17 Nani Palkhivala Memorial National Tax Virtual Moot Court Competition, 2021

TEAM CODE: 04
17th NANI PALKHIVALA NATIONAL VIRTUAL MOOT COURT COMPETITION 2021
17TH NANI PALKHIVALA MEMORIAL NATIONAL TAX VIRTUAL MOOT

COURT COMPETITION, 2021
Civil Appeal Filed Before
The
HIGH COURT OF MADRAS
Under Section 260Aof Income Tax Act, 1961
[Tax Case Appeal No. 323 of 2021]
LEARN MORE EDUCATIONAL TRUST ...APPELLANT
V.
COMMISSIONER OF INCOME TAX ...RESPONDENT
BEFORE HON’BLE CHIEF JUSTICE AND HIS OTHER COMPANION JUDGES OF HIGH
COURT OF MADRAS THROUGH VIRTUAL PLATFORM
WRITTEN SUBMISSION for THERESPONDENTS
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TABLE OF CONTENT
TABLE OF CONTENT ................................................................................................................ II
LIST OF ABBREVIATIONS ......................................................................................................IV
INDEX OF AUTHORITIES ........................................................................................................VI
STATEMENT OF JURISDICTION ............................................................................................ X
STATEMENT OF FACTS ..........................................................................................................XI
STATEMENT OF ISSUES....................................................................................................... XIII
SUMMARY OF ARGUMENTS ..............................................................................................XIV
ARGUMENTS ADVANCED ....................................................................................................... 1
I. WHETHER THE HON’BLE ITAT WAS CORRECT IN CONCLUDING THAT

THE ENTIRE EXEMPTION UNDER § 11 WOULD NOT BE AVAILABLE IF THE
PROVISIONS OF § 13(1) READ WITH § 13(2) WERE ATTRACTED?........................ 1
A. EXEMPTION SHALL BE REVOKED IN ITS ENTIRETY ....................................................... 1
B. DISCRETION RESTS WITH THE ASSESSING OFFICER ..................................................... 2
C. THE RULE OF CONSISTENCY WILL NOT PREVAIL .......................................................... 3
II. WHETHER THE HON’BLE ITAT WAS CORRECT IN HOLDING THAT THE
EXPENDITURE OF RS 30 LAKHS TOWARDS PROVIDING RELIEF TO PEOPLE
AFFECTED BY FLOOD, WOULD AMOUNT TO VIOLATION OF TERMS OF
THE TRUST, AND CONSEQUENTIALLY DENYING THE EXEMPTION
CLAIMED BY THE APPELLANT? ..................................................................................... 4
A. THE TRUST IS BARRED FROM UNDERTAKING OTHER CHARITABLE ACTIVITIES NOT
EXPRESSLY MENTIONED IN ITS OBJECTS ................................................................................. 4
a. Outside the purview of the charitable purpose of education under § 2(15) of the
Act 4
b. The objects shall correspond to the charitable purpose of the trust .................... 5
B. NOTIONAL AMENDMENT TO THE OBJECT OF THE TRUST IS NOT PERMISSIBLE ............ 5
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C. EXEMPTION CLAIMED UNDER § 11 OF THE ACT, SHALL BE DENIED FOR HAVING
VIOLATED THE OBJECT OF THE TRUST, AND CONSEQUENTLY THE REGISTRATION GRANTED
UNDER § 12A OF THE ACT SHALL BE CANCELLED .................................................................. 6
III. WHETHER THE HON’BLE ITAT WAS CORRECT IN NOT TREATING THE
DONATIONS RECEIVED FROM RELIANCE INDUSTRIES LTD. AS CORPUS
DONATIONS, AND CONSEQUENTLY DENYING THE BENEFIT OF § 11(1)(D)
TO THE APPELLANT? .......................................................................................................... 8
A. THE DONATION RECEIVED IS INCOME FROM PROPERTY HELD UNDER TRUST .............. 8
B. THE DONATION IS NOT A CORPUS DONATION ............................................................... 9
C. INVESTMENT OF SURPLUS IN FIXED DEPOSIT IS NOT AN APPLICATION OF INCOME ..... 9
IV. WHETHER THE HON’BLE ITAT WAS CORRECT IN NOT TREATING THE
AMOUNT SPENT IN CONDUCTING CULTURAL EVENT AT SINGAPORE AS
APPLICATION OF INCOME WITHOUT APPRECIATING THE FACT THAT
THE EXPENDITURE WAS INCURRED TO PROMOTE THE ACTIVITIES OF
THE APPELLANT?............................................................................................................... 11
A. EXPENDITURE INCURRED OUTSIDE INDIA CANNOT BE TREATED AS AN APPLICATION
OF INCOME ............................................................................................................................. 11
a. The income must be applied within the geographical boundaries of India ....... 11
b. Statutes must be interpreted in literal sense ........................................................ 12
B. THE ASSESSEE VIOLATED § 11(1) (C) OF THE ACT ..................................................... 13
a. No prior approval of CBDT is obtained by the assessee .................................... 13
b. The activities do not promote international welfare............................................ 13
V. WHETHER THE HON’BLE ITAT WAS CORRECT IN HOLDING THAT THE

