COMMISSIONER OF INCOME TAX JAIPUR vs. M/S OM KOTHARI FOUNDATION

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 354 / 2017 Commissioner of Income Tax (Exemptions), Kailash Heights, 3rd Floor, Lal Kothi, Tonk Road, Jaipur-302015 ----Appellant Versus M/S Om Kothari Foundation, Om Tower, M.I. Road, Jaipur ----Respondent _____________________________________________________ For Appellant(s) : Mr. Daksh Pareek for Mr. Sameer Jain _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Order 13/12/2017 1. By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has remitted back the matter for reconsideration. 2. Learned counsel for appellant has framed following substantial question of law:- “i. Whether, on the facts and in circumstances of the case and in law, the Hon’ble ITAT is right in restoring back the matter to the file of CIT(E) for giving further time and opportunity to the assessee to convert the shares into specified assets within a specified period, particularly when the same is not in accordance with the sixth proviso read with third proviso to section 10(23C) of the I.T. Act which stipulates that a trust cannot hold funds in non-specified modes and is required to convert the same into one or more of the forms or modes specified in sub- section 5 of the Section 11 of the Act within a period of one year form the end of the previous year in which such asset is acquired?”

(2 of 3) [ITA-354/2017] 3. The tribunal has observed which reads as under: 5.2 The contention of the assessee is that the objection of the Ld. CIT(E) was that the assessee had not filed any evidence with regard to receipt of shares and donation in the year 2006-07. This observation of the Ld. CIT(E) is not correct. The assessee had filed the details, he submitted that even if it is presumed that investment in the modes which are not as per Sec. 11(5) of the Act, then the entire exemption of the Trust shall not go, and only the income from said investment should be made liable for charging tax at the maximum marginal rate. The Ld. Counsel placed reliance on the decision of the Tribunal in the case of M/s Santoba Durlabhji vs. ITO in ITA No. 241 & 242/JP/2014, also placed reliance on the Judgment of the Hon'ble Delhi High Court in the case of Director of Income Tax Vs. Shri Radha Krishan Charitable Trust. The Hon'ble High Court affirmed the view of the Tribunal, that the assessee was allowed to hold the investment contrary to provisions of Section 11(5) of the Act under an obligation to disinvest on or before 31/03/1993, without losing the benefit of Section 11 & 12of the Act. This is not the fact of the present case. The Contention of the assessee is that the assessee had not made investment, in fact, the shares were received under the donation and such shares were received for charitable purpose. There is no dispute with regard to the fact that if the assessee has not made investment as per the provisions of Section 13 of the Act, the authorities can withdraw exemption u/s 11 & 12 of the Act. In the present case the assessee has not disputed the fact that the shares of M/s Om Metal Infra Project Ltd. would not fall in the category of shares in a public sector company. 5.3 Ld. Counsel for the assessee placed reliance on the judgment of the Hon'ble Karnataka High Court in the case of Commissioner of Income Tax Vs. Muller's Charitable Institutions this case is related to denial of exemption, but not on the issue of rescinding exemption granted u/s 10(23C)(vi). The decision of the Tribunal in the case of M/s Santokba Durlabhji in ITA No. 241 & 242/JP/2014 is also related with the taxability of income arising from the investment, which are not specified under the provisions of Section 13(1)(d). The issue in the present case, is whether the Ld. CIT(A) is justified in rescinding the notification granted u/s 10(23C)(vi) of the Act, under the facts of the present case. The Ld. Counsel for the

(3 of 3) [ITA-354/2017] assessee has placed on record the order of CIT(A) pertaining to the AY 2008-09 dated 12-8-2016 in assessee's own case. In that year the issue of rescinding the notification u/s 10(23C)(VI) was not under consideration. The only issue which requires to be considered whether the Ld. CIT(E) was justified in withdrawing the notification and benefit u/s 10(23C) (vi) of the Act, on the basis that the assessee has not made investment in the specified assets. There is no dispute with regard to the fact that the assesee kept this investment as it is without converting into the same in the mode specified under the Act despite elapse of several years, the proviso of Section 10(23C)(vi) empowers the prescribed authority under the Act to withdraw the approval granted u/s 10(23C) (vi). It is borne out of records that the Revenue chose not to rescind the approval in earlier years. The Ld. Counsel for the assessee urged that withdrawal of exemption is very harsh step as the assessee has been enjoying the benefit of exemption, for several years. After considering the totality of the fact, we deem it proper to restore this issue to the file of the CIT(E) to reconsider the submissions of the assessee, and give last opportunity to convert the shares into specified assets within a specified period, and meantime withdraw exemption u/s 11 & 12 in respect of income earned from the investment made in non-specified assets. This ground of assessee's appeal is allowed for statistical purpose.” 4. We see not reason to interfere. 5. The appeal, being devoid of merit, deserves to be dismissed and the same is dismissed.

(VIJAY KUMAR VYAS), J. (K.S. JHAVERI), J. Chouhan/13