Ita/737/2009 Of The Commissioner Of Income Tax, Cochin v. The Members Fund Trust

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR &THE HON'BLE MR. JUSTICE BABU MATHEW P.JOSEPH TUESDAY, THE 28TH DAY OF FEBRUARY 2012/9TH PHALGUNA 1933 ITA.No. 737 of 2009 ( ) ------------------------------- ITA.186/COCH/2003 of INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH.......... APPELLANT(S)/APPELLANT ---------------------------------------- THE COMMISSIONER OF INCOME TAX, COCHIN. BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/RESPONDENT ---------------------------------------------- THE MEMBERS FUND TRUST C/O.COCHIN STOCK EXCHANGE LTD, COCHIN. BY SRI.JOSEPH KODIANTHARA (SR.) BY SRI.V.ABRAHAM MARKOS BY SRI.MATHEWS K.UTHUPPACHAN BY SRI.BINU MATHEW BY SRI.TERRY V.JAMES BY SRI.B.J.JOHN PRAKASH BY SRI.TOM THOMAS (KAKKUZHIYIL) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 28-02-2012, ALONG WITH ITA. 747/2009, ITA. 1178/2009, ITA. 1221/2009, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: tss C.N. RAMACHANDRAN NAIR & BABU MATHEW P. JOSEPH, JJ. ----------------------------------------------------------------------- I.T. Appeal Nos. 737, 747,1178 & 1221 of 2009 ----------------------------------------------------------------------Dated this the 28[th] day of February, 2012 JUDGMENT Ramachandran Nair, J. The connected appeals are filed by the revenuechallenging the orders of the Income Tax Appellate Tribunaldeclaring that the respondent Trust had no legal existence forassessment of income tax for the assessment years 1992-93 to1995-96. We have heard Senior Counsel Sri. P.K.R.Menon forthe revenue and Senior Adv. Sri. Joseph Marcose appearing forthe respondent. 2. After hearing both sides and on going through theTribunal's order, what we notice is that a Trust was created bythe Cochin Stock Exchange by a deed executed on 3.5.1991creating 'Members Fund' which is by way of contribution fromevery member at the rate of 0.05% of the turnover. The Fund I.T. Appeal Nos. 737, 747, 1178 & 1221 of 20092 was intended to be utilised for settling default account of themembers. The Fund swelled and the deposits made earnedsubstantial interest. The department tried to assess the Trusttreating the contributions and interest as its own income.However, respondent resisted the same by stating that the Trusthas no legal existence because SEBI has not granted approvaland further the funds were not in fact handed over by the CochinStock Exchange to the Trust. In the appeal, appellate authoritycancelled the assessment stating that the respondent has novalid existence and has no income to be assessed. In the secondappeal by the revenue, the Tribunal verified the factual positionand noticed that the Trust was not actually created. The findingof the Tribunal is that funds were not transferred to the Trustand the entire funds were retained by the Cochin Stock Exchangeand the funds were invested by the Stock Exchange on which itreceived interest. The Tribunal clearly found by referring to theassessments of the Stock Exchange for the very same years thatthe entire contributions and interest generated wereconsidered for assessment of the Stock Exchange as their income.In fact, the finding of the Assessing Officer is that Stock Exchangeutilised 75% of the funds for charitable purposes and therefore I.T. Appeal Nos. 737, 747, 1178 & 1221 of 20093 I.T. Appeal Nos. 737, 747, 1178 & 1221 of 20093 its income is fully exempt under Section 11(1)(a) of the I.T. Act.We do not know how the department can blow hot and cold byassessing income in the hands of the Stock Exchange as theirincome and then assessing the Trust treating the same incomeas that of the Trust to which funds were really not transferred.The Trust-funds were stated to be fully utilised for settlement ofdefault by members. In view of these findings of the Tribunal, wedo not find any justification to to interfere with Tribunal's orders.Consequently, we dismiss all the Appeals. Sd/- C.N. RAMACHANDRAN NAIR, JUDGE Sd/-BABU MATHEW P. JOSEPH, JUDGE.