INCOME ACCUMULATED UNDER § 11(2) BY THE TRUST WOULD BE
TAXABLE, WITHOUT GRANTING DEDUCTION FOR APPLICATION OF
INCOME? ................................................................................................................................ 15
A. THE TRUST HAS FAILED TO UTILIZE THE FUNDS ACCUMULATED WITHIN THE
PRESCRIBED TIME .................................................................................................................. 15
B. THERE IS NO EXEMPTION AVAILABLE FOR DEEMED INCOME ..................................... 16
PRAYER ....................................................................................................................................XVI
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LIST OF ABBREVIATIONS
SERIAL NO. ABBREVIATIONS FULL FORM
1. & And
2. § Section
3. ¶ Paragraph
4. AIR All India Reporter
5. All Allahabad
6. AO Assessing Officer
7. AP Andhra Pradesh
8. Bang. Bangalore
9. Bom. Bombay
10. Cal. Calcutta
11. CBDT Central Board of Direct Taxes
12. Chd Chandigarh
13. CIT Commissioner of Income Tax
14. CTR Current Tax Reporter
15. Del. Delhi
16. ed. Edition
17. F.Y. Financial Year
18. Guj. Gujarat
19. HC High Court
20. HL House of Lords
21. I.T.A. Income Tax Appeal
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22. Id. Ibidem
23. ITAT Income Tax Appellate Tribunal
24. ITR Income Tax Reporter
25. Kar. Karnataka
26. Ker. Kerala
27. Ltd. Limited
28. MP Madhya Pradesh
29. Mum. Mumbai
30. No. Number
31. PCIT Principal Commissioner of Income Tax
32. Pun Pune
33. SC Supreme Court
34. SCC Supreme Court Cases
35. v. Versus
36. Viz Vizag/ Vishakhapatnam
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INDEX OF AUTHORITIES
BOOKS
ARVIND P D ATAR, KANGA & PALKHIVALA’ S THE LAW AND PRACTICE OF INCOME T AX (Lexis
Nexis, 10th ed., 2014). ..........................................................................................................8, 12
GAUTAM NAYAK, TAXATION OF CHARITABLE TRUSTS AND INSTITUTIONS- ASTUDY 54-55 (6th
ed. 2009 .................................................................................................................................9, 13
FOREIGN C ASES
Grey v. Pearson, (1857) 6 HL Cas 61 ......................................................................................... 12
HIGH COURT C ASES
Action for Welfare and Awakening in Rural Environment (AWARE) v. DCIT, (2003) 263
ITR 13 (AP). ........................................................................................................................... 1, 2
Addl. CIT v. Ahmedabad Mill owners' Association, (1977) 106ITR 725 (Guj) ....................... 5
Agappa Child Centre v. CIT, (1997) 226 ITR 211 (Ker.)............................................................ 1
Allahabad Agricultural Institute & Another v. UOI & others, (2007) 291 ITR 116 (All)......... 6
Bar Council of Maharashtra v. CIT, (1980) 126 ITR27 (Bom) ................................................... 5
Board of Control for Cricket in India. v. ITO, (2012) 19 ITR 91 (Mum)................................... 7
CIT v. Foss Electric, (2003) 263 ITR125 (Raj) ............................................................................ 3
CIT v. Jayshree Charity Trust, (1986) 159 ITR 280 (Cal). ........................................................ 16
CIT v. Rao Bahadur Calavala Cunnan Chelty Charities, (1982) 135 ITR 485 (Mad). ............ 16
CIT v. Trustee of H. E. H. The Nizam's Supplemental Religious Endowment Trust, (1981)
127 ITR 378 (AP). .................................................................................................................... 16
Commissioner of Income Tax v. M.Ct. Muthiah Chettiar Family, (1972) 86 ITR 282 (Mad).
................................................................................................................................................... 15
Commissioner of Income-tax v. Divine Light Mission, (2005) 196 CTR 135 (Del). ................ 8
CWT v. Meattles (P.) Ltd., (1985) 156 ITR 569 (Del). ............................................................... 3
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D.C. Agrawal, An analysis of ACIT v. Idicula Trust Society, (2012) 21 taxmann.com 144
(Del)............................................................................................................................................. 2
Director of Income Tax (Exmp.) v. Girdharilal Shewnarain Tantia Trust, (1993) 199 ITR 215
(Cal). .......................................................................................................................................... 16
Krishak Bharati Cooperative Ltd. v. Dy. CIT, (2013) 350 ITR 24 (Del) ................................... 3
Mool Chand Khairati Ram Trust v. Director of Income-tax (Exemptions), (2015) 377 ITR
650 (Del). .................................................................................................................................... 7
Sri Dwarkadheesh Charitable v. Income-Tax Officer, (1975) 98 ITR 557 (All). ...................... 8
The Trustees, The B.N. Gamadia Parsi Hunnarshala v. Assistant Director of Income Tax,
(2002) 77 TTJ 274 (Bom). .................................................................................................16, 17
SUPREME COURT C ASES
Bharat Sanchar Nigam Ltd. v. Union of India (2006) 282 ITR 273 (SC)................................... 3
CIT v. Andhra Chamber of Commerce, (1965) 55 ITR 722 (SC).............................................. 5
CIT v. British Paints India Ltd., (1991) 188 ITR 44 (SC) ........................................................... 3
CIT v. Oswal Agro Mills Ltd., (2008) 313 ITR 24 (SC). ............................................................ 3
Distributors (Baroda) Private Limited v. Union ofIndia,(1985) 155 ITR 120 (SC). .................. 3
DIT v. Bharat Diamond Bourse, (2003) 259 ITR 280 (SC). ...................................................... 5
Jugal Kishore Saraf v. Raw Cotton Co. Ltd, AIR 1955 SC 376 ................................................ 12
M.M. Ipoh & ors. v. CIT, (1967) 67 ITR 106 (SC) ...................................................................... 3
New Jehangir Vakil Mills Co Ltd. v. CIT, (1963) 49 ITR 137 (SC) .......................................... 3
Sole Trustee, Loka Shikshana Trust v. CIT, (1975) 101 ITR 234 (SC)...................................... 5
Sri Agasthyar v CIT, (1999) 236 ITR 23 (SC). ............................................................................ 6
Thiagarajar Charities v. Additional Commissioner of Income-tax, (1997) 225 ITR 1010 (SC).
..................................................................................................................................................... 5
Union of India v. Rajiv Kumar (2003) 6 SCC 516..................................................................... 12
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TRIBUNAL DECISIONS
ACIT v. Nagarjuna Education Society, I.T.A. No. 171& 172/Viz/2011 on 27 July 2007. ....... 9
Director of Income Tax (Exemption) v. Angreji Hatao Nidhi, I.T.A. No. 1075/ Del/2006 on
31 July 2007. ............................................................................................................................... 8
Director of Income-tax (Exemption) v. Charanjiv Charitable Trust, I.T.A. No. 323/Del/2013
on 18 March 2014. ...................................................................................................................... 1
Director of Income-tax, Bangalore v. Sri Ramakrishna Seva Ashrama, I.T.A. No. 248/Kar./
2010 on 17 October 2011. .......................................................................................................... 9
DIT (Exemptions) v. National Association of Software & Services Companies, I.T.A.
No.520/Del./2017 on 10 May 2012. ..................................................................................11, 12
Foundation For Indian Sporting v. Department Of Income Tax, I.T.A. No. 1489/Bang/2013
on 26 August 2016..............................................................................................................12, 13
Free Trade Union Multipurpose Project Trust v.Income Tax Officer (Exemptions), I.T.A. No.
3080 to 3084/Mum/2016 on 4 July 2018. ................................................................................. 9
Impressario Educational Trust v. Commissioner of Income-tax- 1, Kochi, I.T.A. No.
187/Coch./2014 on 27 June 2014. ............................................................................................. 4
Income Tax Officers (Exemption) Ambala v. S.D. Public School, I.T.A No. 80/Chd/2015 on
4 November 2015. .................................................................................................................... 10
India Brand Equity Foundation v. Assistant Commissioner of Income-tax (E), Trust Ward-II,
New Delhi, I.T.A. No. 787/Del/2011 on 11 July 2012. ......................................................... 11
Indian Nutritional Medical Association v. Commissioner of Income-tax -1, Kochi, I.T.A. No.
2236/Pun/2013 on 25 November 2016...................................................................................... 4
Tata Education and Development Trust v. Assistant Commissioner of Income-tax, I.T.A. No.
7241/Mum/2019 on July 4, 2020. ............................................................................................ 13
The Acit, (Exemptions) v. State Examination Board, I.T.A. No. 3271/Ahd/2016 on 31 May,
2018. .......................................................................................................................................... 15
Ved Prakash Mukand Lal Educational Soceity v. Assessee, I.T.A. No.952/Chd/2011 on 12
December 2011. ........................................................................................................................ 10
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INTERNET SOURCES
T. N Pandey, Why registration of trust should continue even if it loses charitable character,
Taxmann, (April 18, 2017), https://www.taxmann.com/research/direct-tax-laws/top-
story/101010000000174999. ..................................................................................................... 7
O THER AUTHORITIES
Press Release, Ministry of Home Affairs, § 11, read with § 12AA of the Income Tax Act,
1961 (July 8, 2015) [https://taxguru.in/income-tax/cbdt-guidelines-ngos-seeking-
exemption-11-providing-relief-earthquake-hit-people-nepal-part-ii.html]......................... 6, 7
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STATEMENT OF JURISDICTION
THE COUNSEL FOR THE RESPONDENTS HUMBLY SUBMIT THEMSELVES TO THE JURISDICTION
OF THE HON’BLE HIGH COURT WHICH HAS BEEN INVOKED BY THE APPELLANT UNDER
SECTION 260A OF INCOME TAX OF INDIA, 1961-
“An appeal shall lie to the High Court from every order passed in appeal by the Appellate
Tribunal before the date of establishment of the National Tax Tribunal, if the High Court is
satisfied that the case involves a substantial question of law.”
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STATEMENT OF FACTS
FACTUAL BACKGROUND
‘Learn More Education Trust’ was solely settled by Mr. Aaryan in 1980 with the two fold
objectives: [i] Providing education to children of special need, [ii] Establishing training
centres for unemployed youth. The trust registered under § 12A of Income Tax Act was
conferred with an exemption under § 80G and § 11 of Income Tax Act. In the year 2006, Mr.
Aaryan settled two other trusts that were engaged in commercial activities with the following
objective:
 SK TRUST: providing exam focused study material for school and college going
children. The main source of income of this trust was sale of books.
 RK TRUST: carrying out employment initiatives for the unemployed youth. The source
of income of this trust was from recruitment fees.
The surplus generated by both these trusts was donated to Learn More Education Trust.
SPECIFIC TRANSACTIONS OF THE TRUST
 The trust organised a fund-raising activity in Singapore for which a sum of Rs. 75 Lakhs
was spent. The trust managed to raise Rs 1.5 crore from the event. An amount of Rs. 30
Lakhs was spent for setting up community canteen during December 2015 to provide food
to people affected by floods in Chennai.
 The trust also received following contributions which were recorded as corpus donations
by the trust:
o Infosys Technologies ltd.donated Rs. 1 crore with the direction to construct computer
laboratory at school. The construction commenced in F.Y. 2015-16 and concluded in
F.Y. 2018-19 and a total of Rs. 80 Lakh was spent for this purpose while the balance
amount was put into a separate fund for repairs and maintenance of laboratory.
o Reliance Industries Ltd.donated 75 lakhs which was to be used for any object deemed
appropriate. The amount was put in a long-term fixed deposit in a bank and interest
earned from the deposit was used to give cash awards to students.
 The trust claimed exemption for the entire income shown in Income and Expenditure
Account of the trust for the F.Y. 2015-16. SK Trust and RK Trust had their administrative
offices within the school managed by Assessee for which no rent was charged as the
surplus from these trusts was donated to the assessee trust.
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 In the F.Y. 2008-09 the assessee accumulated Rs. 1 crore for construction of School
however owning to some disputes the construction could not begin until F.Y. 2015-16.
The construction started in May 2015 and was completed in February 2016.
ADJUSTMENTS MADE TO THE SCRUTINY ASSESSMENT
 The assessee was not entitled to any exemption under § 11 as it had violated provisions of
§ 13(1) read with 13(2) of the Income Tax Act, 1961 for not charging rent from RK and
SK Trust.
 The assessee violated the terms under which it was settled by spending its income for
flood relief which was not its object and hence it was denied exemption under § 11.
 The donation received by the Reliance Industries Ltd. was not corpus donation rather it
was income from property held by the trust.
 The amount spent for fund raising in Singapore doesn’t amount to application of income
and hence no exemption can be granted.
 The amount accumulated by the trust in 2008-09 was not utilised within prescribed time
limit and hence it is separately taxable.
Aggrieved by the order of Assessing Officer, the assessee filed an appeal before the
Commissioner of Income Tax (Appeals)who upheld the order of AO. The matter went before
the Income Tax Appellate Tribunal. The Hon’ble ITAT also upheld the order of Assessing
Officer and CIT(A). The ITAT held that the provisions of IT Act have to be interpreted
strictly and if any one qualifying condition is violated, the consequence would be to deny
exemption in toto. Aggrieved by the order of ITAT, the assessee filed present appeal before
the Madras High Court.
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STATEMENT OF ISSUES
––––––––––––––––––––––––––––––––– ISSUE I–––––––––––––––––––––––––––––––––

