THE COMMISSIONER OF INCOMETAX, TVM. vs. M/S.GEORGE EDUCATIONAL MEDICAL CHARITABL

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ITA/147/2001HC KeralaKLHC01019117200106 February 2008Author: HONOURABLE MR.JUSTICE T.R.RAMACHANDRAN NAIR,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR4 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal allowed the assessee's claim for exemption concerning the Chennai operations. The Tribunal's finding was based on evidence that disproved the Department's allegation that the guest house was maintained and used by the author of the trust and his wife. The Tribunal noted that the author and his wife were engaged in business in Singapore and had their own residence in Chennai. Consequently, the Tribunal concluded that there was no application of the trust's income for the benefit of prohibited persons as contemplated under Section 13(1)(c)(ii) of the Income Tax Act. The High Court found that the Tribunal's finding was based on evidence and therefore, no question of law arose from the order. The appeal was dismissed.

What were the facts?

The appeals by the Commissioner of Income Tax, Trivandrum, challenge an order of the Income-tax Appellate Tribunal (ITAT), Cochin Bench, for the assessment year 1996-97. The assessee, M/s. George Educational Medical & Charitable Society, Trivandrum, was granted registration as a charitable institution. While exemption was allowed for income from its Kerala operations, the Department disallowed exemption for income related to its Chennai operations. This disallowance was based on the Department's contention that the assessee incurred expenditure for furnishing and maintaining a guest house for the author of the trust and his wife, which was considered an application of income for the benefit of a person referred to in Section 13(1)(c)(ii) of the Income Tax Act.

What were the issues?

1. Whether the Tribunal erred in allowing the claim for exemption for income relating to Chennai operations, despite the assessee incurring expenditure for furnishing and maintenance of a guest house for the author of the trust and his wife, which is alleged to be an application of income for the benefit of a person referred to in Section 13(1)(c)(ii) of the Income Tax Act, 1961. Assessee's Contentions: The Tribunal found that the allegation of the Department regarding the guest house being maintained and used by the author of the trust and his wife was incorrect. It was noted that they were engaged in business operations in Singapore and maintained a separate residence in Chennai. Therefore, there was no application of income for purposes prohibited by Section 13(1)(c)(ii). Revenue's Contentions: The Department contended that the expenditure on the guest house constituted an application of the trust's income for the benefit of the author of the trust and his wife, thereby disentitling the trust to exemption under Section 13(1)(c)(ii).

Which sections of the Income-tax Act were involved?

Section 13(1)(c)(ii)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR WEDNESDAY, THE 6TH FEBRUARY 2008 / 17TH MAGHA 1929 ITA.No. 147 of 2001() --------------------- ITA.42/2000 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT: ----------------- THE COMMISSIONER OF INCOME TAX, TRIVANDRUM. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL,GOI(TAXES) SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENTS: ------------- M/S. GEORGE EDUCATIONAL MEDICAL & CHARITABLE SOCIETY, TRIVANDRUM. BY ADV.SRI. C. KOCHUNNI NAIR & SRI. DALE P. kURIEN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 06/02/2008, ALONG WITH ITA 158 OF 2001 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C .N. RAMACHANDRAN NAIR & T.R. RAMACHANDRAN NAIR, JJ. -------------------------------------------- I.T.A. No. 147 & 158 OF 2001 -------------------------------------------- Dated this the 6th day of February, 2008

JUDGMENT C.N. Ramachandran Nair,J. Heard standing counsel appearing for the appellant in both the cases, which arise from the order of the Income-tax Appellate Tribunal for the year 1996-97. The assessee was granted registration as charitable institution. It has operations both in Kerala as well as in Tamil Nadu. Department has granted exemption for the income from Kerala operations on the ground that assessee was applying the income for charitable purposes. However, disallowance was made for the income relating to operations in Chennai for the reason that respondent- assessee incurred expenditure for furnishing and maintenance of guest house for the author of the trust and his wife. Disallowance is made by reference to Section 13(1)(c)(ii) of the I.T. Act which disentitles a charitable organisation for exemption if any part of such income or any property of the trust or institution is during

2 the previous year used or applied directly or indirectly for the benefit of any person referred to in sub-section (3). We notice from the order of the Tribunal that the allegation of the Department that the guest house is maintained and used by the author of the trust and his wife is incorrect because they were engaged in business operations in Singapore and they were maintaining another house in Chennai for their residence. Since there was no application of income for purposes referred in Section 13(1)(c)(ii) the Tribunal allowed the claim. We find that the finding entered by the Tribunal is based on evidence. No question of law arises from the order of the Tribunal. We accordingly dismiss the appeal. (C.N.RAMACHANDRAN NAIR) Judge. (T.R.RAMACHANDRAN NAIR) Judge. kk

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