M/S.SRI VEKKALIAMMAN EDUCATI vs. THE DEPUTY COMMISSIONER OF I

T.C.A.No.890 of 2019 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 24.09.2020 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM and THE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal No.890 of 2019 M/s.Sri Venkkaliamman Educational and Charitable Trust, No.108, East Madha Street, Royapuram, Chennai-600 013. .. Appellant -vs- The Deputy Commissioner of Income Tax, Exemptions-II, Chennai – 34. .. Respondent Appeal under Section 260A of the Income-tax Act, 1961, against the order dated 10.09.2014 made in I.T.A.No.970/MDS/14 on the file of the Income Tax Appellate Tribunal 'C' Bench, Chennai for the assessment year 2010-11. For Appellant : Ms.T.C.A.Sangeetha 1/8 http://www.judis.nic.in T.C.A.No.890 of 2019 For Respondent : Mr.J.Narayanasamy Senior Standing Counsel ****** JUDGMENT (Delivered by T.S.Sivagnanam, J.) This appeal by the appellant/assessee filed under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) is directed against the order dated 10.09.2014 in I.T.A.No.970/MDS/2014, passed by the Income Tax Appellate Tribunal, 'C' Bench, Chennai (for brevity “the Tribunal”) for the assessment year 2010-11. 2.The appeal was admitted on 22.11.2019 on the following substantial question of law:- “Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal is justified in disallowing the investment in gold bullion by the appellant and treating the same as a violation of Section 11(5) of the Income Tax Act, 1961?” 2/8 http://www.judis.nic.in T.C.A.No.890 of 2019 3.We have elaborately heard Ms.T.C.A.Sangeetha, learned counsel for the appellant/assessee and Mr.J.Narayanaswamy, learned Senior Standing Counsel appearing for the respondent/Revenue. 4.The assessee is a registered Public Charitable Trust, which has established and administering an educational institution. It has been granted registration under Section 12A of the Act. For the assessment year under consideration (AY 2010-11), the assessee filed their return of income declaring its total income as 'Nil' and claiming exemption under Section 11 of the Act. The case was taken up for scrutiny and notice under Section 143(2) of the Act was issued on the assessee on 14.09.2011. In the scrutiny assessment, certain disallowances/additions were made and the taxable income of the assessee was determined as Rs.2,52,28,792/- by order dated 25.02.2013. Aggrieved by such order, the assessee filed appeal before the Commissioner of Income Tax (Appeals)-VII, Chennai (for brevity “the CIT(A)”). By order dated 27.12.2013, the assessee's appeal was allowed. Aggrieved by the same, the Revenue filed appeal before the Tribunal. 3/8 http://www.judis.nic.in T.C.A.No.890 of 2019 5.We have gone through the grounds of appeal raised by the Revenue before the Tribunal and for easy reference, we quote the same hereunder:- “5.1.The ld CIT(A) erred in holding that investment made in gold bullion to the extent of Rs.41.24 is not an investment in the modes other than specified in Sec.11(5) of the Act. 5.2.The ld CIT(A) failed to appreciate the fact that the Assessing Officer had categorically analysed the issue and observed that the investment in gold bullion amounting to Rs.26.85 lakhs in M/s.Prince gem & Jewellery P. Ltd. for the purpose of distribution of prizes and awards to meritorious students could not be substantiated with evidence by the Trust by way of name of student, address, etc. 5.3.The ld CIT(A) failed to appreciate that similar investment in Joyalukkas in the form of 26 gold coins weighing 50 gms each and the assessee could not substantiate with evidence that the said investments were utilised for the purpose of gold metals either in the current year or in the subsequent year (Asst. Year 2011-12). 5.4.The ld CIT(A) ought to have appreciated that in the final accounts of Asst. Year 2011-12, the said investment 4/8 http://www.judis.nic.in T.C.A.No.890 of 2019 in gold towards purchase of gold medals were not shown as application of income. 5.5.The ld CIT(A) ought to have appreciated the fact that purchase of gold bullion and gold coins cannot be considered as a transaction connected with the educational activity.” 6.On a perusal of the above grounds raised before the Tribunal, it is seen that the stand taken by the Revenue was that the CIT(A) ought not to have held that the investment made in gold bullion is not an investment in the modes other than specified in Section 11(5) of the Act. Without examining the correctness of the said contention, the Tribunal in paragraph 8, while faulting the CIT(A) for accepting the stand taken by the assessee on the ground that there were only bald assertions, the Tribunal came to the conclusion that the purchase of gold by the assessee was not application of funds, but an investment in gold bullion and this investment is in violation of Section 11(5) of the Act. There is nothing on record to indicate that this opinion was formed by the Tribunal and recorded in its order after the assessee had an opportunity to put forth their contention. 5/8 http://www.judis.nic.in T.C.A.No.890 of 2019 7.The assessee's case is that if such was the view of the Tribunal, then the assessee's case should have been considered as per the proviso (iia) to Section 13(1)(d) of the Act. The assessee would contend before us that the asset, not been specified investment, can be held for a period of one year from the end of previous year in which such an asset was acquired, which is the case of the assessee. Since this issue was not dealt with by the Tribunal, rather the assessee appears to have not been put on notice, the above opinion formed by the Tribunal holding that the purchase of gold by the assessee was not application of funds, but an investment in gold bullion, we find that the assessee has been put to prejudice. Therefore, they are required to be granted a fresh opportunity to put forth their contention. 8.In the light of the above, the appeal is allowed and the finding rendered by the Tribunal in paragraph 8 of the order dated 10.09.2014 is set aside and the matter is remanded to the Tribunal to consider the said issue afresh and in accordance with law. 6/8 http://www.judis.nic.in T.C.A.No.890 of 2019 9.In the result, the appeal is allowed to the extent indicated. The substantial questions of law framed for consideration are left open. No costs. (T.S.S., J.) (V.B.S., J.) 24.09.2020 Index : Yes/No Speaking/Non-Speaking Order abr To The Income Tax Appellate Tribunal 'C' Bench, Chennai. 7/8 http://www.judis.nic.in T.C.A.No.890 of 2019 T.S.Sivagnanam, J. and V.Bhavani Subbaroyan, J. (abr) T.C.A.No.890 of 2019 24.09.2020 8/8 http://www.judis.nic.in