ISSUE I: WHETHER THE HON’BLE ITAT WAS CORRECT IN CONCLUDING THAT THE ENTIRE
EXEMPTION UNDER § 11 WOULD NOT BE AVAILABLE IF THE PROVISIONS OF § 13(1) READ
WITH 13(2) WERE ATTRACTED?
––––––––––––––––––––––––––––––––– ISSUE II –––––––––––––––––––––––––––––––––

ISSUE II: WHETHER THE HON’BLE ITAT WAS CORRECT IN HOLDING THAT THE
EXPENDITURE OF RS. 30 LAKHS TOWARDS PROVIDING RELIEF TO PEOPLE AFFECTED BY
FLOOD, WOULD AMOUNT TO VIOLATION OF TERMS OF THE TRUST, AND CONSEQUENTIALLY
DENYING THE EXEMPTION CLAIMED BY THE TRUST?
––––––––––––––––––––––––––––––––– ISSUE III ––––––––––––––––––––––––––––––––
ISSUE III: WHETHER THE HON’BLE ITAT WAS CORRECT IN NOT TREATING THE DONATIONS
RECEIVED FROM RELIANCE INDUSTRIES LTD. AS CORPUS DONATIONS , AND CONSEQUENTLY
DENYING THE BENEFIT OF § 11(1)(D) TO THE APPELLANT?
––––––––––––––––––––––––––––––––– ISSUE IV––––––––––––––––––––––––––––––––
ISSUE IV: WHETHER THE HON ’BLE ITAT WAS CORRECT IN NOT TREATING THE AMOUNT
SPENT IN CONDUCTING CULTURAL EVENT AT SINGAPORE AS APPLICATION OF INCOME
WITHOUT APPRECIATING THE FACT THAT THE EXPENDITURE WAS INCURRED TO PROMOTE
ACTIVITIES OF APPELLANTS?
––––––––––––––––––––––––––––––––– ISSUE V–––––––––––––––––––––––––––––––––

ISSUE V: WHETHER THE HON’BLE ITAT WAS CORRECT IN HOLDING THAT THE INCOME
ACCUMULATED UNDER § 11(2) BY THE TRUST WOULD BE TAXABLE, WITHOUT GRANTING
DEDUCTION FOR APPLICATION OF INCOME?
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SUMMARY OF ARGUMENTS
1. WHETHER THE HON’BLE ITAT WAS CORRECT IN CONCLUDING THAT THE

ENTIRE EXEMPTION UNDER § 11 WOULD NOT BE AVAILABLE IF THE
PROVISIONS OF § 13(1) READ WITH 13(2) WERE ATTRACTED?
It is submitted that the exemption shall be revoked in its entirety as the provisions of § 13(1)
read with § 13(2) of the Income Tax Act, 1961 [hereinafter referred as,“the Act”], are
violated. Since no income as such accrued to the trust pertaining to giving the premise for
administrative office to other trusts person, the AO has the discretion to disallow the
exemption under § 11 of the Act. Thus, in the circumstances, where the transactions are
erroneous, it would not be apposite to compel the revenue to follow the same on the principle
of consistency.
2. WHETHER THE HON’BLE ITAT WAS CORRECT IN HOLDING THAT THE

EXPENDITURE OF RS. 30 LAKHS TOWARDS PROVIDING RELIEF TO PEOPLE
AFFECTED BY FLOOD, WOULD AMOUNT TO VIOLATION OF TERMS OF THE
TRUST, AND CONSEQUENTIALLY DENYING THE EXEMPTION CLAIMED BY
THE TRUST?
It is submitted that the trust is barred from undertaking other charitable activities not
expressly mentioned in its objects. Notional Amendment to the objects of the trust is not
permissible and exemption claimed under § 11 of the Act, shall be denied for having violated
the object of the Trust and consequently the registration granted under § 12A of the Act shall
be cancelled. Thereby, Hon’ble ITAT was correct in holding that the expenditure would
amount to violation of terms of the Trust, and consequentially denying the exemption claimed
by the Appellant.
3. WHETHER THE HON’BLE ITAT WAS CORRECT IN NOT TREATING THE

DONATIONS, AND CONSEQUENTLY DENYING THE BENEFIT OF § 11(1)(D) TO
THE APPELLANT?
It is humbly submitted that the Hon’ble ITAT was correct in not treating the donations
received from Reliance Industries Ltd. as corpus donations. The donation received from
Reliance Industries Ltd. is income from property held under trust and not a corpus donation
as no specific directions were received from the donor to treat the said amount as corpus
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therefore no exemption can be granted under § 11(1)(d) of the Act. Moreover, investment of
surplus in fixed deposit is not an application of income.
4. WHETHER THE HON’BLE ITAT WAS CORRECT IN NOT TREATING THE

APPLICATION OF INCOME WITHOUT APPRECIATING THE FACT THAT THE
EXPENDITURE WAS INCURRED TO PROMOTE ACTIVITIES OF APPELLANTS?
It is humbly submitted before the Hon’ble HC that the exemption under §11(1) of the Act is
available only if income is applied for charitable purpose in India. The assessee spent Rs 75
lakhs in a cultural event at Singapore and the exemption cannot be allowed as the income was
not applied within the geographical boundaries of India which is a mandatory pre-requisite
under § 11(1)(a) of the Act. Moreover, no prior approval from CBDT was acquired for such
expenditure and therefore the income spent can also not be treated as an application of
income under §11(1)(c) of the Act.
5. WHETHER THE HON’BLE ITAT WAS CORRECT IN HOLDING THAT THE

INCOME ACCUMULATED UNDER § 11(2) BY THE TRUST WOULD BE
TAXABLE, WITHOUT GRANTING DEDUCTION FOR APPLICATION OF
INCOME?
It is submitted that Hon’ble ITAT was correct in holding that the income accumulated by the
Learn More Education Trust under § 11(2) of the Act would be taxable and the trust should
not be entitled to claim any exemption for application of Income. The trust has failed to
utilize the funds that it had accumulated within the time limit prescribed under § 11(2) of the
Act because of which the amount accumulated becomes the deemed income of the trust.
There are numerous judgments of different High Courts which suggest that the exemption
under § 11(1)(a) of the Act cannot be given on deemed income of the assessee. Hence, it is
for these reasons it is submitted that the Trust is not entitled to claim exemption for
application of Income.
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ARGUMENTS ADVANCED
I. WHETHER THE HON’BLE ITAT WAS CORRECT IN CONCLUDING THAT THE

