COMMISSIONER OF INCOME TAX vs. TAPASYA SIKSHA SAMITI

PDF · subscribers
ITA/113/2010HC Madhya PradeshMPHC01022459201031 July 20154 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no question of law arises for consideration. The Court analyzed Section 13(2) of the Act, which states that the bar under Section 13(2) is attracted if any part of the income or property of the institution is used or applied directly or indirectly for the benefit of a person referred to in sub-section (3), or if the income of the property or institute is diverted in favour of such a person. The Court found that the Commissioner (Appeals) and the Tribunal had concurrently held that the funds of the trust were not diverted for the benefit of Shri Sanjeev Saxena, nor did he seek any benefit from the trust. On the contrary, he had provided an interest-free loan to the trust, which was utilized to its advantage without any consequential benefit to Shri Saxena. Therefore, the bar created under Section 13(1)(c) of the Act was not applicable. The Court found no error in the concurrent orders passed by the lower authorities and concluded that they were in accordance with the law.

What were the facts?

The appeals were filed by the Commissioner of Income Tax, Bhopal, against orders of the Income Tax Appellate Tribunal concerning Tapasya Education Society, Bhopal, for assessment years 2005-06, 2006-07, and 2007-08. The assessee, a trust running educational institutions, sought exemptions under Section 10 of the Income Tax Act. The Assessing Officer disallowed certain exemptions, citing Section 13(1)(c), due to transactions with the society's President, Shri Sanjeev Saxena, who had advanced interest-free loans to the society. The Commissioner (Appeals) and the Tribunal had allowed the exemptions, finding that Section 13(1)(c) was not attracted as Shri Saxena had not derived any profit or benefit from the trust's funds.

What were the issues?

1. Whether a question of law arises concerning the applicability of Section 13(1)(c) of the Income Tax Act, 1961, when the President of an educational trust advanced interest-free loans to the trust, and whether such a transaction is hit by the bar created under Section 13(1)(c) if the President had received interest in the society. Assessee's Contention: The judgment does not record specific arguments made by the assessee. However, the findings of the Commissioner (Appeals) and the Tribunal, which were upheld, suggest the assessee argued that Section 13(1)(c) was not attracted because the President did not derive any profit or benefit from the trust's funds, and in fact, provided interest-free loans to the trust. Revenue's Contention: The revenue argued that once it is established that Shri Sanjeev Saxena had received interest in the society, any transaction done by him is hit by the bar created under Section 13(1)(c) of the Act. The revenue relied on decisions in Champa Charitable Trust Vs. Commissioner of Income Tax [(1995 125 CTR 246] and Pt. Kanahya Lal Punj Charitable Trust Vs. Director of Income Tax [(2008) 218 CTR 311].

Which sections of the Income-tax Act were involved?

Section 10,Section 13(1)(c),Section 13(2),Section 260-A

AI-generated summary — verify with the full judgment below

HIGH COURT OF MADHYA PRADESH : AT JABALPUR

Income Tax Appeal No.56 of 2012 Commissioner of Income Tax, Bhopal Vs. Tapasya Education Society, Bhopal

Income Tax Appeal No.77 of 2012 Commissioner of Income Tax, Bhopal Vs. Tapasya Education Society, Bhopal

Income Tax Appeal No.113 of 2010 Commissioner of Income Tax, Bhopal Vs. Tapasya Education Society, Bhopal

Present : Hon’ble Shri Justice Rajendra Menon. Hon’ble Shri Justice Sushil Kumar Gupta.

Shri Sanjay Lal, counsel for appellant. Shri Mukesh Agarwal, counsel for respondent/assesse.

Whether approved for reporting: Yes / No.

JUDGMENT 31.7.2015

As common question of law are proposed to be canvassed in all these three appeals filed against the same assesse for different years of assessment under section 260- A of the Income Tax Act (hereinafter referred to as ‘Act’ for short) they are being disposed of by this common judgment.

2.

In I.T.A.No.56/2012 the orders passed by the Income Tax Appellate Tribunal on 15.12.2011 for assessment year 2006-07 has been challenged. Similarly in I.T.A.No.77/2012 the order passed by the Income Tax Appellate Tribunal for the assessment year 2007-08 has been challenged and in I.T.A.No.113/2010 the order passed by the Tribunal for the assessment year 2005-06 has been challenged.

3.

The respondent/assesse is a trust running an educational institution in the name and style of Radha Raman Institute of Technology and Science, Radha Raman Institute of Pharmacy and Radha Raman Engineering College. The return of income were filed during various periods and certain exemptions were sought under section 10 of the Act on account of certain transactions made by the society with its President one Shri Sanjeev Saxena. It was found by the Assessing Officer that certain loans were advanced by Shri Sanjeev Saxena, interest free to the society and as this act of President attracted the bar created under section 13(1)(c) the benefit was disallowed. The Income Tax Commissioner and the Tribunal having allowed this benefit these appeals by the revenue. The Commissioner (Appeals) found that as Shri Sanjeev Saxena had given the interest free loan and had not 3

derived any profit on benefit from the funds of the trust the provision of section 13(1)(c) are not attracted. The Tribunal also found that there is no error in holding so by the appellate authority. However learned counsel for appellant invited out attention to a decision of Bombay High Court and Delhi High Court in the case of Champa Charitable Trust Vs. Commissioner of Income Tax [(1995 125 CTR 246] and Pt.Kanahya Lal Punj Charitable Trust Vs. Director of Income Tax [(2008) 218 CTR 311] to say that once it is established that Shri Sanjeev Saxena had received interest in the society, therefore any transaction done by him is hit by the bar created under section 13(1)(c) of the Act, therefore the question of law arises for consideration.

4.

We have considered the rival contentions and find that under section 13(2) it is provided that if any part of income or property of the institution during the year is used or applied directly or in directly for the benefit of any person referred to in sub-section (3) or if income of the property or institute is diverted in favour of any such person, the bar under section 13(2) gets attracted. The Commissioner Income Tax and Tribunal found that in this case the funds of the trust were not be diverted to the benefit of Shri Sanjeev Saxena nor was any benefit desired by him from the trust, on the contrary he had given interest free loan to the trust and the trust has utilized the same to its advantage, without granting any consequential benefit to Shri Sanjeev Saxena as a result the bar created under section 13(1)(c) of the Act does not apply.

5.

In doing so, we are of the considered view that the 4

Commissioner (Appeals) and the Tribunal has not committed any error. The concurrent orders are passed in accordance with law and no question of law arises for consideration of this Court.

6.

In view of aforesaid, all the appeals are dismissed.

(RAJENDRA MENON) (SUSHIL KUMAR GUPTA) JUDGE JUDGE M

More judgments on Section 10

All 591 judgments and leading authorities on Section 10 →

Recent GST High Court judgments

Search GST case law →