2020 (10) TMI 254 - HC - Income Tax

Exemption u/s 11 - disallowing the investment in gold bullion by the appellant and treating the same as a violation of Section 11(5) - Tribunal came to the conclusion that the purchase of gold by the assessee was not application of funds, but an investment in gold bullion and this investment is in violation of Section 11(5) - HELD THAT - There is nothing on record to indicate that this opinion was formed by the Tribunal and recorded in its order after the assessee had an opportunity to put forth their contention. Assessee's case is that if such was the view of the Tribunal, then the assessee's case should have been considered as per the proviso (iia) to Section 13(1)(d) - The assessee would contend before us that the asset, not been specified investment, can be held for a period of one year from the end of previous year in which such an asset was acquired, which is the case of the assessee. Since this issue was not dealt with by the Tribunal, rather the assessee appears to have not been put on notice, the above opinion formed by the Tribunal holding that the purchase of gold by the assessee was not application of funds, but an investment in gold bullion, we find that the assessee has been put to prejudice. Therefore, they are required to be granted a fresh opportunity to put forth their contention. Appeal is allowed and the finding rendered by the Tribunal 2014 (9) TMI 957 - ITAT CHENNAI is set aside and the matter is remanded to the Tribunal to consider the said issue afresh.

Summary

Issues involved: Appeal against disallowance of investment in gold bullion under Section 11(5) of the Income Tax Act, 1961.

Analysis:

1. Background and Procedural History: The appellant, a registered Public Charitable Trust operating an educational institution, filed an appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal for the assessment year 2010-11. The appeal raised a substantial question of law regarding the disallowance of investment in gold bullion under Section 11(5) of the Act.

2. Contentions of the Parties: The appellant contended that the investment in gold bullion was in compliance with the proviso (iia) to Section 13(1)(d) of the Act, allowing holding of assets not specified as investments for a specified period. The Revenue, on the other hand, argued that the investment in gold bullion was not a valid application of funds as per Section 11(5) of the Act.

3. Tribunal's Decision and Grounds Raised by Revenue: The Tribunal faulted the CIT(A) for accepting the appellant's stand without sufficient evidence, concluding that the purchase of gold by the appellant was not an application of funds but an investment in violation of Section 11(5) of the Act. The Revenue raised multiple grounds before the Tribunal, challenging the CIT(A)'s decision and highlighting the lack of evidence regarding the utilization of gold investments for educational purposes.

4. Judicial Analysis and Ruling: The High Court observed that the Tribunal's decision lacked a proper opportunity for the appellant to present their case, especially regarding the applicability of the proviso (iia) to Section 13(1)(d) of the Act. As a result, the Court set aside the Tribunal's finding and remanded the matter back to the Tribunal for a fresh consideration in accordance with the law. The Court emphasized the need for a fair hearing and proper consideration of all legal provisions before making a final determination.

5. Outcome: The High Court allowed the appeal to the extent indicated, without imposing any costs, leaving the substantial questions of law framed for consideration open for future proceedings. The Court's decision highlighted the importance of procedural fairness and adherence to legal provisions in tax matters, ensuring that parties have a proper opportunity to present their arguments before a final decision is made.