Estate Of Maligai Merchant v. The Asst.director Of Income-Tax (Exemptions)-Ii Chennai-34

IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 14.12.2009 The Honourable Mr.Justice K.RAVIRAJA PANDIANandThe Honourable Mr.Justice M.M.SUNDRESH Estate of Maligai MerchantC/o.The Official Trustee of Tamil NaduHigh Court CampusChennai- 600 104. ...Appellant Vs.The Asst.Director of Income-tax(Exemptions)-IIChennai-34. ... Respondent Appeal filed under Section 260-A of the Income Tax Act againstthe order of the Income Tax Appellate Tribunal, Madras 'A' Bench,dated 20.7.2007 passed in I.T.A.No.1425/Mds/2006. Against the orderof the Office of the Commissioner of Income Tax (Appeals) XI, 121Mahatma Gandhi Road, Chennai-34 made in ITA NO.364/2004-05 dated2.2.2006. Against the order of the Asst.Director of Income Tax(Exemptions) II Chennai-34 made in PAN/GIR No.2603 E Assessment Year1997-98 order dated 24.02.2005. For Appellant : Mr.R.Venkata Narayanan for Mr.Subbaraya AiyarFor Respondent : Mr.Patty B.Jegannathan (Judgment of the Court was delivered by K.RAVIRAJA PANDIAN,J.) The revenue has come up on appeal against the order of theIncome Tax Appellate Tribunal, Madras 'A' Bench, dated 20.7.2007passed in I.T.A.No.1425/Mds/2006 in respect of the assessment year1997-1998 by formulating the following substantial questions of law: "(1). Whether on the facts and in the circumstances ofthe case, the Tribunal was right in law in holding that theconditions stipulated for availing the benefit ofaccumulation of income under Section 11(2) are notsatisfied? https://hcservices.ecourts.gov.in/hcservices/ (2). Whether on the facts and in the circumstances ofthe case, the Tribunal is justified in law in holding thatfor the purpose of accumulation of the income as providedunder Section 11(2) of the Income Tax Act requiresspecification of the purposes? 3. Whether on the facts and in the circumstances ofthe case, the Tribunal was right in law in holding that thereasons stated in Form 10 are vague and not specific?" 2. The facts of the case are as follows: "(1). Whether on the facts and in the circumstances ofthe case, the Tribunal was right in law in holding that theconditions stipulated for availing the benefit ofaccumulation of income under Section 11(2) are notsatisfied? https://hcservices.ecourts.gov.in/hcservices/ (2). Whether on the facts and in the circumstances ofthe case, the Tribunal is justified in law in holding thatfor the purpose of accumulation of the income as providedunder Section 11(2) of the Income Tax Act requiresspecification of the purposes? 3. Whether on the facts and in the circumstances ofthe case, the Tribunal was right in law in holding that thereasons stated in Form 10 are vague and not specific?" 2. The facts of the case are as follows: The appellant is a Charitable Trust under the control andmanagement of the Official Trustee of Tamil Nadu. The appellant trustfiled its return of income for the assessment year 1997-98 on15.7.1997 declaring "Nil" income after claiming exemption underSection 11 of the Income-tax Act. The return was processed underSection 143(1)(a) and the case was reopened by issue of notice underSection 148. Assessment under Section 143(3) read with 147 wascompleted on 24.2.2005 determining the total income at Rs.4,86,170/-.The appellant filed form 10 for accumulating income under Section 11(2) specifying the purposes of contribution to poor feedign andtemple festival expenses. The assessing officer while deciding theapplication of income in Form No.10 was of the opinion that thepurpose of accumulation mentioned therein are vague and not specificand hence declined the benefit of accumulation under Section 11(2) ofthe Act by following the decision of the jurisdictional High Court inthe case of CIT Vs. M.Ct.M.Chettiar Family Trust (245 ITR 410). Itis the contention of the appellant that it is charitable trust underthe control and management of the Administrator General and OfficialTrustee of Tamil Nadu. The estates are being managed by the A.G.&O.T. appointed by the High Court of Madras and the major decisionsin the matter relating to investment, payment, etc., of A.G. & O.T.in the matters of estates are being taken with the concurrence of theHigh Court. The appellant filed form 10 specifying the purpose foraccumulation and there is no dispute that they are not charitable innature. Aggrieved by the assessment order, the appellant filed appealto the Commissioner of Income-tax (Appeals) and reiterated thesubmissions made before the assessing officer. The Commissioner ofIncome-tax (Appeals) vide his order dated 2.2.2006 accepted thecontentions of the appellant and held that the purpose ofaccumulation delineated by the appellant does not tantamount to beinggeneral and vague and the purposes have an individuality and reversedthe order of the assessing officer. Aggrieved by the same, therevenue filed an appeal to the Income-tax Appellate Tribunal. TheTribunal relying on its order in the case of Estate of MaligaiMerchant in I.T.A.No.1524/04 dated 7.6.2005 and allowed the appealfiled by the Department. Aggrieved by the same, the present appealis filed. 3. The learned counsel appearing for the appellant as well asthe counsel for the respondent submits that the issue involved inthis appeal is covered by the decision of this Court in the case ofEstate of Kadapakam Charities Vs. The Asst.Director of Income Tax(Exemptions) II, Chennai – 34 (T.C.(A) No.281 of 2004) dated15.12.2008,wherein it was observed as follows: 3. The learned counsel appearing for the appellant as well asthe counsel for the respondent submits that the issue involved inthis appeal is covered by the decision of this Court in the case ofEstate of Kadapakam Charities Vs. The Asst.Director of Income Tax(Exemptions) II, Chennai – 34 (T.C.(A) No.281 of 2004) dated15.12.2008,wherein it was observed as follows: ".... 8.The decision of the Calcutta High Court willnot strictly apply to this case, since in that case in Form10, all the objects of the trust had been enumerated andtherefore, rejection of Form 10 was not justified. In thiscase, the purpose has been specified viz., repair andrenovation of the building, and the difficulties inimmediately starting the renovation have also been broughtto the notice of the authorities. But at the same time, wealso see that Form 10 has not been duly filled up. Even inthe matter decided by the Calcutta High Court, the assesseewas allowed to adduce fresh evidence to show the specificpurpose for which the trust requires accumulation of theincome. In this case too, especially in view of the factthat it is AG & OT who is administering the trust, we feelthat the same indulgence could be shown. We are notanswering the questions of law raised, however, we remandthe matter to the Assessing Officer and the assessee shallspecify the purpose in addition to renovation and repair ofthe building and also the amount and the period for whichaccumulation is required, and the Assessing Officer shallconsider the same in accordance with law...." 4. Having regard to the submission made by the counsel on eitherside, the order of the Tribunal is hereby set aside and the matter isremitted back to the assessing officer in terms of the directiongiven in the order dated 15.12.2008 made in T.C.(A) No.281 of 2004and the tax case is disposed of accordingly. Consequently, theconnected miscellaneous petition is closed. //true copy// Sub Asst.Registrar usk https://hcservices.ecourts.gov.in/hcservices/ Copy to: 1. The Assistant Registrar, Income Tax Appellate Tribunal, 1[st] Floor, Rajaji Bhavan, Besant Nagar, Madras-90. 2. The Commissioner of Income Tax (Appeals)-XI 121, Mahatma Gandhi Road, Chennai-34. 3.The Asst.Director of Income-tax (Exemptions)-IIChennai-34.Chennai-34. 1 cc to Mr.Patty B.Jaganathan, Advocate, Sr.No.68261 T.C.(A).No.130 of 2008 AKR {CO}TP/29.12.2009.