2007 (8) TMI 315 - HC - Income Tax

Claim for exemption in respect of agricultural income derived from property held in trust for religious/charitable purpose - claim of the assessee for exemption can be accepted if assessee proves its status as a charitable institution - since admittedly the petitioner had not produced the trust deed before the revisional authority, the matter merits to be remitted back to the revisional authority concerned to verify the trust deed to consider the claim for exemption

Summary

Issues:
Exemption under section 4(b) of the Tamil Nadu Agricultural Income-tax Act, 1955 based on charitable institution status and trust deed verification.

Analysis:
The judgment pertains to tax case revisions challenging the order of the Tamil Nadu Agricultural Income-tax Appellate Tribunal for the assessment years 2000-01 and 1999-2000. The assessee claimed exemption under section 4(b) of the Act, citing registration as a charitable institution under section 12A(a) of the Central Income-tax Act, 1961. The assessing authority granted exemption considering the charitable nature of the society's activities, including training young priests nationwide. However, proceedings were initiated to cancel the exemption due to the non-production of the trust deed verifying key elements like declaration, property setting, and beneficiary statement.

The Special Commissioner and Commissioner of Agricultural Income-tax referred to a previous court decision emphasizing the need for trust deed production. The petitioner argued that exemption under the Income-tax Act should extend to the Agricultural Income-tax Act based on trust status. The Revenue contended that without the trust deed, the Commissioner's decision was justified. The Commissioner's order highlighted the absence of the trust deed, leading to the negation of the exemption claim under the Agricultural Income-tax Act.

The relevant section for exemption, section 4(b), was analyzed based on a previous court decision. It was clarified that for agricultural income, trusts with income solely from agricultural sources need not be registered under the Central Income-tax Act. The court stressed the importance of trust deed verification for claiming exemption under the Agricultural Income-tax Act, requiring the petitioner to produce the trust deed for further consideration. Another case for the assessment year 1999-2000 presented similar circumstances, leading to the remittance of both cases back to the Tribunal for trust deed examination.

In conclusion, the orders of the Tribunal were set aside, and the matters were remitted back for trust deed evaluation to determine the eligibility for exemption under section 4(b) of the Tamil Nadu Agricultural Income-tax Act. The judgment underscores the significance of trust deed verification in establishing the charitable status for tax exemption purposes.