Commissioner Of Income Taxchennai v. M/S. Ideal Entertainment P Ltd

In the High Court of Judicature at Madras Dated : 03.08.2010Coram :- THE HON'BLE MR.JUSTICE F.M.IBRAHIM KALIFULLAandTHE HON'BLE MR.JUSTICE M.M.SUNDRESH Tax Case (Appeal) No.755 of 2010 Commissioner of Income TaxChennai. .. Appellant vs. M/s. Ideal Entertainment P Ltd.15/7, Shenoy Nagar,Nungambakkam, Chennai. .. Respondent Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961, against the order of theIncome Tax Appellate Tribunal, Madras 'A' Bench, dated 29.1.2010 passed inI.T.A.No.1897/mds/2008. For Appellant : Mr.J.NarayanaswamyStanding Counsel for Income-tax Judgment(Judgment of the Court was delivered byM.M.SUNDRESH,J.) The appeal has been filed by the revenue challenging the order passed by the Tribunal inITA.No.1897/Mds/2008 whereby the order passed by the Commissioner of Income Tax (Appeals)-VIwas confirmed. The revenue while filing this appeal has raised the following substantial question oflaw: " Whether on the facts and circumstances of the case, the Tribunal was right in holding thatAssessee Company is entitled for deduction towards interest income from Kailas Projects, anAssociation of Persons as per the provisions of Section 86." 2. The facts in brief are as follows: The Assessee was a member of an association of persons titled Kailas Project. The assessee receivedinterest from the said association of persons and claimed the said amount towards exemption underSection 86 of the Income Tax Act. However, the Assessing Officer has disallowed the claim of theassessee on the ground that the provisions of Section 86 of the Income Tax Act can be madeapplicable only to the assessee who is not a company or co-operative society. Therefore, inasmuch asthe assessee is a company, the Assessing Officer has held that the provisions of Section 86 of theIncome Tax Act are not applicable to it. However on appeal, the Commissioner of IncomeTax(Appeals) has allowed the claim and deleted the additions made by the Assessing Officer. Notsatisfied with the same, the revenue took the matter on further appeal before the Tribunal and theTribunal on a consideration of Section 86 and comparing the same with Section 40(ba) of the Income Tax Act has concurred with the decision of the Commissioner of Income Tax (Appeals) by holdingthat a reading of Section 86 would clearly show that there is no bar for the assessee to claim thebenefits provided thereunder. Challenging the same, the revenue has come up on appeal by raisingthe substantial question of law referred above. 3. In order to appreciate the contentions of the learned counsel appearing for the appellant, it isuseful to extract the provisions of Section 86 of the Income Tax Act which is as follows: "Where the assessee is a member of an association of persons or body of individuals (other than acompany or a co-operative society or a society registered under the Sections Registration Act, 1860(21 of 1860), or under any law corresponding to that Act in force in any part of India), income-taxshall not be payable by the assessee in respect of his share in the income of the association or bodycomputed in the manner provided in section 67A:Provided that,- (a) where the association or body is chargeable to tax on its total income at the maximum marginalrate or any higher rate under any of the provisions of this Act, the share of a member computed asaforesaid shall not be included in his total income; (b) in any other case, the share of a member computed as aforesaid shall form part of his total income: Provided further that where no income-tax is chargeable on the total income of the association orbody, the share of a member computed as aforesaid shall be chargeable to tax as part of his totalincome and nothing contained in this section shall apply to the case". (a) where the association or body is chargeable to tax on its total income at the maximum marginalrate or any higher rate under any of the provisions of this Act, the share of a member computed asaforesaid shall not be included in his total income; (b) in any other case, the share of a member computed as aforesaid shall form part of his total income: Provided further that where no income-tax is chargeable on the total income of the association orbody, the share of a member computed as aforesaid shall be chargeable to tax as part of his totalincome and nothing contained in this section shall apply to the case". 4. A perusal of the above said provision would clearly show that in the case where the assessee is amember of association of persons, income tax was not to be payable by the assessee in respect of hisshare in the income of the association or body in the manner provided under Section 67A of the Act.The exclusion provided under the section that other than the company or the co-operative society ora society registered under the Societies Registration Act, 1860 would be made applicable only to theassociation of persons or a body of individuals and not to the member. In other words, if theassociation of persons or a body of individuals happened to be a company or a co-operative societyor a society registered under the Societies Registration Act, then in such an eventuality the member,who is also an assessee is not entitled to get the benefits provided under Section 86 of the Act. 5. Further, a reading of Section 40(ba) of the Act would also make it clear that the share of theassessee under the income of association of persons shall not be taxable. Hence, a combined readingof the above said provisions would make it clear that there is no bar for a private company like theassessee from getting the benefits of Section 86 of the Act. 6. It is a well settled principle of law that in order to interpret a taxing statute, a literalinterpretation will have to be given while interpreting the same. Unless the interpretation wouldlead to manifest in justice or absurdity such an interpretation cannot be given other than the literalinterpretation. Therefore, considering the well settled principles of interpretation, we are of theopinion that the decision made by the Tribunal while confirming the order of Commissioner ofIncome Tax (Appeals) does not warrant anyF.M.IBRAHIM KALIFULLA,J,and M.M.SUNDRESH,J. kua interference. Accordingly, we do not find any merit in the appeal. Hence, the appeal is dismissed andthe substantial question of law raised is answered in favour of the assessee and against the revenue.No costs. Index : yes/no (F.M.I.K.J) (M.M.S.J.)Internet: yes/no 03.08.2010.kua To 1. The Commissioner of Income TaxChennai. 2. Income Tax Appellate TribunalMadras 'A' BenchMadras.TC (A) No.755 of 2010