Law:

Section:

JUDGMENT N. Kumar, J.- The revenue has preferred this appeal challenging the order passed by the appellate authority as well as the Tribunal holding that the assessees investment was less than 5% of the capital of the concern in which investment is made and therefore, they cannot be denied the benefit under Sections 11 and 12 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'). The assessee - Islamic Academy of Education at Mangalore, has been granted exemption under Sections 11 and 12 of the Act. The trustees of the assessee-Trust were the directors of Yenepoya Institute of Medical Science Research Private Limited. The funds of the assessee Trust were invested in the said Yenepoya ' Institute of Medical Science Research Private Limited. The Assessing Officer held that the funds invested exceeds 5% of the capital and therefore, Section 13(4) of the Act is not applicable and accordingly, held that the income of the assessee is not exempted in view of Section 13(2)(h) of the Act. Aggrieved by the same, they preferred an appeal to the Commissioner of Income Tax (Appeals). Before the Appellate Authority it was contended that the trust was running Dental Institutions and the campus was set up at Derelakatte, 13 kms. away from the city. The construction of the hospital at the campus was in progress. In the meantime, the trust proposed to set up a medical college. As per MCI guidelines, trie college was required to have a hospital attached to it. No other hospital was willing to provide the needed access to the hospital facility. Therefore, the trust invested Rs.20,00,000/- in the shares of Yenepoya Institute of Medical Science Research Private Limited, a company owning and running a hospital within the Mangalore city. The trust utilised three floors of the hospital building owned by the said company exclusively for the dental section. The hospital was also being used by the dental and medical students. The investment was made so that the trust may have a say in the decision-making process of the company so that the interest of the trust is not jeopardised. Therefore, they contended that the amount invested did not exceed 5% of the share capital as the…

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