Principal Commissioner of Income Tax vs. M/s.Bhakthavatsalam Memorial Trust

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TCA/226/2022HC Madras23 October 2024Bench: Honourable Mr Justice R. SURESH KUMAR5 pages
AI SummaryDismissed

What did the High Court hold?

The High Court did not adjudicate on the substantial questions of law. The learned Senior Standing Counsel for the appellant Revenue brought to the court's notice that, as per CBDT's Circular No. 9 of 2024 dated 17.09.2024, the tax effect in the instant case was less than the monetary limit imposed for filing appeals. Consequently, the Court recorded this submission. The Tax Case Appeal was dismissed for low tax effect, with the substantial questions of law kept open for adjudication at an appropriate stage. No costs were awarded. The specific findings of the ITAT on the eligibility for exemption under Section 11, violations of Section 13(1)(b) and Section 11(5), and the treatment of corpus funds were not discussed or decided by the High Court.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income Tax (Exemptions), filed a Tax Case Appeal under Section 260A of the Income Tax Act, 1961, challenging an order dated January 11, 2018, passed by the Income Tax Appellate Tribunal (ITAT), 'C' Bench, Chennai. The appeal pertains to Assessment Years 2010-11 and 2011-12 and concerns the eligibility of M/s. Bhakthavatsalam Memorial Trust (the assessee) for exemption under Section 11 of the Income Tax Act. The core of the dispute involves the assessee advancing money to another trust and alleged violations of Section 13(1)(b) and Section 11(5) of the Act. The High Court was seized of the matter.

What were the issues?

The Tribunal had to decide the following substantial questions of law raised by the Revenue: 1. For AY 2010-11 & 2011-12: Whether the ITAT erred in holding the assessee eligible for exemption under Section 11 of the Income Tax Act, 1961, despite a mismatch between the objects of the assessee trust and the recipient trust to which funds were advanced. 2. For AY 2010-11: Whether the ITAT erred in holding no violation of Section 13(1)(b) of the Act, given the recipient trust is for a particular religious community. 3. For AY 2010-11: Whether the ITAT erred in holding no violation of Section 13(1)(b) of the Act, without appreciating the assessee's failure to accumulate and invest funds as per Section 11(5). 4. For AY 2011-12: Whether the ITAT erred in holding that corpus donations cannot be treated as income if the assessee is not eligible for exemption under Section 11. Assessee's arguments were not recorded. Revenue argued that the tax effect was below the monetary limit specified in CBDT's Circular No. 9 of 2024, dated September 17, 2024.

Which sections of the Income-tax Act were involved?

Section 260A,Section 11,Section 13(1)(b),Section 11(5)

AI-generated summary — verify with the full judgment below

T.C.A.No.226 of 2022 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 23.10.2024 CORAM THE HON'BLE MR.JUSTICE R.SURESH KUMAR AND THE HON'BLE MR.JUSTICE C.SARAVANAN Tax Case Appeal No.226 of 2022 Principal Commissioner of Income Tax (Exemptions) Ward-2, Ayakar Bhavan, Annexe Building, III Floor 121, M.G.Road, Nungambakkam, Chennai-34. .... Appellant Vs. M/s.Bhakthavatsalam Memorial Trust Plot No.14, 31st Street, Periyar Nagar Korattur, Chennai-80 PAN AAATB 2624D .... Respondent ----- Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, 'C' Bench Chennai, dated 11.01.2018 in ITA.No.684/MDS/2015. For Appellant : Mrs.V.Pushpa Senior Standing Counsel For Respondent : Mr.A.S.Sriraman J U D G M E N T (Delivered by R.SURESH KUMAR, J.) This Tax Case Appeal has been filed by the Revenue calling in question the correctness of the order passed by the Income Tax Appellate Tribunal, 1 of 5 https://www.mhc.tn.gov.in/judis T.C.A.No.226 of 2022 Chennai by raising the following substantial questions of law: For AY 2010-11 1. Whether on the facts and circumstances of the case, the Hon'ble ITAT was right in law in holding that the assessee is eligible for exemption u/s.11 of the IT Act, 1961 without appreciating the fact that there is a complete mismatch between the objects of the assesee's trust and that of the recipient trust to which the assessee had advanced money? 2. Whether on the facts and circumstances of the case, the Hon'ble ITAT was right in law in holding that there was no violation u/s.13(1)(b) of the Income Tax Act, 1961 irrespective of the fact that the recipient trust is established for the welfare of a particular religious community? 3. Whether on the facts and circumstances of the case, the Hon'ble ITAT was right in law in holding that there was no violation u/s.13(1)(b) of the Income Tax Act, 1961 without appreciating the fact that there is a complete failure on the part of the assessee to accumulate and invest the funds in terms of the provisions of Section 11(5) of the I.T.Act? For AY 2011-12 4. Whether on the facts and circumstances of the case, the Hon'ble ITAT was right in law in holding that the assessee is eligible for exemption u/s.11 of the IT 2 of 5 https://www.mhc.tn.gov.in/judis T.C.A.No.226 of 2022 Act, 1961 without appreciating the fact that there is a complete mismatch between the objects of the assessee trust and that of the recipient trust to which the assessee had advanced money? 5. Whether on the facts and circumstances of the case, the Hon'ble ITAT was right in law in holding that donation specifically given for corpus funds cannot be treated as income of the trust if the assessee is not eligible for exemption u/s.11 of the IT Act? 2. It is brought to our notice by the learned Standing Counsel for the appellant Revenue that in the instant case, as per the CBDT's Circular No.9 of 2024 dated 17.09.2024 the tax effect is said to be less than the monetary limit imposed and therefore, the appeal can be disposed of, keeping the substantial questions of law raised in this appeal open for adjudication at a later point of time. 3. Recording the aforesaid submission made by the learned Standing Counsel for the appellant Revenue, this Tax Case Appeal is dismissed for low tax effect, keeping open the substantial questions of law for adjudication at appropriate stage. No costs. (R.S.K.,J.) (C.S.N.,J.) 23.10.2024 3 of 5 https://www.mhc.tn.gov.in/judis T.C.A.No.226 of 2022 NCS : Yes/No

KST R.SURESH KUMAR, J. AND C.SARAVANAN, J. KST To The Income Tax Appellate Tribunal 'C' Bench, Chennai. T.C.A.No.226 of 2022 4 of 5 https://www.mhc.tn.gov.in/judis T.C.A.No.226 of 2022 23.10.2024 5 of 5 https://www.mhc.tn.gov.in/judis

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