ENTIRE EXEMPTION UNDER § 11 WOULD NOT BE AVAILABLE IF THE
PROVISIONS OF § 13(1) READ WITH § 13(2) WERE ATTRACTED?
1. It is submitted that the Hon’ble ITAT was correct in concluding that the entire exemption
under § 11 of the Act would not be available if the provisions of § 13(1) read with § 13(2) of
the Act were attracted. And in this regard, there are three key submissions to be made by the
Respondents; Exemption shall be revoked in its entirety [A]; Discretion rests with the
Assessing Officer [hereinafter referred as, “AO”] [B]; and The Rule of consistency shall not
prevail [C].
A. EXEMPTION SHALL BE REVOKED IN ITS ENTIRETY

2. § 13 of the Act enunciates the conditions when § 11 of the Act shall not be applicable and
hence exemption shall not be granted. § 13(1)(c)(ii) of the Act deals with such income or
property that is directly or indirectly used by the persons referred in § 13(3) of the Act. The
person referred includes the author, founder, trustee to name a few. It is also to be noted that
even if there is one instance of application or use of the income or property of the trust
directly or indirectly for the benefit of any prohibited person, the trust will lose the exemption
in respect of its entire income.1In the case of Agappa Child Centre v. CIT, an asset was kept
at the disposal of the managing trustee, and no compensation was charged from the managin g
trustee, the Kerala HC held that the trust was hit by § 13 of the Act and was not entitled to
claim exemption.2
3. § 13(2) of the Act deals with the condition when the property of the trust is given to the
prohibited person under § 13 of the Act without adequate rent or compensation, as the
provisions of § 11 read with § 13 of the Act do not apply to a case of unfair dealing of trust
funds.3The department is justified in denying the exemption in that case.
4. Reading the said provision, it would be seen that the legislative emphasis is on availability for
the use of any person referred to in § 13(3) of the Act and that too for any period during the
previous year in question without charging adequate rent or compensation. There is no
1
Director of Income-tax (Exemption) v. Charanjiv Charitable Trust, I.T.A. No. 323/Del/2013 on 18 March
2014.
2
Agappa Child Centre v. CIT, (1997) 226 ITR 211 (Ker.).
3
Action for Welfare and Awakening in Rural Environment (AWARE) v. DCIT, (2003) 263 ITR 13 (AP).
WRITTEN SUBMISSION for THE RESPONDENTS P AGE |1

dispute that the chief trustee is one of such prohibited persons as could be understood
from §13(3) of the Act. If any property is made available for use, it is covered by the deeming
provision of the Act. 4
5. Mr. Aaryan the sole trustee5 of the Learn More Educational Trust [hereinafter referred as,
“Trust”] is also the settlor of two other trusts (SK Trust and RK Trust) engaged in
commercial activities.6 These trusts have an administrative office within the school that is
managed by the Trust. No rentals or any other adequate consideration is charged by the
Appellant.7 As Mr. Aaryan is the trustee of these two trusts, he falls the category of
prohibited person under § 13 of the Act, and hence the exemption benefit under § 11 of the
Act shall be revoked in entirety. Therefore, the magnitude of the violation of § 13 of the Act
is severe in the present matter and it cannot be calculated with sufficient accuracy owing to
the fact that the offices are established for over a decade.8 It poses a strong reason for not
allowing the trust to be penalised only to the extent of violation under § 13 of the Act at most
the notional rent.9
B. DISCRETION RESTS WITH THE ASSESSING OFFICER
6. In the cases covered under § 13(2)(b) of the Act, it can't be stated that forfeiture of exemption
can be confined to the portion of benefit given to the specified persons. Clause (b) the land,
building, and other property are allowed to be used by the specified person without charging
adequate rent or compensation or security. Since no income as such accrues to the trust and
there is no direct transfer of any income to the benefit of a specified person the AO may
choose to disallow exemption in toto.10
7. In the instant case, the premise of the trust is given to the other two trusts (SK trust and RK
Trust), no income is accrued to the trust pertaining to the renting of the office.11 It is not
possible for the AO to determine the extent of the violation and hence the initial adjustment
made by him was correct to interpret the provisions of § 13 of the Act strictly and its non-
adherence to deny exemption in toto under § 11 of the Act.12
4
Id.
5
Moot Proposition, ¶ 2.
6
7
8
Id.
9
Moot Proposition, ¶ 17 (a).
10
D.C. Agrawal, An analysis of ACIT v. Idicula Trust Society, (2012) 21 taxmann.com 144 (Del).
11
12
Moot Proposition, ¶ 15 (a).

C. THE RULE OF CONSISTENCY WILL NOT PREVAIL

25. The observations made by the Apex Court are that res judicata is not applicable as each
assessment year is a separate proceeding.13 Further, it is noted that if there is a legal issue
involved regarding the non-availability of exemption under §. 11 of the Act on account of
violation of provisions under §. 13(1)(c) or 13(2)(c) read with 13(3) of the Act, the principle
of res judicata does not apply.
26. It is been held that where a question of lawis involved, the rule of consistency will not
prevail.14 Furthermore, there cannot be estoppel against the law.15The provisions relating to
exemption had also undergone material changes from time to time. The HC struck a note of
caution that the rule of consistency is not of a wide application and a blind adherence to this
rule would lead to anomalous results.16 Thus, in the circumstances, where the views are
mistaken and erroneous, it would not be apposite to compel the revenue to follow the same
on the principle of estoppel or of consistency. 17
27. The exemption under § 11 of the Act has been claimed by the trust since its registration under
§ 12A of the Act in 1980.18 Being no rentals charged from the SK Trust and RK Trust which
are two other trusts settled by the Appellant violates § 13 of the Act.19 Since there is a
significant material change in the Trust as the property is been utilised by them without any
consideration. The revenue authorities cannot be stopped from taking a view of statutory
provisions in the later year.20 Even if the exemption had been incorrectly granted in the
previous year, it would not entitle the assessee to claim the same in subsequent years also.
Thereby the rule of consistency shall not apply in the present case.21
28. In light of the abovementioned submission, it is concluded that ITAT was correct in revoking
the entire exemption of the trust under § 11 of the Act as it violated the conditions under § 13
of the Act by permitting benefits to the sole trustee without any consideration in return.
13
M.M. Ipoh &ors. v. CIT, (1967) 67 ITR 106 (SC); New Jehangir Vakil Mills Co Ltd. v. CIT, (1963) 49 ITR
137 (SC); Bharat Sanchar Nigam Ltd. v. Union of India (2006) 282 ITR 273 (SC).
14
CIT v. Oswal Agro Mills Ltd., (2008) 313 ITR 24 (SC).
15
CIT v. British Paints India Ltd., (1991) 188 ITR 44 (SC); CIT v. Foss Electric, (2003) 263 ITR125 (Raj);
Distributors (Baroda) Private Limited v. Union ofIndia,(1985) 155 ITR 120 (SC).
16
Krishak Bharati Cooperative Ltd. v. Dy. CIT, (2013) 350 ITR 24 (Del).
17
Mool Chand Khairati Ram Trust v. Director of Income-tax (Exemptions), (2015) 377 ITR 650 (Del).
18
19
Supra note 11.
20
CWT v. Meattles (P.) Ltd., (1985) 156 ITR 569 (Del).
21
Id.

II. WHETHER THE HON’BLE ITAT WAS CORRECT IN HOLDING THAT THE
EXPENDITURE OF RS 30 LAKHS TOWARDS PROVIDING RELIEF TO PEOPLE
AFFECTED BY FLOOD, WOULD AMOUNT TO VIOLATION OF TERMS OF THE
TRUST, AND CONSEQUENTIALLY DENYING THE EXEMPTION CLAIMED BY
THE APPELLANT?
1. It is submitted that the expenditure of Rs. 30 lakhs towards providing relief to people affected
by the flood, would amount to a violation of terms of the Trust, and consequentially denying
the exemption claimed by the Appellant for the following reasons; The trust is barred from
undertaking other charitable activities not expressly mentioned in its objects[A]; Notional
Amendment to the objects of the trust is not permissible [B] and; Exemption claimed under §
11 of the Act 22, shall be denied for having violated the object of the Trust and consequently
the registration granted under § 12A of the Act shall be cancelled[C].
A. THE TRUST IS BARRED FROM UNDERTAKING OTHER CHARITABLE ACTIVITIES NOT

