent. were made. The AO was of the opinion that such substantial purchases made from a related party had to be at arm’s length. The AO thereupon referred to section 13 of the Act and without any further discussion concluded that the assessee-trust has made purchases on unreasonable rates from Pawansut Trading Pvt Ltd, New Delhi who is person specified under section 13(3). The AO held
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