2019 (12) TMI 579 - HC - Income Tax

Exemption u/s 11 - Whether assessee is right in law and fact in holding that the assessee is a religious and charitable institution and carried on kuri business for utilizing the income therefrom also for the charitable purpose such as medical relief, education etc. ? - Tribunal is right in holding that the interest claimed cannot be taxed in the hands of the assessee trust as it is exempt from taxation? - HELD THAT - In view of the remand made by the hon'ble Supreme Court in Dharmodayam Co. case, the matter requires reconsideration by the Tribunal. Of course, we take note of the fact that in the case of Dharmodayam Co. 2000 (11) TMI 10 - SC ORDER the Tribunal had ultimately found the issue in favour of the assessee therein. But question as to whether a similar situation prevails in the instant case which would satisfy the different conditions stipulated under sub-section (4A), is a matter which requires examination. Since some of the reference cases are of the year 2005, we do not think it appropriate to dismiss them on the basis of the litigation policy of the Government. Instead we leave it open to the respondent to take up such contention before the Tribunal, at the time when the matter is considered afresh. Instead of specifically answering question of law referred, we think it only appropriate to remit the income tax appeals for fresh consideration

Summary

Issues:
1. Whether the income derived from Kuri business by a Charitable Trust is eligible for exemption under Section 11 of the Income Tax Act?
2. Whether the Trust is a religious and charitable institution conducting Kuri business for charitable purposes?
3. Whether the interest claimed by the Trust can be taxed?

Issue 1:
The High Court considered whether the income from Kuri business conducted by a Charitable Trust is eligible for exemption under Section 11 of the Income Tax Act. The Court referred to previous judgments and highlighted the introduction of sub-section (4A) to Section 11 from 01-04-1984. The Court noted a previous decision by the Supreme Court which stated that income from Kuri business held in trust would not be governed by sub-section (4A) until its introduction in 1984. However, the Supreme Court observed that the Tribunal and High Court had not considered the conditions introduced by sub-section 11 (4A) which are essential to determine the eligibility for exemption under Section 11.

Issue 2:
The Court addressed whether the Trust is a religious and charitable institution conducting Kuri business for charitable purposes. The Respondent argued that the Income Tax Appellate Tribunal had reconsidered the matter and allowed exemptions based on a remand by the Supreme Court in a similar case. On the contrary, the Senior Standing Counsel for Income Tax contended that the previous order cannot be taken as a precedent without evaluating the specific circumstances of the present case to determine if it satisfies the conditions under Section 11 (4A).

Issue 3:
Regarding the taxation of interest claimed by the Trust, the Court noted arguments raised by both parties. The Respondent highlighted that the amount involved in the reference cases was below the limit set by the Government's litigation policy. However, the Senior Standing Counsel for the revenue argued that in cases with a cascading effect, it is the department's responsibility to present the issue before the court. The Court decided to remit the income tax appeals for fresh consideration by the Appellate Tribunal based on the Supreme Court's decision in a similar case, emphasizing the need for the Tribunal to consider the conditions stipulated under sub-section 11 (4A) while reevaluating the matter.

In conclusion, the High Court remitted the income tax appeals for fresh consideration by the Appellate Tribunal based on the Supreme Court's decision in a similar case. The Court emphasized the importance of evaluating whether the Trust satisfies the conditions stipulated under sub-section 11 (4A) to determine its eligibility for exemption under Section 11 of the Income Tax Act.