EXPRESSLY MENTIONED IN ITS OBJECTS
2. It is submitted that firstly, building a community canteen is outside the purview of the
charitable purpose of education under § 2(15) of the Act (a);Secondly, the objects shall
correspond to the charitable purpose of the trust (b).
a. Outside the purview of the charitable purpose of education under § 2(15) of the Act
3. The definition in § 2(15) is an inclusive one. The object of the assessee does not fall in any
one of the clauses mentioned in § 2(15) of the Act 23 and in order to fall within the meaning of
'education' as provided in § 2(15) of the Act, there should be normal schooling by way of
regular and systematic instruction.24Expenditure on the community canteen is not covered
under the purview of § 2(15) of the Act.
4. “The sense in which the word 'education' has been used in § 2(15) of the Act is the systematic
instruction, schooling or training given to the young in preparation for the work of life. It
also connotes the whole course of scholastic instruction which a person has received. The
word 'education' has not been used in that wide and extended sense, according to which
every acquisition of further knowledge constitutes education. What education connotes in that
22
Income Tax Act, 1961, § 11, No. 43, Acts of Parliament, 1961 (India).
23
Indian Nutritional Medical Association v. Commissioner of Income-tax -1, Kochi, I.T.A. No. 2236/Pun/2013
on 25 November 2016.
24
Impressario Educational Trust v. Commissioner of Income-tax- 1, Kochi, I.T.A. No. 187/Coch./2014 on 27
June 2014.

clause is the process of training and developing the knowledge, skill, mind .and character of
students by normal schooling”.25
5. To assist people affected by the natural calamity is not covered under the purpose of
education as this object does not assist in fulfilling the charitable purpose of education. The
trust was established with the following two objects; to provide education to children with
special needs (a); and, to establish centers for learning and vocational training for
unemployed youth (b).26 Both these objects are placed to fulfill the charitable purpose of
education, assisting the people affected by natural calamity as an object do not fulfils the
same.27
b. The objects shall correspond to the charitable purpose of the trust
6. The definition of ‘charitable purpose’ is enshrined under § 2(15) of the Act. “Charitable
Purpose” includes relief of the poor, education, medical relief, [preservation of and
preservation of monuments or places or objects of artistic or historic interest,] and the
advancement of any other object of general public utility.28
7. Even if it is contended by the Appellant that the object to assist people affected by natural
calamity comes under the charitable purpose of the advancement of any other object of
general public utility.29 It is still against the procedure and the core objects of the trust which
are demarcated for the purpose of education. Hence this object is distinct and not fulfils the
purpose for which the trust was established. Thereby the object corresponds to the
advancement of any other object of general public utility which is not the purpose of the trust.
The charitable purpose is education under § 2(15) of the Act and thus the objects shall only
correspond to its fulfillment.
B. NOTIONAL AMENDMENT TO THE OBJECT OF THE TRUST IS NOT PERMISSIBLE
8. Whenever the registered charitable trust alters its object clause, they are required to make an
application within 30 days from the date of alteration before the Principal Commissioner of
Income Tax [hereinafter referred as,“PCIT”]. PCIT is sought to verify the object clause and
other documents before granting the registration. The order must be passed within 6 months
25
Thiagarajar Charitiesv.Additional Commissioner of Income-tax, (1997) 225 ITR 1010 (SC).
26
27
28
Bar Council of Maharashtra v. CIT, (1980) 126 ITR27(Bom); CIT v. Andhra Chamber of Commerce, (1965)
55 ITR722 (SC); Addl. CIT v. Ahmedabad Mill owners' Association, (1977) 106ITR 725(Guj);Sole Trustee,
Loka Shikshana Trust v. CIT, (1975) 101 ITR234 (SC); DIT v. Bharat Diamond Bourse, (2003) 259 ITR 280
(SC).
29
Moot Proposition, ¶ 17(b).

from the end of the month in which the application is received and the validity of the order
passes is effective only for 5 years.
9. The Appellant has setup the canteen in the month of December without the approval of
PCIT30. Even after a month after adding the objects, the Appellants had not notified to the
PCIT. Thereby they have violated the terms of the trust by diverting their funds for an object
that is not part of their trust deed.
10. “If there is no such direct clause and the organization is still desirous of undertaking the
same, it may, before making application to Central Board of Direct Taxes [hereinafter
referred as, “CBDT”] under § 11(1)(c) of the Act, consider amending/modifying the object
clause of its MoA/Trust Deed suitably so as to include the same therein, following due
procedure31 but once a charitable trust is effectively created, any subsequent deviation from
its purpose by the founder or the trustee would amount to a breach of trust.” 32 The
government has released the above circular for the charitable trust which showed their
inclination for helping the victims of the earthquake in Nepal in the year 2015. The circular
clearly mentions that the trust is obliged to take permission from CBDT for modifying its
object clause to include the activity in the trust deed.
11. In this instant case, the Appellant failed to inform the authorities about the additional object
to assist people affected by natural calamity and regarded as a notional amendment to the
object of the Trust, which is not acceptable under the law.
C. EXEMPTION CLAIMED UNDER § 11 OF THE ACT, SHALL BE DENIED FOR HAVING VIOLATED
THE OBJECT OF THE TRUST, AND CONSEQUENTLY THE REGISTRATION GRANTED UNDER §
12A OF THE ACT SHALL BE CANCELLED

12. It is contended that where the objects of the Trust or institution, which were the basis for
registration have been altered after the grant of such registration, the registration granted
would not survive.33
13. The opening words of § 12A(1) of the Act clearly indicate that the conditions imposed under
that § are in addition to the conditions or exemptions as specified under § 11 and § 12 of the
Act. Thus, if the conditions as specified under § 12A(1) of the Act are not met, then the
exemption available under §11 of the Act would not be available to the assessee. This does
30
31
Press Release, Ministry of Home Affairs, § 11, read with § 12AA of the Income Tax Act, 1961 (July 8, 2015)
[https://taxguru.in/income-tax/cbdt-guidelines-ngos-seeking-exemption-11-providing-relief-earthquake-hit-
people-nepal-part-ii.html].
32
Sri Agasthyar v. CIT, (1999) 236 ITR 23 (SC).
33
Allahabad Agricultural Institute & Another v. UOI & others, (2007) 291 ITR 116 (All).

not mean that if a trust is registered under § 12A of the Act, exemption under § 11 and § 12
would necessarily follow. The provisions of § 12 of the Act do not curtail or in any manner
dilute the mandatory requirements of § 11 of the Act. Thus, notwithstanding that an assessee
has been granted a registration under § 12A of the Act, it would be necessary for the assessee
to comply with the conditions of § 11 of the Act in order to claim any benefit under the
provisions of that section.34
14. It is hereby submitted that both the § 12(A) and 13 of the Act are distinctive and the appellant
cannot rely on the reasoning that the registration granted under § 12A of the Act has not been
revoked, and hence exemption claimed under § 11 of the Act cannot be denied for having
violated the object of the Trust.35 Thus, when there is the change in objects of the Trust, after
the grant of registration under § 12A, it cannot automatically claim benefits under § 11 or 12
of the Act and that the AO is not bound by the registration granted earlier under § 12A of the
Act, because the same would not survive.36
15. Sub-section (3) of § 12AA of the Act prescribes two conditions for cancellation of
registration of a trust or legal institution formed for carrying on activities of charitable nature.
According to this sub-section, if the commissioner of trust is satisfied that the activities of
any trust or institution are not genuine or are not being carried out in accordance with the
objects of the trust or institution, he shall pass an order in writing cancelling the registration
granted under the said section. 37
16. In the instant case as the appellant spent a part of the income of the trust to help people
affected by natural calamity and hence this activity is not in accordance with the objects of
the trust.38 It is thereby submitted that the registration of the trust shall be cancelled effective
immediately.
17. Therefore, in light of above-mentioned reasons the expenditure towards providing relief to
people affected by flood, would amount to violation of terms of the Trust, and
consequentially denying the exemption claimed under § 11 of the Act.
34
Mool Chand Khairati Ram Trust v. Director of Income-tax (Exemptions), (2015) 377 ITR 650 (Del).
35
Moot Proposition, ¶ 17(d).
36
Board of Control for Cricket in India. v. ITO, (2012) 19 ITR 91 (Mum).
37
T. N Pandey, Why registration of trust should continue even if it loses charitable character, TAXMANN, (April
18, 2017), https://www.taxmann.com/research/direct-tax-laws/top-story/101010000000174999.
38
Supra Note 30.

