Ita/91/2002 Of The Commissioner Of Incometax, Tvm v. M/S.sree Seetharama Anjaneya Veda Kendra

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR TUESDAY, THE 1ST APRIL 2008 / 12TH CHAITHRA 1930 ITA.No. 91 of 2002 -------------------------- ITA.83/COCH/2000 OF I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/ RESPONDENT: ----------------------------------------- THE COMMISSIONER OF INCOME TAX, TRIVANDRUM. BY ADV. SRI.P.K.R.MENON(SR.),SR.COUNSEL FOR IT, SRI.GEORGE K. GEORGE, SC FOR IT. RESPONDENT/ APPELLANT: ----------------------------------------- M/S.SREE SEETHARAMA ANJKANEYA VEDA KENDRA,PADMAVILASOM ROAD,TRIVANDRUM. BY ADV. SRI.JOSEPH MARKOSE, SRI.JOSEPH KODIANTHARA. THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 01/04/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N. Ramachandran Nair & T.R. Ramachandran Nair, JJ. - - - - - - - - - - - - - - - - - - - - - - - - I.T.A. Nos.91 & 139 of 2002 - - - - -- - - - - - - - - - - - - - - - - - - - - Dated this the 1st day of April, 2008. JUDGMENT C.N. Ramachandran Nair, J. The appeals filed under Section 260-A of the Income Tax Act, areagainst the orders of the Income Tax Appellate Tribunal upholding therespondent/assessee's claim for exemption under Section 11(2) of the Actfor the assessment years 1995-96 and 1996-97. The assessee is a charitableinstitution formed with the object of imparting education in Vedas andUpanishads. In the course of assessment for the assessment yearsconcerned, the assessing officer noticed that the assessee was carrying over75% of the income from year to year for 10 years every year on a regularbasis and the assessee was only engaged in creation of assets. On enquiryconducted by the Inspector of Income Tax, it was found that there was noregular course study for Vedas and Upanishads and the Inspector noticedsubstantial reduction in student numbers in the course of time. Twoteachers appeared to have been found with some students from Maharashtra.Even though notice for accumulation of income was given, the assessingofficer doubted whether the respondent/assessee is capable of achieving the ITA 91 & 139/02 objects stated in the trust deed. The assessing officer also found that thepurpose for which accumulation was made as stated in the prescribed formunder Section 11(2) is vague. He also took into account the contract theassessee has, with another company for construction of buildings, thoughfor the purpose of the trust. If the projects have to be funded with theincome accumulated, then it is not known whether the assessee will haveany surplus fund to spend for the objects of the trust after meeting the hugeproject cost in the construction activity undertaken by the assessee. Theappellate authority also confirmed the order of the assessing officer.However, the Tribunal took the view that the assessee has accumulated only75% of the income every year and the amount so accumulated is invested inthe specified investments qualifying for deduction under Section 11(2) ofthe Act. 2. Learned Standing Counsel for the department rightly pointed outthat the approach of the Tribunal is technical and the assessing officer isjustified in going into the question whether the objects of the trust are reallyaccomplished which alone will entitle the assessee for claiming exemption.Primafacie, we are of the view that the carry forward of income upto 75%,though permitted under Section 11(2) of the Act, should not be adopted ona routine basis and if it is done, the very purpose of the trust will bedefeated. In fact, Section 11(2) of the Act providing for carry over upto75% is an exception and if it is followed from year to year, then the ITA 91 & 139/02 2. Learned Standing Counsel for the department rightly pointed outthat the approach of the Tribunal is technical and the assessing officer isjustified in going into the question whether the objects of the trust are reallyaccomplished which alone will entitle the assessee for claiming exemption.Primafacie, we are of the view that the carry forward of income upto 75%,though permitted under Section 11(2) of the Act, should not be adopted ona routine basis and if it is done, the very purpose of the trust will bedefeated. In fact, Section 11(2) of the Act providing for carry over upto75% is an exception and if it is followed from year to year, then the ITA 91 & 139/02 genuineness of the activities of the trust itself should be examined by theassessing officer. In any case, we feel that since the assessment pertains tothe years 1995-96 and 1996-97, the assessing officer had occasion toconsider the facts pertaining to subsequent years. Since another 12 yearshave passed from the relevant assessment years, we feel that the assessingofficer should examine the matter with reference to the activities of theassessee for subsequent years, the orders passed for those years and passfresh orders. In fact, we are of the view that a detailed investigation isrequired about the activities of the trust and the expenditure it incurred sofar to achieve the objects of the trust and diversions, if any made. Wetherefore set aside the orders of the Tribunal and all the authorities belowand remand the matter back to the assessing officer for fresh considerationwith reference to subsequent assessments and after conducting enquiry andif necessary, after conducting a local inspection in the premises of theassessee about the activity being carried on by the Trust. The appeal is disposed of in the above terms. (C.N. Ramachandran Nair, Judge.) (T.R. Ramachandran Nair, Judge.)