2017 (8) TMI 1404 - HC - Income Tax

Application of income for non-charitable purposes - Shares held by the Assessee in the Delhi Guest House Pvt. Ltd. ( DGHPL ) - conversion of the property from lease hold to free hold, of the entity whose shares were held by the Assessee - Held that - As a result of a dispute which arose amongst the family members of Dr. Bhai Mohan Singh, the Assessee was restrained from converting the shares held in DGHPL to other permissible forms of investment before the time limit prescribed in clause (iia) of proviso to Section 13(1)(d) of the Act. The conversion could ultimately take place only in 2012 after the restraint was lifted. In view of the above concurrent factual finding, no question of law arises for determination on this aspect. Payment of ₹ 3.33 crores as charges for conversion of the property held by DGHPL from leasehold to freehold. This issue is linked with the earlier issue regarding the shareholding in DGHPL - The conversion of the property from lease hold to free hold, of the entity whose shares were held by the Assessee could not in the circumstances be said to be application of income for non-charitable purposes. Consequently, no substantial question of law arises on this aspect as well.

Summary

Issues involved:
1. Appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the Assessment Year 2007-08.
2. Dispute regarding shares held in Delhi Guest House Pvt. Ltd. and conversion of shares to other permissible forms of investment.
3. Payment of charges for the conversion of property from leasehold to freehold.

Analysis:
1. The appeal before the High Court was made by the Revenue against the order of the Income Tax Appellate Tribunal (ITAT) for the Assessment Year 2007-08. The Revenue was aggrieved by the decisions of the Commissioner of Income Tax (Appeals) and ITAT concerning two main issues.

2. The first issue revolved around the shares held by the Assessee in Delhi Guest House Pvt. Ltd. (DGHPL). It was established that due to a family dispute involving Dr. Bhai Mohan Singh, the Assessee was restricted from converting the shares in DGHPL to other permissible forms of investment until 2012. Both the CIT (A) and ITAT concurred on this factual finding, leading to the dismissal of any legal question on this matter.

3. The second issue pertained to the payment of ?3.33 crores as charges for converting the property from leasehold to freehold, which was connected to the earlier issue of shareholding in DGHPL. The Court determined that this conversion did not amount to the application of income for non-charitable purposes, thereby concluding that no substantial legal question arose in this regard.

4. Consequently, the High Court dismissed the appeal, affirming the decisions of the lower authorities on both issues. The judgment highlighted the factual findings and legal interpretations that led to the dismissal of the appeal under Section 260A of the Income Tax Act, 1961.