III. WHETHER THE HON’BLE ITAT WAS CORRECT IN NOT TREATING THE
DONATIONS, AND CONSEQUENTLY DENYING THE BENEFIT OF § 11(1)(D) TO
THE APPELLANT?
29. Appellant had claimed the Rs 75 lakhs donated by Reliance Industries Ltd. as corpus
donation therefore exempted under § 11(1)(d) of the Act. Unless the assessee satisfies the
following conditions, the exemption cannot be allowed. 39 Respondent submits that, the
donation received is income from property held under trust [A]; the donation is not a corpus
donation [B]; and, Investment of surplus in fixed deposit is not an application of income [C].
A. THE DONATION RECEIVED IS INCOME FROM PROPERTY HELD UNDER TRUST

30. §2(24)(iia) of the Act enunciates that, income incorporates any voluntary contribution
received by a charitable or religious trust established wholly or partly for such purposes. 40 A
Voluntary donation is money given or gifted gratuitously without any consideration. 41 It is
provided under § 12(1) of the Act that any voluntary contributions received by a trust other
than those with a specific direction that they shall form part of corpus of the trust will be
treated as income from property held under charitable or religious trust. 42
31. A donation automatically comes within the purview of § 12(1) of the Act if it is an income in
the hands of the trust and is voluntarily received by the charitable or religious
institution.43Furthermore, § 12(1) of the Act also stipulates that there must be a specific
direction from the donor that the amount donated shall from a part of the corpus of the trust
or the institution. 44
32. The trustee received Rs 75 lakhs as a donation from Reliance Industries Ltd. 45 The amount
was donated with a direction that it shall be used for any purpose of the trust which deems
appropriate.46 The donor has not given any express instruction that the sum be included in the
corpus as prescribed under § 12 of the Act. Consequently, the amount can only be classified
as income under § 2(24)(iia) of the Act because it was a voluntary donation to a charitable
39
1 ARVIND P DATAR, KANGA & PALKHIVALA’S THE LAW AND PRACTICE OF INCOME TAX (Lexis Nexis, 10th
ed., 2014).
40
Income Tax Act, 1961 § 2(24)(iia).
41
Commissioner of Income-tax v. Divine Light Mission, (2005) 196 CTR 135 (Del).
42
Income Tax Act, 1961 § 12(1).
43
Sri Dwarkadheesh Charitable v. Income-Tax Officer, (1975) 98 ITR 557 (All).
44
Director of Income Tax (Exemption) v. Angreji Hatao Nidhi, I.T.A. No. 1075/ Del/2006 on 31 July 2007.
45
46
Id.

trust founded for charitable purposes, and because it is income, it is subject to § 12 of the Act.
Hence, no exemption can be granted to assessee under § 11(1)(d) of the Act.
B. THE DONATION IS NOT A CORPUS DONATION

33. Under § 11(1)(d) of the Act, voluntary contributions must be made with a specific direction
that they shall form part of the corpus of the trust or institution. 47 The tribunal in ACIT v.
Nagarjuna Education Society held that, “(a) Direction that donation should form part of
corpus should come from the donor and not the discretion of others. (b) It does not depend on
the sweet will of the donee/institution or other agencies. (c) Assessing Officer cannot change
character from corpus to voluntary.” 48 Direction from donor also includes within it the
intention of the donor. 49The assessee bears the burden of proving that such donations are in
fact corpus donations which shall not form part of income of the trust under § 11(1) of the
Act.50
34. Reliance Industries Ltd. donated Rs 75 lakhs to the Trust for any object which is deemed
appropriate by the Trustee, Mr. Aaryan. 51The Trust has two main purposes viz. (a) to provide
education to children with special needs and, (b) to set up vocational training centers for
unemployed youths. 52 The phrase ‘Any object which deems appropriate’ cannot be construed
as a direction that donation is made towards corpus of the trust and neither donor nor the
Assessing Officer on its own has power to treat the amount as a corpus donation. Therefore,
the facts, in present case do not reveal that donor has any specific intention to donate the
amount towards corpus of the trust.
35. Moreover, the assessee accepted before the ITAT that no directions or intentions were
furnished by Reliance Industries Ltd. 53 Therefore, the donation of Rs 75,00,000 does not
qualify as a corpus donation under § 11(1)(d) of the Act and exemption should not be
granted.
C. INVESTMENT OF SURPLUS IN FIXED DEPOSIT IS NOT AN APPLICATION OF INCOME
36. To consider investment of funds of the assessee-trust in fixed deposit as application of
income for charitable purposes, a strong association between the deposit and charitable
47
Income Tax Act, 1961 § 11(1)(d).
48
ACIT v. Nagarjuna Education Society, I.T.A. No. 171& 172/Viz/2011 on 27 July 2007.
49
Director of Income-tax, Bangalore v. Sri Ramakrishna Seva Ashrama, I.T.A. No. 248/Kar./ 2010 on 17
October 2011.
50
Free Trade Union Multipurpose Project Trust v. Income Tax Officer (Exemptions), I.T.A. No. 3080 to
3084/Mum/2016 on 4 July 2018.
51
52
53

purpose must be established. 54 This implies that such a fixed deposit must result in fulfillment
of the objects and purposes of the trust and mere deposit of surplus in bank cannot be
regarded as a charitable activity. 55
37. Fixed deposits can be made in banks with intention of using them for future charitable
purposes. 56 Such activity, however, must be carried out in conformity with § 11(2) of the
Act.57§11(2) of the Act provides that Assessing Officer must be notified of such
accumulation along with the purpose behind such accumulation. 58
38. In the instant case, the assessee created an endowment fund in the name of Reliance
Industries and deposited the amount in a long-term fixed deposit with a nationalized bank. 59
The Assessing officer was not notified of such accumulation as the assessee treated the
questioned amount as corpus donation. No specific purpose can be deduced behind creation
of an endowment fund and depositing the amount in a fixed deposit therefore, the investment
should not be treated as an application of income.
39. The donation was not a corpus donation as donor did not specify the same therefore; the
amount is a voluntary contribution and must be treated as income from property held under
trust which can be exempted only if 85% of the amount is utilized for charitable purposes. No
exemption should be granted to assessee as he did not fulfill the required pre-requisites and
mere depositing surplus in a fixed deposit with a nationalized bank should not be treated as
an application of income under § 11 of the Act.
54
Ved Prakash Mukand Lal Educational Soceity v. Assessee, I.T.A. No.952/Chd/2011 on 12 December 2011.
55
Income Tax Officers (Exemption) Ambala v. S.D. Public School, I.T.A No. 80/Chd/2015 on 4 November
2015.
56
Id.
57
GAUTAM NAYAK, TAXATION OF CHARITABLE TRUSTS AND INSTITUTIONS- A STUDY 54-55 (6th ed. 2009).
58
Income Tax Act, 1961, § 11(2).
59
WRITTEN SUBMISSION for THE RESPONDENTS P AGE | 10

IV. WHETHER THE HON’BLE ITAT WAS CORRECT IN NOT TREATING THE
APPLICATION OF INCOME WITHOUT APPRECIATING THE FACT THAT THE
EXPENDITURE WAS INCURRED TO PROMOTE THE ACTIVITIES OF THE
APPELLANT?
40. It is humbly submitted before the Hon’ble HC that the exemption under § 11(1) of the Act is
available only if income is applied for charitable purpose in India. The Hon’ble Tribunal was
correct in holding that provisions of § 11(1) of the Act cannot be applied in the facts and
circumstances of the case because, Expenditure incurred outside India cannot be treated as an
application of income [A]; and, the assessee violated § 11(1)(c) of the Act [B].
A. EXPENDITURE INCURRED OUTSIDE INDIA CANNOT BE TREATED AS AN APPLICATION OF

INCOME
41. The expenditure in question was made for conducting an event outside India. The exemption
cannot be allowed as, the income must be applied within the geographical boundaries of India
[a]; and, Statutes must be interpreted in literal sense [b].
a. The income must be applied within the geographical boundaries of India

42. § 11(1) (a) of the Act enunciates that, “income derived from property held under trust wholly
for charitable or religious purposes, to the extent to which such income is applied to such
purposes in India shall be considered an application of income and therefore exempted under
income tax”. 60 The word ‘applied’ in § 11 of the Act is preceded by the phrase ‘to such
purposes in India’ which means "to put the use" or "to turn to use" or "to make use" and it
further puts a geographical restriction for its application in India. 61 Any other interpretation of
the phrase would clog the natural flow of the entire group of words “to the extent to which
such income is applied to such purposes in India”.
43. The Hon'ble HC in DIT (Exemptions) v. National Association of Software & Services
Companies has held that, to claim exemption under § 11 of the Act it is mandatory that
income must be applied in India and for charitable purposes in India. 62 The income applied
60
Income Tax Act, 1961, §11(1)(a).
61
India Brand Equity Foundation v. Assistant Commissioner of Income-tax (E), Trust Ward-II, New Delhi,
I.T.A. No. 787/Del/2011 on 11 July 2012.
62
DIT (Exemptions) v. National Association of Software & Services Companies, I.T.A. No.520/Del./2017 on
10 May 2012.

