DIRECTOR OF INCOME TAX Vs. BHARAT DIAMOND BOURSE
SUPREME COURT OF INDIA (FROM: BOMBAY)
DIRECTOR OF INCOME TAX
BHARAT DIAMOND BOURSE
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(1.)These appeals arise out of the judgments of the High Court of Bombay disj missing the appeals filed by the revenue under section 260 A of the Income Ta> iw act, 1961 (hereinafter referred to as 'the act'). Civil appeal no. 8211/2001 pertains to assessment year 1989-90 while civil appeal no. 8212/2001 pertains to the as sessment year 1990-91. Since the issues fact and law are common, both the appeals are disposed of by this commons judgment.
(2.)The respondent-assessee is incorporated as a company limited by guarantee] under the Companies Act, 1956 and is appeal non-profit service organization. For that assessment years 1989-90 and 1990-91 returns were filed by the assessee along with audited income and expenditure accounts and balance sheets for the relevant previous years. The assessee claimed the benefit of section 11 of the Act on the ground that it was an institution established wholly for 'charitable purposes' within the meaning of section 2 (15) of the act and had been registered as such under section 13 of the Act. The assessing officer (hereinafter referred to as the 'ao') denied the benefit of section 11 on two grounds. First, he held that the respondent-assessee was a diamond bourse and as such its objects were not 'charitable purpose' within the meaning of section 2 (15) of the Act. Secondly, he took the view that, even if so, the assessee had breached the conditions under section 13 and as such was liable to be denied the benefit of section 11. The assessee carried the matter in appeals to the commissioner of income tax (appeals) who confirmed the orders of the A. O. Further appeals were carried to the income tax appellate tribunal. The tribunal came to the conclusion that the objects for which the respondent-assessee was established were 'charitable purpose' within the meaning of section 2 (15) of the Act and that there was no breach of the provisions of section 13. In this view of the matter, the tribunal allowed the appeals of the assessee for both assessment years and reversed the orders of the two authorities below. Being aggrieved thereby, the department carried appeals to the High Court under section 260 A and these appeals have been dismissed.
(3.)Shri R. P. Bhat, learned senior counsel for the revenue, urges two grounds in support of the appeal: (1) The assessee was not entitled to benefit of section 11 of the Act. (2) Even if the assessee was to be treated as an institution entitled to the benefit of section 11 of the Act, the assessee lost that exemption by lending Rs. 70 lacs during the previous years relevant to the assessment years 1989-90 and 1990-91 to bharat Shah, the founder of the institution. The exemption was lost by reason of section 13 (2) (a) read with section 13 (3) (a) of the Act.
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