Income-tax---

----Charitable purposes---Charitable trust---Exemption---Denial of exemption---Shares received by charitable trust as donation---Persons mentioned in S.13 (3), Indian Income Tax Act, 1961 having substantial interest in company---No investment of trust funds in purchasing shares---Exemption cannot be denied---Indian Income Tax Act, 1961, Ss.11 & 13.

Where a charitable trust receives as donation shares in a company in which the persons mentioned in section 13(3) of the Income Tax Act, 1961, had substantial interest, the trust cannot be said to have invested its funds in purchasing the shares in question. In such cases, section 13(2)(h) will have no application.

CIT v. Insaniyat Trust (1988) 173 ITR 248 (Guj.) fol.

M.J. Thakore instructed by M.R. Bhatt of R.P. Bhatt & Co. for the Commissioner.

DA. Mehta for K.C. Patel for the Assessee.

JUDGMENT

G.T. NANAVATI, J.---The Income Tax Appellate Tribunal has referred the following questions to this Court under section 256(1) of the Income Tax Act, 1961:

"(1) Whether the Income Tax Appellate Tribunal was right in law in holding that the condition precedent in section 13(2)(h) of the Income Tax Act, 1961, is not fulfilled in this case because that condition requires a positive act on the part of the trustees to invest the funds of the trust in certain concerns in which the persons referred to in section 13(3) have substantial interest and because such funds were not invested in purchasing the shares which were donated to the trust?

(2) Whether the burden lay on the Revenue to show that the provisions of section 13(1)(c) of the Income Tax Act applied in the case of the assessee in view of Explanation 3 to that section?

(3) Whether the Income Tax Appellate Tribunal was right in law in holding that the case of the assessee was not hit by the provisions of section 13(2)(h) of the Income Tax Act?"

The point that arises for consideration in this reference is concluded by a decision of this Court in C.I.T. v. Insaniyat Trust (1988) 173 ITR 248, wherein it has been held that, where a charitable trust receives as donation shares in a company in which the persons mentioned in section 13(3) have substantial interest, the trust cannot be said to have invested its funds in purchasing the shares in question. In such cases, section 13(2)(h) will have no application. Following that decision, we answer questions Nos. 1, 2 and 3 in the affirmative, that is, against the Revenue and in favour of the assessee. The reference is disposed of accordingly with no order as to costs.

M.BA./160/T.F.

Reference disposed.