outside India cannot be covered under application of income within the purview of § 11 of
the Act.63
44. The fund-raising event was conducted by assessee in Singapore to show-case the talents of
children studying in its schools. 64 It is pertinent to note that the income is spent outside India
and the condition of application of income in India is a mandatory requirement for
quantifying the exemption under § 11(1) of the Act. Therefore, the Tribunal was correct in
not treating the amount spent in conducting cultural event at Singapore as application of
income.
b. Statutes must be interpreted in literal sense

45. In Jugal Kishore Saraf v. Raw Cotton Co. Ltd, Apex Court held that, “The cardinal rule of
construction of statutes is to read the statute literally, that is, by giving to the words used by
the Legislature their ordinary, natural and grammatical meaning.” 65 Judicial adventurism,
masquerading as judicial innovativeness should not result in legislation. 66 Judicial restraint,
and not innovativeness or novelty, may be the proper approach to follow in order that, the
long settled legal position is not turned upside-down.67
46. The Courts must ordinarily follow the grammatical meaning of the words unless doing so
results in some absurdity or some repugnance or inconsistency with the rest of the instrument,
in which case the grammatical and ordinary sense of the words may be modified, so as to
avoid that absurdity and inconsistency, but no further.” 68 The territorial limit of application of
income -viz. the taxable territories - is as essential to secure exemption as the nature of the
purpose-viz. religious or charitable. 69
47. In present case, the assessee conducted a fund-raising initiative in Singapore to show-case the
talents of children studying in its schools. 70 Expenditure of Rs 75 lakhs was made in
organizing the event. 71 It is submitted that the provision must be interpreted in literal sense, in
the form of their plain grammatical meaning and therefore, it is necessary that the application
63
Id.
64
65
Jugal Kishore Saraf v. Raw Cotton Co. Ltd, AIR 1955 SC 376, 381.
66
Foundation For Indian Sporting v. Department Of Income Tax, I.T.A. No. 1489/Bang/2013 on 26 August
2016.
67
Id.
68
Grey v. Pearson, (1857) 6 HL Cas 61; Union of India v. Rajiv Kumar (2003) 6 SCC 516.
69
1 ARVIND P DATAR, KANGA & PALKHIVALA’S THE LAW AND PRACTICE OF INCOME TAX (Lexis Nexis, 10th
ed., 2014).
70
71
Id.

of income must be within the boundaries of India for claiming exemption under § 11(1)(a) of
the Act.
B. THE ASSESSEE VIOLATED § 11(1) (C) OF THE ACT
48. § 11(1)(c) of the Act stipulates that the income generated by a charitable or religious trust
created after 1952 would not be included in total income if same tend to promote
international welfare in which India is interested, to the extent where income is applied for
purposes outside India. Provided, that prior approval from concerned authority has been taken
for such application. 72 It is therefore submitted that, No prior approval of CBDT is obtained
by the assessee [a]; and, the activities do not promote international welfare [b].
a. No prior approval of CBDT is obtained by the assessee

49. The expenditure was made outside India, the assessee could have taken recourse to § 11(1)(c)
of the Act and income would not have been included in total income, had the assessee been
granted an approval from the CBDT for application outside India. 73
50. In present case, the assessee spent Rs 75 lakhs in foreign currency on cultural event in
Singapore to show-case the talents of the children studying in its schools. 74 The income of the
trust has been applied outside India and without approval of the CBDT as per the provisions
of § 11(1)(c) of the Act. Therefore, the expenditure incurred cannot be treated as an
application of income under § 11(1)(c) of the Act and no exemption can be granted under §
11 of the Act.
b. The activities do not promote international welfare

51. § 11(1)(c) of the Act includes two significant phrases viz. ‘tend to promote’ and
‘international welfare in which India is interested’. 75 The phrase ‘tend to promote’ only
signifies that such an activity undertaken which may lead to promotion of international
welfare, should have a tendency to lead to such promotion in present or in near future. 76
‘International welfare in which India is interested’ is not defined under the Act and therefore
will have to be interpreted in a wide manner, “meaning thereby any activity in the nature of
72
Income Tax Act, 1961 §11(1)(c).
73
Supra note 66.
74
75
Income Tax Act, 1961 §11(1)(c).
76
Tata Education and Development Trust v. Assistant Commissioner of Income-tax, I.T.A. No. 7241/Mum/2019
on July 4, 2020.

welfare on an international scale which will benefit/impact various countries of the world
including India.” 77
52. The fund-raising event conducted by Mr. Aaryan, the trustee in Singapore in 2015-16 was for
students of India in general, and the same does not tend to promote international welfare
under § 11(1)(c) of the Act.78 The cultural event in Singapore showcasing talents of children
and contribution from the audience do not fit within the parameters prescribed under §
11(1)(c) of the Act which stipulates that the activities must specifically promote international
welfare in which India is interested. The funds generated will specifically be used for
charitable purposes in India thereby not promoting any welfare globally. Hence, the
expenditure should not be treated as an application of income under § 11(1)(c) of the Act.
77
Id.
78

V. WHETHER THE HON’BLE ITAT WAS CORRECT IN HOLDING THAT THE

INCOME ACCUMULATED UNDER § 11(2) BY THE TRUST WOULD BE TAXABLE,
WITHOUT GRANTING DEDUCTION FOR APPLICATION OF INCOME?
53. It is humbly submitted that Hon’ble ITAT was correct in holding that the income
accumulated by the Trust under § 11(2) of the Act would be taxable and therefore the trust
should not be entitled to get an exemption for application of Income for the following broad
reasons the trust has failed to utilize the funds accumulated within the prescribed time
limit[A]; and, there is no exemption available for deemed income [B].
A. THE TRUST HAS FAILED TO UTILIZE THE FUNDS ACCUMULATED WITHIN THE PRESCRIBED
TIME
54. ICAI 79 has discussed the scheme of § 11 of the Act. § 11(2) 80 of the Act provides that where
85% of the income derived from property held under trust is neither applied, nor deemed to
have been applied to charitable or religious purposes in India during the previous year in
which it is derived, but such income is accumulated or set apart for application in future to
such purposes in India, the income accumulated or set apart shall be exempt from tax
provided period for which the income is to be accumulated or set apart shall in no case
exceed 5 years.81
55. If the accumulations are not utilised for the specified purposes during the period of
accumulation or in the year immediately following the expiry of that period, then the
accumulations to the extent they are not so utilised, it shall be deemed to be the income of the
person and will become chargeable to tax as income of the previous year immediately
following the expiry of that period. 82 The same has also been reiterated by the Madras HC in
the case of Commissioner of Income Tax v. M.Ct. Muthiah Chettiar Family 83and The Acit,
(Exemptions), v. State Examination Board.84
56. In the instant case the amount was accumulated by the Trust in the F.Y. 2008-09.85 The firm
should have utilized the amount accumulated by the end of F.Y. 2014-15. The trust has
clearly failed to utilize the amount accumulated within prescribed time limit and hence the
amount becomes deemed income after the expiry of the period.
79
GAUTAM NAYAK, TAXATION OF CHARITABLE TRUSTS AND INSTITUTIONS - ASTUDY 149-150 (6th ed. 2009).
80
81
Income Tax Act, 1961, § 11(2)(a).
82
83
Commissioner of Income Tax v. M.Ct. Muthiah Chettiar Family, (1972) 86 ITR 282 (Mad).
84
The Acit, (Exemptions) v. State Examination Board, I.T.A. No. 3271/Ahd/2016 on 31 May, 2018.
85

