2008 (4) TMI 16 - SC - Income Tax

Assessee claimed exemption under Section 10(23) on the basis that the objects of the respondent-assessee are exclusively charitable - AO rejected the claim - once trust is registered u/s 12A then AO can t make further probe into the objects of trust- since the department did not challenge the correctness of the judgment in the similar matter in another case - revenue appeal is dismissed

Summary

Issues:
Exemption under Section 10(23) of the Income-tax Act for Assessment Years 1991-92 and 1992-93.
Interpretation of the objects of the Trust under Section 2(15) of the Income Tax Act.
Relevance of Registration under Section 12-A in determining the scope of further probe into the Trust's objects.

Exemption under Section 10(23) of the Income-tax Act:
The respondent-assessee claimed exemption under Section 10(23) for the Assessment Years 1991-92 and 1992-93 based on the charitable nature of its objects. The assessing officer and the Commissioner of Income-tax (Appeals) rejected the claim. However, the Income Tax Appellate Tribunal allowed the appeals filed by the respondent-assessee. Subsequently, the High Court dismissed the appeals based on a previous decision. The Supreme Court granted leave only in respect of Question No.'B' related to the Registration under Section 12-A. Ultimately, the Court found that both questions were concluded by a previous judgment, leading to the dismissal of the appeals.

Interpretation of the objects of the Trust under Section 2(15) of the Income Tax Act:
The key issue was whether the objects of the Trust, restricting benefits to the members of the Club, fell within the definition of "General Public Utility" under Section 2(15) of the Income Tax Act. The Tribunal had held that the Trust's objects constituted a section of the public and not a Body of Individuals. The High Court, relying on a previous decision, dismissed the appeals. The Supreme Court noted that the appeals were rightly dismissed as the appellant did not challenge the correctness of the previous judgment. The Court found that the matter was concluded by the previous judgment, leading to the dismissal of the appeals.

Relevance of Registration under Section 12-A in determining the scope of further probe into the Trust's objects:
The second substantial question of law was whether Registration under Section 12-A prevented the Assessing Officer from further probing into the objects of the Trust. The High Court dismissed the appeals based on a previous decision, which was not challenged by the appellant. The Supreme Court granted leave only in respect of this question but found that it was also concluded by the previous judgment. As the Revenue did not challenge the decision in the previous case, the Court held that both questions deserved to be dismissed, ultimately ordering the dismissal of the appeals.

In conclusion, the Supreme Court upheld the dismissal of the appeals, finding that both issues raised had been conclusively addressed in a previous judgment. The Court emphasized that as the appellant did not challenge the previous decision, the matters had attained finality, leading to the dismissal of the appeals.