2019 (8) TMI 849 - HC - Income Tax

Exemption u/s 11 - when the shares were donated to the Trust with a condition that it should be retained for at least 5 years, holding of such shares in contravention of Section 13(1) (d) - HELD THAT - Entire matter is wholly factual. AO vide an order dated 21.12.2006 by referring to Section 11(5) of the Act held that the assessee trust was required to dispose or convert the assets not conforming to the requirement of Section 11(5) into permissible investment within one year from the end of the financial year in which such bonus shares or other assets are received or 31.03.1992 whichever is later and also held that the income over expenditure derived by the assessee during the previous year relevant to the assessment year 2001-02 is assessable at the maximum marginal rate. The assessee filed an appeal before the Tribunal, this issue arose not only for the assessment year under consideration (2001-02), but also for the assessment year 2002-03. So far as the order passed by the Tribunal for the assessment year 2002-03, admittedly, the revenue did not prefer any appeal. The learned Senior Standing Counsel for the appellant/revenue, on instructions, submitted that appeal was not preferred on account of low tax effect. It is not known as to how the appeal could not have been filed for two reasons namely the issue is a recurring issue, apart from that the Tribunal followed the decision in the case of CIT Vs. Nagi Reddy Charities 1998 (9) TMI 30 - MADRAS HIGH COURT which according to the revenue was distinguishable. In any event, the order passed in the assessee's own case which was affirmed by the Tribunal has become final. So far as, present appeal is concerned, the Tribunal took note of the factual position and held that it is not for the assessee to sell the shares and law cannot compel one to do the impossible. We are of the considered view that decision arrived at by the Tribunal is upon appreciation of the factual position and we find that there is no substantial question of law arising for consideration in this appeal.

Summary

Issues:
Appeal against the order passed by the Income Tax Appellate Tribunal for assessment years 2000-01 and 2001-02 - Interpretation of Section 13(1)(d) in relation to the exemption under Section 11.

Analysis:
The appeals were filed by the revenue against the order of the Income Tax Appellate Tribunal for the assessment years 2000-01 and 2001-02. The main question of law was whether holding shares donated to a trust with a condition of retention for at least 5 years, in contravention of Section 13(1)(d), would result in denial of exemption under Section 11. The Tribunal held that it is not for the assessee to sell the shares, and law cannot compel one to do the impossible.

Upon review, the High Court found the matter to be factual. The Assessing Officer had held that the assessee trust was required to dispose or convert assets not conforming to Section 11(5) into permissible investments within a specified time frame. The Tribunal's decision was based on the factual position and the previous decision in the assessee's favor for the assessment year 2002-03. The revenue did not appeal the decision for 2002-03 due to low tax effect, despite the issue being recurring.

The High Court concluded that the Tribunal's decision was based on an appreciation of the factual position, and no substantial question of law arose for consideration in the appeal. As a result, the appeals were dismissed, and no costs were awarded. The connected miscellaneous petition was closed accordingly.