2018 (5) TMI 1730 - HC - Income Tax

Exemption u/s 11 - Contravention of Section 13(1)(d) - Dividend income - Tax at margin rate u/s 164 - trust received gift of TISCO Ltd. shares which were subsequently written off. - Whether tax at margin rate u/s 164(2) is to be levied on the income earned from non-exempt asset - whether holding of ineligible assets is sufficient to attract the provisions of Section 13(1)(d)(iii) - Held that - When the shares are forming part of corpus after 1st June, 1973, question of accretion does not even arise thus the investment in right-issue cannot, by any stretch of imagination, by equated with the phrase accretion by way of bonus shares. Since dividend income is exempt, no income remains taxable at Maximum Marginal rate - Decision of tribunal 2014 (11) TMI 444 - ITAT JAIPUR confirmed - Decided in favor of assessee.

Summary

Issues:
1. Interpretation of tax provisions regarding income from non-exempt assets.
2. Eligibility of the assessee to claim under Section 11 despite provisions of Section 13(1)(d)(iii).
3. Validity of quashing revision orders under Section 263 by the ITAT.
4. Denial of exemption under Section 13(1)(d)(iii) restricted to income earned from shares only.

Analysis:
1. The court framed substantial questions of law regarding the correct application of tax provisions. The first issue concerned the correctness of levying tax on income from non-exempt assets under Section 164(2). The court examined whether the Tribunal's decision in favor of the assessee was justified.
2. In another case, the court deliberated on the eligibility of the assessee to claim benefits under Section 11 despite the applicability of Section 13(1)(d)(iii). The court assessed the legal provisions and the specific circumstances of the case to determine the validity of the claim.
3. The court addressed the validity of the ITAT's decision to quash revision orders under Section 263. It considered whether the ITAT's determination of the issue of applicability of Section 13(1)(d)(iii) in favor of the assessee was appropriate despite pending challenges before the court.
4. Lastly, the court examined the issue of denial of exemption under Section 13(1)(d)(iii) being restricted to income earned from shares only. The court analyzed the arguments presented by both parties and concluded that in the peculiar facts of the case, the Tribunal's view was just and proper, ruling in favor of the assessee and dismissing the appeals. The court clarified that its decision in this case would not set a precedent.

This comprehensive analysis provides insights into the various legal issues addressed in the judgment, including the interpretation of tax provisions, eligibility for tax benefits, validity of tribunal decisions, and the scope of exemption denial under specific sections.