2009 (2) TMI 827 - HC - Income Tax

Summary

Issues Involved:
1. Whether the petitioner is entitled to exemption u/s 10(23C)(vi) of the Income-tax Act, 1961 for the assessment years 2003-04 and 2004-05.
2. Whether the investment made by the petitioner in Shriram Chits Pvt. Ltd. violates the conditions stipulated for availing exemption u/s 10(23C)(vi).

Summary:

Issue 1: Entitlement to Exemption u/s 10(23C)(vi)

The petitioner, an Educational Trust, challenged the order of the Chief Commissioner of Income-tax (CCIT) denying exemption u/s 10(23C)(vi) for the assessment years 2003-04 and 2004-05. The petitioner argued that the institution's primary purpose of imparting education falls within the ambit of section 2(15) of the IT Act as a public utility being charitable in nature. The petitioner claimed that the accumulated income was below the thresholds specified for the respective years, and thus, the conditions for investment in specified securities were not applicable. The petitioner relied on the Supreme Court decisions in CIT v. Andhra Chamber of Commerce and S.RM.M.CT.M. Tiruppani Trust v. CIT.

Issue 2: Violation of Conditions for Exemption

The Revenue argued that the petitioner violated the conditions stipulated in the 3rd proviso to section 10(23C)(vi) by not investing the surplus funds in accordance with section 11(5) of the IT Act. The CCIT found that the petitioner made payments to Shriram Chits Pvt. Ltd., which is not in accordance with section 11(5), thereby violating the conditions for exemption. The court noted that the 3rd proviso to section 10(23C)(vi) requires satisfaction of both limbs (a) and (b), and any investment or deposit of funds in contravention of section 11(5) disqualifies the applicant from exemption.

Court's Analysis and Conclusion

The court emphasized that exemption provisions must be construed strictly and in accordance with the legislative intent. The court found that the petitioner's investment in Shriram Chits Pvt. Ltd. violated the conditions stipulated in the 3rd proviso to section 10(23C)(vi), thereby disentitling the petitioner from the claimed exemption. The court dismissed the writ petition, stating that there was no infirmity in the CCIT's order. The decisions cited by the petitioner were found not applicable to the present case.

Final Order

The writ petition is dismissed with no order as to costs.

Dr. B.S. Chauhan, C.J. - I agree.

Petition dismissed.