DCIT (E) 2(1), MUMBAI vs. PIROJSHA GODREJ FOUNDATION, MUMBAI

By the impugned order CIT(A) directed the AO to allow assessee’s claim of exemption u/s.10 (34) in respect of dividend income received during the year after due verification. Observation and findings of CIT(A) was as under:- I have considered the facts and circumstances of the case, gone through the assessment order of the A.O and the submissions of the assessee and also discussed the case with the AR of the assessee. The contentions and submissions of the assessee were being discussed and decided here in under: i. The AO has not allowed exemption u/s. 10(34) holding that same is not available while computing income u/s, 11. The appellant has relied in this regard on the judgement of Hon. ITAT Mumbai and Hon. Bombay High Court as above. During the course of appellate proceedings it was submitted that dividend income can be claimed exempt u/s. 10 irrespective of the fact as to whether deduction u/s. 11 has been allowed or not. In this regard appellant has relied upon the judgement of Hon. ITAT, Mumbai dt. 26.03.2014 in the case of Jamsetji Tata Trust vs. JOlT (E) Range-II 148 ITO 388. On perusal of this judgement it is noted that the Hon. ITAT while dealing with the same issue have observed as under :- "In our view the exemption u/s 11 is available on the income of the public charitable / religious trust or institution which is otherwise taxable in the hands of other persons. Thus the income which is exempt u/s 10 cannot be brought to tax by virtue of sections 11 and 13 of the Act because no such pre condition is provided either u/s 10 or 11 to 13 of Income-tax Act. Therefore, section 11 to 13 would not operate as overriding affect to the section 10 of the Act. The language of these provisions does not suggest that either section 10 is subjected to the provisions of sections 11 to 13 or sections 11 to 13 has any overriding affect over section 10. Therefore, the benefit of section 10 cannot be denied by invoking the provisions of sections 11 to 13 of the Act. Once the conditions of section 10 are satisfied then no other condition can be fastened for denying the claim under section 10 of the Act." 9.8 In view of the above discussion and following the various decisions (supra) we hold that the dividend income on shares and mutual funds and long term capital gain on sale of shares an exempt u/s 10(34) 10(35) and 10(38) respectively and cannot be brought to tax by applying sections 11 and 13 of the Act."

Pirojshah Godrej Foundation ii. Further in support of its contention the appellant has also relied upon the Judgement of Hon. Bombay High Court dated 01.04.2015 in the case of DIT(E) vs. Jasubhai Foundation 374 ITR 215. On perusal of this judgement it is .noted that the Hon'ble jurisdictional High Court while deciding same issue has observed as under:- "8. Upon a perusal of the order of the Assessing Officer and that of the Commissioner upholding it, we are of the view that the Tribunal was correct in setting aside these concurrent orders. The language of the two sections is plain and clear. The provisions, namely, sections 10 and 11 fall under a Chapter which is titled "Incomes Which Do Not Form Part of Total Expenditure" (Chapter III). Section 10 deals with incomes not included in total income whereas section 11 deals with income from property held for charitable or religious purposes. We have not found anything in the language of the two provisions nor was Mr. Malhotra able to point out as to how when certain income is not to be included in computing total income of a previous year of any person, then, that which is excluded from section 10 could be included in the total income of the previous year of the person/assessee. That may be a person who receives or derives income from property held under trust wholly for charitable or religious purposes. Thus, the income which is not to be included in computation of the total income is a matter dealt with by section 10 and by section 11 the case of an assessee who has received income derived from property held under trust only for charitable or religious purposes to the extent to which such income is applied to such property in India and that any such income is accumulated or set apart for application for such purposes in India to the extent of which the income so accumulated or set apart in computing 15% of the income of such property, is dealt with. Therefore, it is a particular assessee and who is in receipt of such income as is falling under clause (a) of sub-section (1) of section 11 who would be claiming the exemption or benefit. That is a income derived by a person from property. It is that which is dealt with and if the property is held in trust for the specified purpose, the income derived there from is exempt and to the extent indicated in section 11(1)(a) of the Income Tax Act, 1961. There is nothing in the language of sections 10 or 11 which says that what is provided by section 10 or dealt with is not to be taken into consideration or omitted from the purview of section 11. If we accept the argument of Mr. Malhotra and the Revenue, the same would amount to reading into the provisions something which is expressly not there. In such circumstances, the Tribunal was right in its conclusion that the income which in this case the assessee trust has not included by virtue of section la, then, that cannot be considered under section 11.

In the circumstances and when the income from property held for charitable or religious purpose is not a matter covered or dealt with by Section 10 that the Tribunal's view cannot be termed as perverse or clear language of these provisions enables us to uphold the order of the Pirojshah Godrej Foundation Tribunal. It is, accordingly, upheld. The Revenue's appeal does not raise any substantial question of law. " iii. In view of above, Assessing Officer is directed to follow the findings of Hon'ble courts as above and allow the appellant's claim of exemption under section 10 on dividend income -received during the year after due verification.