Estate Of Shri Audikesavalu Naidu v. The Assistant Director Of Income-Tax (Exemptions)-Ii Chennai-34

In the High Court of Judicature at MadrasDated : 14.12.2009 Coram :- The Honourable Mr.Justice K.RAVIRAJA PANDIANandThe Honourable Mr.Justice M.M.SUNDRESH Estate of Shri Audikesavalu NaiduC/o.The Official Trustee of Tamil NaduHigh Court CampusChennai-600 104. ...Appellant/RespondentVs.The Assistant Director of Income-tax(Exemptions)-IIChennai-34. ... Respondent/Appellant Appeal filed under Section 260-A of the Income Tax Act 1961against the order of the Income Tax Appellate Tribunal, Madras 'A'Bench, dated 14.9.2007 passed in I.T.A.No.1306/Mds/2007 against theorder of the Income Tax Officer (OSD), Exempations II, Chennai 34 inITA.No.14/06-07 dated 2.1.2007 against the order of the AssistantDirector of Income Tax (E) II, Chennai 34 in PAN/GIR.No.2638-E dated27.3.2006. For Appellant : Mr.R.Venkata Narayanan for Mr.Subbaraya Aiyar PadmanabhanFor Respondent : Mr.Patty B.JegannathanJUDGMENT (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 14.9.2007passed in I.T.A.No.1306/Mds/2007 in respect of the assessment year1998-1999 by formulating the following substantial questions of law:"(1). Whether on the facts and in the circumstancesof the case the Tribunal was right in holding that theconditions stipulated for availing the benefit ofaccumulation of income under Section 11(2) of the IncomeTax Act are not satisfied?(2). Whether on the facts and in the circumstancesof the case, the Tribunal is justified in law in holdingthat for the purpose of accumulation of the income as https://hcservices.ecourts.gov.in/hcservices/ provided under Section 11(2) of the Income Tax Act,requires specification of the purposes? 3. Whether on the facts and in the circumstances ofthe case, the Tribunal was right in law in holding thatthe reasons stated in Form 10 are vague and notspecific?" https://hcservices.ecourts.gov.in/hcservices/ provided under Section 11(2) of the Income Tax Act,requires specification of the purposes? 3. Whether on the facts and in the circumstances ofthe case, the Tribunal was right in law in holding thatthe reasons stated in Form 10 are vague and notspecific?" 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 appellanttrust filed its return of income fort he assessment year 1998-99 on30.10.1998 declaring "Nil" income after claiming exemption underSection 11 of the Income-tax Act. The return was processed underSection 143(1). Notice under Section 148 was issued on 24.3.2005 andassessment under Section 143(3) read with 147 was completed on27.3.2006 determining the total income at Rs.2,97,520/. Theappellant filed form 10 for accumulating income under Section 11(2)specifying the purpose to promote educational activities andcreation of asset for the trust. The assessing officer whiledeciding the application of income in Form No.10 was of the opinionthat the purpose of accumulation mentioned therein are vague and notspecific and hence declined the benefit of accumulation underSection 11(2) of the Act by following the decision of thejurisdictional High Court in the case of CIT Vs. M.Ct.M.ChettiarFamily Trust (245 ITR 410). It is the contention of the appellantthat it is charitable trust under the control and management of theAdministrator General and Official Trustee of Tamil Nadu. Theestates are being managed by the A.G.& O.T. appointed by the HighCourt of Madras and the major decisions in the matter relating toinvestment, payment, etc., of A.G. & O.T. In the matters of estatesare being taken with the concurrence of the High Court. Theappellant filed form 10 specifying the purpose for accumulation andthere is no dispute that they are not charitable in nature.Aggrieved by the assessment order, the appellant filed appeal to theCommissioner of Income-tax (Appeals) and reiterated the submissionsmade before the assessing officer. The Commissioner of Income-tax(Appeals) vide his order dated 2.2.2006 accepted the contentions ofthe appellant and held that the purpose of accumulation delineatedby the appellant does not tantamount to being general and vague andthe purposes have an individuality and reversed the order of theassessing officer. Aggrieved by the same, the revenue filed anappeal to the Income-tax Appellate Tribunal. The Tribunal relying ontis order in the case of Estate of Maligai Merchant inI.T.A.No.1524/04 dated 7.6.2005 and allowed the appeal filed by theDepartment. Aggrieved by the same, the present appeal is 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 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 inForm 10, all the objects of the trust had been enumeratedand therefore, rejection of Form 10 was not justified. Inthis case, 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, theassessee was allowed to adduce fresh evidence to show thespecific purpose for which the trust requires accumulationof the income. In this case too, especially in view of thefact that it is AG & OT who is administering the trust, wefeel that 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 repairof the building and also the amount and the period forwhich accumulation is required, and the Assessing Officershall consider the same in accordance with law...." 4. Having regard to the submission made by the counsel oneither side, the order of the Tribunal is hereby set aside and thematter is remitted back to the assessing officer in terms of thedirection given in the order dated 15.12.2008 made in T.C.(A) No.281of 2004 and the tax case is disposed of accordingly. usk Sd/-Asst. Registrar //True Copy// Copy to: Sub Asst. Registrar 1.The Assistant Registrar, Income-tax Appellate Tribunal, A Bench, Chennai Income-tax Appellate Tribunal, A Bench, Chennai 2.The Commissioner of Income Tax (Appeals)-XIChennaiChennai 3.The Asst.Director of Income-tax (Exemptions)-IIChennai.Chennai. 4.The Income Tax Officer (OSD) Excemptions II, Chennai 34 Excemptions II, Chennai 34 + 1 cc to Mr.Patty B. Jegannathan, SR.68250 SSN(CO)SR/19.12.2009 T.C.(A).No.807 of 2008