In  10 ITR (Trib) 201 the AO denied the benefit of section 11 to the assessee-trust only because
the trust money has been uti- lised by the trustee to meet his medical emergency. Citing the hon’ble Madras High Court decision in 241 ITR 193 the ITAT held that it is not possible to take a view that the amount has been utilised for the benefit of the trustee given a fact that the trust was only managing a critical situation to save the life of the person who is really the soul of the entire institution so that in a way it is possible to say that the assessee-trust was discharging its obligation in saving the life of Shri Ravi Shankar, the trustee and thereby ensuring the continued activities of the assessee-trust itself. The assessee-trust was imparting training in performing arts like various dance forms including traditional Kuchipudi. Shri Ravi Shankar, the trustee is the person who is really managing the affairs of the assessee-trust and he is in fact the soul and substance of the institution.he was an outstanding Kuchipudi dancer, composer and choreographer and was undergoing dialysis for many years. He required money to attend to a medical emergency in the relevant year.
The Tribunal found that Shri Ravi Shankar was not availing of any remuneration from the assessee-trust. It was in the interest of the assessee-trust itself that Shri Ravi Shankar regained his health and he could attend the day-to-day activities of the trust. Therefore, the payments made by the assessee-trust to Shri Ravi Shankar to meet his medical emergency is held as not application of money for the benefit of the trustee as envisaged in section 13(3).
In this case the trustee later has arranged to pay back the money to the assessee-trust as soon as he was in a position to do so.
Importantly inreinstating exemption the bench held that it is possible in law even to hold that the assessee-trust was discharging its obligation alone and not extending any undue advantage to its key trustee. The Madras High Court to its defence desired upon the AO to look at the substance of the transaction and the real nature of the transaction before invoking clauses of section 13 to deny a trust of its exemption. Citing Madras High Court decision the bench called upon the AO not to ignore the constitutional background of the obligations of the State in regard to health care, which has been fulfilled by the trust.
The case has relevance in the present Covid life saving situation which is an emergency situation thereby may warrant for some institutions including corporates to bear medical costs of its personnel without impacting taxation adversely either for the payer or beneficiary.