2001 (3) TMI 1028 - HC - Income Tax

Summary

Issues Involved:
1. Nature of the transaction (lease vs. sale).
2. Eligibility for exemption u/s 11 of the Income-tax Act.
3. Validity of registration u/s 12A of the Income-tax Act.
4. Proper application of income for charitable purposes.

Summary:

1. Nature of the Transaction:
The Tribunal concluded that the transaction was a sale of leasehold rights of use of space, with the assessee retaining only the right to charge monthly rent and transfer fees. The High Court found merit in the assessee's contention that there is no legal concept of "sale of leasehold rights of use of space." The Department did not support this proposition. Consequently, the matter was remitted back to the Tribunal to reconsider this point in light of the parties' contentions during the assessment proceedings.

2. Eligibility for Exemption u/s 11:
The assessee claimed exemption u/s 11 on the grounds of being a charitable institution. The Tribunal held that the assessee was not entitled to this exemption as it had not obtained registration u/s 12A. The High Court noted that the Tribunal did not properly consider whether the assessee applied its income for earmarked purposes and whether it was entitled to claim benefits under sections 11 and 12 during the assessment years 1989-90 and 1990-91. This aspect was remanded back to the Tribunal for reconsideration.

3. Validity of Registration u/s 12A:
The Tribunal concluded that the assessee's application for registration u/s 12A was belated by 12 years and merely taken on record without issuing a formal certificate. The High Court disagreed, stating that the certificate issued on February 8, 1984, after condoning the delay, was valid and had not been revoked. The High Court referenced the Madras High Court's judgment in New Life in Christ Evangelistic Association v. CIT, which held that the issuance of a certificate u/s 12A does not preclude the Assessing Officer from examining the application of income for charitable purposes during specific assessment years.

4. Proper Application of Income for Charitable Purposes:
The High Court emphasized that the Tribunal should ascertain whether there was a proper application of income for charitable purposes during the assessment years 1989-90 and 1990-91. The Tribunal was directed to reconsider this point, keeping the contentions on both sides open.

Conclusion:
The High Court remitted the matter back to the Tribunal to reconsider the nature of the transaction and the proper application of income for charitable purposes. The Tribunal's findings on other points were not disturbed. The reference was kept pending, and the Tribunal was directed to provide its decision on the specified points before the High Court would consider the reference further. The writ petition was disposed of with no order as to costs.