THE COMMISSIONER OF INCOME TAX (EXEMPTIONS) vs. GUJARAT COUNCIL OF SCIENCE CITY

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TAXAP/308/2018HC GujaratGJHC24020797201810 April 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the Revenue's appeal. The Court noted that the Tribunal had relied on its own judgment for an earlier assessment year, which was upheld by the High Court in Tax Appeal No. 1050 of 2009. In that prior decision, the High Court had observed that the Government Resolution specifically provided that the grant was a contribution towards the corpus fund. Therefore, such contributions fall within the excluded category under Section 12 of the Act, as they were made with a specific direction to form part of the corpus. Consequently, these amounts are not considered income derived from property held under trust for charitable purposes for the purposes of Section 11. The Court further held that in light of Section 11(1)(d), such income is not to be included in the total income. The High Court reiterated its earlier view, finding support from its decision in Commissioner of Income-tax v. Sthanakvasi Vardhman Vanik Jain Sangh, which held that voluntary contributions made with a specific direction to form part of the corpus are not deemed income derived from property held under trust for charitable purposes. Thus, the Tribunal was justified in holding the grant-in-aid as part of the corpus and exempt under Section 11(1)(d).

What were the facts?

The Revenue, the Commissioner of Income Tax (Exemptions), is in appeal against an order of the Income Tax Appellate Tribunal (ITAT) dated October 31, 2017. The appeal concerns the taxability of annual and recurring grants received by the assessee, Gujarat Council of Science City. The ITAT had previously ruled in favor of the assessee for an earlier assessment year. The Revenue had appealed this decision to the High Court, which dismissed the appeal in Tax Appeal No. 1050 of 2009, upholding the Tribunal's view that the grants formed part of the corpus and were eligible for exemption under Section 11(1)(d) of the Income Tax Act.

What were the issues?

1. Whether, on the facts and in law, the Tribunal was justified in holding that annual and recurring grants received by the assessee without any specific direction are eligible for exemption under Section 11(1)(d) of the Income Tax Act. Assessee's Contention: The judgment does not record specific arguments made by the assessee before the High Court. However, the High Court's previous order in Tax Appeal No. 1050 of 2009, which the Tribunal relied upon, indicates that the grants were considered contributions towards the corpus fund of the society. This would fall within the excluded category under Section 12 of the Act, meaning they are not income derived from property held under trust for charitable purposes, and thus eligible for exemption under Section 11(1)(d). Revenue's Contention: The Revenue contended that the Tribunal was not justified in not appreciating that the annual and recurring grants received by the assessee without any specific direction are eligible for exemption under Section 11(1)(d) of the Act. The Revenue's appeal to the High Court suggests disagreement with the Tribunal's interpretation of the nature of these grants.

Which sections of the Income-tax Act were involved?

Section 11(1)(d),Section 12

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/308/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 308 of 2018 ========================================================== THE COMMISSIONER OF INCOME TAX (EXEMPTIONS) Versus GUJARAT COUNCIL OF SCIENCE CITY ========================================================== Appearance: MR MANISH BHATT FOR MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 10/04/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)

1.

Revenue is in appeal against the judgement of the Income Tax Appellate Tribunal dated 31.10.2017 raising following question for our consideration: “Whether on the facts and circumstances of the case and in law, the Tribunal was justified in not appreciating that the annual and recurring grants received by the assessee without any specific direction is eligible for exemption u/s. 11(1)(d) of the Act?

2.

From the record it emerges that the Tribunal has relied on its own judgement in case of assessee in the earlier assessment year. We are informed that the Revenue had carrie such matter C/TAXAP/308/2018 ORDER in Appeal. The High Court has been pleased to dismissed the same being Tax Appeal No. 1050 of 2009 making following observations:

“13. Thus, the said Government Resolution specifically provides that the grant provided by it is by way of contribution towards the corpus fund of the society. In the circumstances, the contributions received from the Government would fall within the excluded category under section 12 of the Act, viz. contributions made with a specific direction that they shall form part of the corpus of the trust or institution. Hence, the amount received by way of the contributions made by the Government would not be income derived from property held under trust wholly for charitable or religious purpose for the purposes of section 11 of the Act. Moreover, in the light of the provisions of section 11(1)(d) of the Act the said income is not to be included in the total income of the previous year of the person in receipt of the income.

14.

In the aforesaid background, the Tribunal was justified in holding that the grant-in-aid received by the assessee is part of the corpus and cannot be held to be the income of the assessee and as such, the assessee would be entitled for exemption under section 11(1)(d) of the Act.

15.

The aforesaid view finds support from the decision of this High Court in the case of Commissioner of Income-tax v. Sthanakvasi Vardhman Vanik Jain Sangh, (supra), wherein its has been held that in the light of the provisions of section 12 of the Act, it is obvious that any voluntary contribution which is made with a specific direction that it shall form part of the corpus of the trust or institution, would not be deemed to be the income derived from the property held under trust wholly for the charitable or religious purposes.” C/TAXAP/308/2018 ORDER

3.

In the result, Tax Appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) JYOTI V. JANI

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