Commissioner of Income Tax vs. Mahendra Educational Trust

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TCA/304/2022HC Madras23 October 2024Bench: Honourable Mr Justice R. SURESH KUMAR4 pages
AI SummaryDismissed

What did the High Court hold?

The Tax Case Appeal was dismissed by the High Court. The Revenue's learned Standing Counsel brought to the court's notice CBDT's Circular No.9 of 2024 dated 17.09.2024, stating that the tax effect in this case was less than the monetary limit imposed. Consequently, the appeal was disposed of without adjudicating the substantial questions of law raised. The court explicitly kept the substantial questions of law open for adjudication at an appropriate stage. No costs were awarded. Therefore, no findings were made on the merits of the issues raised by the Revenue, and no operative directions were issued regarding the exemption or the alleged violations. The Tribunal's order dated February 11, 2021, remains undisturbed on merits by this High Court order.

What were the facts?

The Revenue has filed this Tax Case Appeal against the order of the Income Tax Appellate Tribunal, Chennai, dated February 11, 2021. The appeal concerns the assessee, M/s. Mahendra Educational Trust, and challenges the Tribunal's decision regarding the denial of exemption under Section 11 of the Income Tax Act, 1961. The core of the dispute revolves around alleged violations of Section 13(1)(c) read with Section 13(3) and its sub-clauses, concerning the transfer of trust funds to unregistered trusts, business concerns where trustees were directors, and to the founder trustee. The Revenue contends these transfers were barred and warranted denial of exemption. The appeal was filed under Section 260A of the Income Tax Act, 1961.

What were the issues?

The Tribunal was asked to decide the following substantial questions of law: 1. Whether, on the facts and circumstances, the Tribunal was right in holding that there is no reason to deny exemption under Section 11 of the Income Tax Act, 1961, to the assessee Trust, despite alleged violations under Section 13(1)(c) read with Section 13(3) and Section 13(3)(h) of the Act? 2. Whether, on the facts and circumstances, the Tribunal's order is perverse and not right in law in holding that the transfer of trust funds to an unregistered trust and a business concern in which assessee trustees were directors/trustees, as well as to the founder trustee, is not barred under Section 13(1)(c)(ii) read with Section 13(3)(a), (e), and (h), thereby not warranting denial of exemption under Section 11 in its entirety? 3. Whether, on the facts and circumstances, the Tribunal's order is perverse and not right in law in holding that the specified interested persons were not benefited directly or indirectly by such transfer of trust funds to them? Contentions: Assessee: Not recorded in the judgment. Revenue: Argued that the Tribunal erred in not denying exemption under Section 11 due to violations of Section 13(1)(c) and Section 13(3) of the Income Tax Act, 1961, specifically concerning the transfer of trust funds to related parties.

Which sections of the Income-tax Act were involved?

Section 11,Section 13(1)(c),Section 13(3),Section 13(3)(h),Section 260A

AI-generated summary — verify with the full judgment below

T.C.A.No.304 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.304 of 2022 Commissioner of Income Tax Chennai .... Appellant Vs. M/s.Mahendra Educational Trust Kalipatti Post, Attayampatti Via Tiruchengode, Namakkal 637 501 PAN : AAAAM2491C .... Respondent ----- Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, 'A' Bench Chennai, dated 11.02.2021 in ITA.No.126/Chny/2019. For Appellant : Mrs.V.Pushpa Senior Standing Counsel For Respondent : Mr.N.V.Balaji 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, Chennai by raising the following substantial questions of law: 1 of 4 https://www.mhc.tn.gov.in/judis T.C.A.No.304 of 2022 1. Whether on the facts and circumstances of the case, the Tribunal was right in holding that there is no reason to deny exemption under Section 11 of the Income Tax Act, 1961 to the assessee Trust, when there is violation under Section 13(1)(c) read with Section 13(3) as well as Section 13(3)(h) of the Income Tax Act, 1961? 2. Whether on the facts and circumstances of the case, the order of the Tribunal is not perverse on facts and right in law in holding that the transfer of trust funds to unregistered trust and business concern in which assessee trustees are the directors/trustees and also to founder trustee is not barred as per the Section 13(1)(c)(ii) read with 13(3)(a)(e) as well as 13(3)(h) warranting denial of exemption under Section 11 in entirety? 3. Whether on the facts and circumstances of the case, the order of the Tribunal is not perverse on facts, and right in law in holding above said specified interested persons were not benefitted directly or indirectly by such transfer of trusts funds to them? 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 2 of 4 https://www.mhc.tn.gov.in/judis T.C.A.No.304 of 2022 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 NCS : Yes/No

KST To The Income Tax Appellate Tribunal 'A' Bench, Chennai. 3 of 4 https://www.mhc.tn.gov.in/judis T.C.A.No.304 of 2022 R.SURESH KUMAR, J. AND C.SARAVANAN, J. KST T.C.A.No.304 of 2022 23.10.2024 4 of 4 https://www.mhc.tn.gov.in/judis

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