2005 (11) TMI 27 - SC - Income Tax

Trust - exemption u/s 11 and 12 - allegation of violation of the Foreign Contribution (Regulation) Act, 1976 - trust was registered after the receipt of the amount by the assessee from Dubai, though it is claimed that the application for registration had been filed earlier - impugned order is set aside - matter is remitted to the HC for its fresh determination in accordance with law - HC could not have been dismissed the appeal on the ground that no substantial question of law arises

Summary

Issues:
Exemption under sections 11 and 12 of the Income-tax Act, 1961 denied to the assessee - Treatment of rupees thirty lakhs received from Dubai as income - Violation of the Foreign Contribution (Regulation) Act, 1976 - Disagreement between Assessing Officer and Commissioner (Appeals) - Confirmation of exemption by the Income-tax Appellate Tribunal - Dismissal of appeal by the High Court under section 260A - Registration of trust after receipt of amount from Dubai - Source of contribution and its identity in question - Requirement of deeper consideration by the High Court.

Analysis:
The Supreme Court granted leave in a case where the respondent-assessee was denied exemption under sections 11 and 12 of the Income-tax Act, 1961, and the amount of rupees thirty lakhs received from Dubai was treated as income due to a perceived violation of the Foreign Contribution (Regulation) Act, 1976. The Commissioner (Appeals) overturned the Assessing Officer's decision, concluding that the assessee was entitled to exemption. This decision was upheld by the Income-tax Appellate Tribunal.

The appellant then filed an appeal under section 260A of the Income-tax Act, 1961, which was dismissed by the High Court on the grounds that no substantial question of law was present in the appeal. The Supreme Court highlighted that the trust was registered post the receipt of the amount from Dubai, raising questions about the source of contribution and its identity. The Court emphasized the need for a more thorough examination by the High Court, indicating that the appeal required deeper consideration beyond the mere presence of substantial legal questions.

As a result, the Supreme Court allowed the civil appeal, setting aside the impugned order, and remitted the case back to the High Court for a fresh determination in accordance with the law. The Court refrained from expressing any opinion on the underlying questions, emphasizing that the High Court should decide the appeal without being influenced by any observations made in the Supreme Court's order. No costs were awarded in this matter.