B. THERE IS NO EXEMPTION AVAILABLE FOR DEEMED INCOME

57. It is humbly submitted that there is no exemption available for deemed income as suggested
by § 11(1) of the Act. 86The Bombay HC in the case of The Trustees, The B.N. Gamadia Parsi
Hunnarshala vs. Assistant Director of Income Tax 87 held “careful perusal of the language
employed in § 11 of the Act makes it crystal clear that exemption is available only on the
income within the meaning of § 11 and not on the deemed income.”
58. The Madras HC88 observed that in the context of § 11(1)(a) of the Act ‘income’ means the
income which is available in the hands of the assessee because accumulation of 15 per cent is
possible only from the income available with the assessee and not the deemed income. This
judgment is also in consonance with the view taken by the A.P. HC in the case of CIT v.
Trustee of H. E. H. The Nizam's Supplemental Religious Endowment Trust 89and Calcutta HC
in the case of Director of Income Tax (Exmp.) v. Girdharilal Shewnarain Tantia Trust90.
59. In the case of Director of Income Tax (Exemption) v. G. Shewnarain Tantia Trust 91, the HC
of Calcutta analysed the meaning of the word 'income' used in § 11 of the Act. The Court
observed that the ‘income’ contemplated by the provisions of § 11 of the Act is the real
income and not income as assessed or assessable.
60. In the case of CIT v. Jayshree Charity Trust92 the court observed that what is deemed to be
income can neither be spent nor accumulated for charitable purposes and the word
‘application’ or ‘accumulation’ can only be of real income. It was observed that the deeming
provisions should not be construed in a way to frustrate the object of § 11 of the Act, the
objects of § 11 of the Act being application of income received by it for charitable purposes.
61. In the F.Y. 2008-09, the Appellant accumulated a sum of Rs.1 crore in terms of § 11(2) of the
Act for the purpose of constructing a school in Madurai. 93 The income accumulated by the
trust in 2008-09 could be used till F.Y. 2014-15 but because the trust failed to use the
accumulated funds till F.Y. 2014-15 it becomes the deemed income of trust for the F.Y.
2015-16.94
86
87
The Trustees, The B.N. Gamadia Parsi Hunnarshala v. Assistant Director of Income Tax, (2002) 77 TTJ 274
(Bom).
88
CIT v. Rao Bahadur Calavala Cunnan Chelty Charities, (1982) 135 ITR 485 (Mad).
89
CIT v. Trustee of H. E. H. The Nizam's Supplemental Religious Endowment Trust, (1981) 127 ITR 378 (AP).
90
Director of Income Tax (Exmp.) v. Girdharilal Shewnarain Tantia Trust, (1993) 199 ITR 215 (Cal).
91
Id.
92
CIT v. Jayshree Charity Trust, (1986) 159 ITR 280 (Cal).
93
94
Income Tax Act, 1961, § 11(3)(c).

62. § 11(3)95of the Act uses the expression ‘income of such person’ in contradistinction to the
words ‘income derived from property’ used in other sub-sections of § 11 of the Act. Thus, it
cannot be said that deemed income under § 11(3)96 of the Act should be taken as part the
income derived from property for the purposes of allowing the benefit of exemption.97
63. In the light of foregoing averments, it is submitted that as the trust has failed to utilize the
funds accumulated within the prescribed time limit[A]; there is no exemption available for
deemed income, the sum of Rs.1 crore accumulated in F.Y. 2008-09 is separately taxable as
income in the hands of Trust[B].
95
96
Id.
97
Supra note 87.

PRAYER
IN LIGHT OF THE ISSUES RAISED, ARGUMENTS ADVANCED AND AUTHORITIES CITED IT IS HUMBLY
PRAYED THAT THE HON ’ BLE HIGH COURT MAY BE PLEASED TO
 HOLD that the entire exemption under § 11 of the Act would not be available as the
provisions of § 13(1) read with 13(2) of the Act are attracted.
 HOLD that the expenditure of Rs. 30 lakhs towards providing relief to people affected by
flood, would amount to violation of terms of the trust, and hence the exemption claimed
by the trust cannot be granted.
 HOLD that the donations received from Reliance Industries Ltd. cannot be treated as
corpus donations, and hence the benefit of § 11(1)(d) of the Act cannot be provided.
 HOLD that the amount spent in conducting cultural event at Singapore was not an
application of income.
 HOLD that the income accumulated under § 11(2) of the Act by the trust would be
taxable, without granting deduction for application of income.
AND/OR
PASS ANY OTHER ORDER, DIRECTION, OR RELIEF THAT THIS HON’BLE COURT
MAY DEEM FIT IN THE INTERESTS OF JUSTICE, EQUITY AND GOOD CONSCIENCE.
All of which is humbly prayed
Date: --/--/20XX Sd/-

On behalf of
Counsel for the Respondents
WRITTEN SUBMISSION for THE RESPONDENTS P AGE | XVI

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TEAM CODE: 04

17th NANI PALKHIVALA NATIONAL VIRTUAL MOOT COURT COMPETITION 2021

17TH NANI PALKHIVALA MEMORIAL NATIONAL TAX VIRTUAL MOOT

Civil Appeal Filed Before

HIGH COURT OF MADRAS

Under Section 260Aof Income Tax Act, 1961

[Tax Case Appeal No. 323 of 2021]

LEARN MORE EDUCATIONAL TRUST ...APPELLANT

COMMISSIONER OF INCOME TAX ...RESPONDENT

WRITTEN SUBMISSION for THERESPONDENTS

WRITTEN SUBMISSION for THE RESPONDENTS P AGE |I

TABLE OF CONTENT ................................................................................................................ II

LIST OF ABBREVIATIONS ......................................................................................................IV

INDEX OF AUTHORITIES ........................................................................................................VI

STATEMENT OF JURISDICTION ............................................................................................ X

STATEMENT OF FACTS ..........................................................................................................XI

STATEMENT OF ISSUES....................................................................................................... XIII

SUMMARY OF ARGUMENTS ..............................................................................................XIV

ARGUMENTS ADVANCED ....................................................................................................... 1

I. WHETHER THE HON’BLE ITAT WAS CORRECT IN CONCLUDING THAT

A. EXEMPTION SHALL BE REVOKED IN ITS ENTIRETY ....................................................... 1

B. DISCRETION RESTS WITH THE ASSESSING OFFICER ..................................................... 2

C. THE RULE OF CONSISTENCY WILL NOT PREVAIL .......................................................... 3

A. THE TRUST IS BARRED FROM UNDERTAKING OTHER CHARITABLE ACTIVITIES NOT

EXPRESSLY MENTIONED IN ITS OBJECTS ................................................................................. 4

B. NOTIONAL AMENDMENT TO THE OBJECT OF THE TRUST IS NOT PERMISSIBLE ............ 5

WRITTEN SUBMISSION for THE RESPONDENTS P AGE | II

C. EXEMPTION CLAIMED UNDER § 11 OF THE ACT, SHALL BE DENIED FOR HAVING

UNDER § 12A OF THE ACT SHALL BE CANCELLED .................................................................. 6

B. THE DONATION IS NOT A CORPUS DONATION ............................................................... 9

C. INVESTMENT OF SURPLUS IN FIXED DEPOSIT IS NOT AN APPLICATION OF INCOME ..... 9

A. EXPENDITURE INCURRED OUTSIDE INDIA CANNOT BE TREATED AS AN APPLICATION

b. Statutes must be interpreted in literal sense ........................................................ 12

B. THE ASSESSEE VIOLATED § 11(1) (C) OF THE ACT ..................................................... 13

a. No prior approval of CBDT is obtained by the assessee .................................... 13

b. The activities do not promote international welfare............................................ 13

V. WHETHER THE HON’BLE ITAT WAS CORRECT IN HOLDING THAT THE

PRESCRIBED TIME .................................................................................................................. 15

B. THERE IS NO EXEMPTION AVAILABLE FOR DEEMED INCOME ..................................... 16

WRITTEN SUBMISSION for THE RESPONDENTS P AGE | III

SERIAL NO. ABBREVIATIONS FULL FORM

4. AIR All India Reporter

10. Cal. Calcutta

11. CBDT Central Board of Direct Taxes

12. Chd Chandigarh

13. CIT Commissioner of Income Tax

14. CTR Current Tax Reporter

15. Del. Delhi

16. ed. Edition

17. F.Y. Financial Year

18. Guj. Gujarat

19. HC High Court

20. HL House of Lords

21. I.T.A. Income Tax Appeal

WRITTEN SUBMISSION for THE RESPONDENTS P AGE | IV

22. Id. Ibidem

23. ITAT Income Tax Appellate Tribunal

24. ITR Income Tax Reporter

25. Kar. Karnataka

26. Ker. Kerala

27. Ltd. Limited

28. MP Madhya Pradesh