PRINCIPAL COMMISSIONER OF INCOME TAX vs. M/S MAHASEMAM TRUST

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TCA/266/2020HC Madras22 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 CBDT's Circular No. 9 of 2024 dated 17.09.2024, stating that the tax effect in the instant case was less than the monetary limit imposed. Consequently, the Revenue submitted that the appeal could be disposed of, keeping the substantial questions of law open for future adjudication. Recording this submission, the High Court dismissed the Tax Case Appeal on the ground of low tax effect. The substantial questions of law were expressly left open for adjudication at an appropriate stage. No order as to costs was made.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income Tax, filed a Tax Case Appeal before the High Court of Judicature at Madras, challenging an order of the Income Tax Appellate Tribunal (ITAT), Chennai. The appeal pertains to the assessment year 2015-16 and concerns the assessee, M/s. Mahasemam Trust. The core of the dispute revolves around the ITAT's decision to grant the benefit of Sections 11 and 12 of the Income Tax Act to the assessee, which the Revenue contested. The procedural history indicates that the appeal was filed under Section 260A of the Income Tax Act, 1961, against the ITAT's order dated 30.09.2019 in ITA No.1325/Chny/2019.

What were the issues?

The Tribunal had to decide five substantial questions of law raised by the Revenue. 1. Whether the Appellate Tribunal erred in directing the Assessing Officer to grant the benefit of Sections 11 and 12 of the Act to the assessee Trust? 2. Whether the Tribunal was correct in law in holding that micro financing to the poor at an exorbitant rate of 24% constitutes 'relief of the poor' and falls within the ambit of charitable activity as defined in Section 2(15) of the Income Tax Act? 3. Whether the Tribunal was correct in law in concluding that the assessee trust was rendering service in the nature of 'providing relief to the poor' solely on the basis that it was not serving the 'rich and affluent', while ignoring the trust's commercial motive and targeting the poor for income generation? 4. Whether the assessee's activity was solely micro finance and if such an activity is charitable in nature, especially when no individual is directly involved except a section of Self Help Groups? 5. Whether the Tribunal was correct in law in holding that the consultation fee paid to Trustees/Relatives of Trustees was reasonable and did not violate any provisions of the Act, despite the payment not being proportionate to services rendered and potentially violating Section 13(2)(c) of the Income Tax Act? The Revenue argued that the activities were commercial in nature and not charitable. The assessee's contentions are not explicitly recorded in the provided text.

Which sections of the Income-tax Act were involved?

Section 260A,Section 11,Section 12,Section 2(15),Section 13(2)(c)

AI-generated summary — verify with the full judgment below

T.C.A.No.266 of 2020 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 22.10.2024 CORAM THE HONOURABLE MR.JUSTICE R.SURESH KUMAR and THE HONOURABLE MR.JUSTICE C.SARAVANAN T.C.A.No.266 of 2020 The Principal Commissioner of Income Tax Central 2, No.108, Mahatma Gandhi Road, Chennai. ... Appellant -Vs- M/s.Mahasemam Trust, No.2/47-B, Melur Road, Uthangudi, Madurai - 625 107. PAN:AAATM704C ... Respondent PRAYER : Tax Case Appeal filed under Section 260 A of the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal 'B' Bench, Chennai dated 30.09.2019 in I.T.A.No.1325/Chny/2019 for the assessment year 2015-16. For Appellant : Mr.Karthik Ranganathan Senior Standing Counsel For Respondent : Mr.Punniyakutti 1/5 https://www.mhc.tn.gov.in/judis T.C.A.No.266 of 2020 J U D G M E N T (Judgment of the Court was 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, Chennai by raising the following substantial questions of law: 1. Whether the Appellate Tribunal is correct in law in directing the Assessing Officer to give benefit of Sections 11 and 12 of the Act to the assessee Trust? 2. Whether the Appellate Tribunal is correct in law when the activity of micro financing to poor at an exorbitant rate of 24% constitutes 'relief of the poor' and falls with the ambit of charitable activity as defined in Section 2(15) of the Income Tax Act? 3. Whether the Tribunal is correct in law holding the assessee trust is rendering service in the nature of 'providing relief to the poor' only on the ground that the assessee is not serving to "rich and affluent" by ignoring that fact that the assessee trust with a commercial motive has made poor as its target group for earning income on commercial lines? 4. Whether on the facts and in the circumstances of the case, the assessee had carried out only activity of micro finance and whether such activity is in 2/5 https://www.mhc.tn.gov.in/judis T.C.A.No.266 of 2020 charitable in nature wherein no individual is directly involved except a particular section of the so called Self Help group? 5. Whether the Tribunal is correct in law in concluding that the consultation fee paid to the Trustees/Relatives of the Trustees is reasonable and that there is no violation of any of the provisions of the Act, ignoring the fact that the amount paid to them is not proportionate to the services rendered by them especially when such service was rendered only by other trusts and the assessee had only acted as a facilitator, and as such there is a violation of the provisions of Section 13(2)(c) of the Income Tax Act? 2. It is brought to our notice by the learned Senior 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 Senior 3/5 https://www.mhc.tn.gov.in/judis T.C.A.No.266 of 2020 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. However, there shall be no order as to costs. (R.S.K., J.) (C.S.N., J.) 22.10.2024 (2/3) NCC : Yes / No Index : Yes / No Speaking Order : Yes / No vji To The Income Tax Appellate Tribunal 'B' Bench, Chennai. 4/5 https://www.mhc.tn.gov.in/judis T.C.A.No.266 of 2020 R.SURESH KUMAR, J. and C.SARAVANAN, J. vji T.C.A.No.266 of 2020 22.10.2024 (2/3) 5/5 https://www.mhc.tn.gov.in/judis

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