Itr/4/2005 Of The Commissioner Of Income Tax, Cochin v. St.thomas Cathedral Church,Irinjalakuda

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM & THE HONOURABLE MR. JUSTICE AMIT RAWAL WEDNESDAY, THE 13TH DAY OF NOVEMBER 2019 / 22ND KARTHIKA, 1941 ITR.No.2 OF 2005 ARIISING FROM ORDER ITA 730/Coch/1994 OF I.T.A.TRIBUNAL,COCHIN BENCH APPLICANT: THE COMMISSIONER OF INCOME TAX, COCHIN BY ADVS.SRI.P.K.RAVINDRANATHA MENON,SR.COUNSEL, GOI(TAXES)SRI.GEORGE K. GEORGE, SC, FOR IT RESPONDENT: ST.THOMAS CATHEDRAL CHURCH,IRINJALAKUDA R1 BY ADV. SRI.ANIL D. NAIR R1 BY ADV. SRI.P.JINISH PAUL R1 BY ADV. KUM.MEKHALA M.BENNY R1 BY ADV. SRI.R.SREEJITH THIS INCOME TAX REFERENCE HAVING BEEN FINALLY HEARD ON13.11.2019, ALONG WITH ITR.3/2005, ITR.4/2005, ITR.1/2012, THECOURT ON THE SAME DAY PASSED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM & THE HONOURABLE MR. JUSTICE AMIT RAWAL WEDNESDAY, THE 13TH DAY OF NOVEMBER 2019 / 22ND KARTHIKA, 1941 ITR.No.3 OF 2005 ARIISING FROM ORDER ITA 731/Coch/1994 OF I.T.A.TRIBUNAL,COCHIN BENCH APPLICANT: THE COMMISSIONER OF INCOME TAX, COCHIN BY ADVS.SRI.P.K.RAVINDRANATHA MENON,SR.COUNSEL, GOI(TAXES)SRI.GEORGE K. GEORGE, SC, FOR IT RESPONDENT: ST.THOMAS CATHEDRAL CHURCH, IRINJALAKUDA R1 BY ADV. SRI.ANIL D. NAIR R1 BY ADV. SRI.P.JINISH PAULR1 BY ADV. KUM.MEKHALA M.BENNY R1 BY ADV. SRI.R.SREEJITH THIS INCOME TAX REFERENCE HAVING BEEN FINALLY HEARD ON13.11.2019, ALONG WITH ITR.2/2005, ITR.4/2005, ITR.1/2012, THECOURT ON THE SAME DAY PASSED THE FOLLOWING: IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM & THE HONOURABLE MR. JUSTICE AMIT RAWAL WEDNESDAY, THE 13TH DAY OF NOVEMBER 2019 / 22ND KARTHIKA, 1941 ITR.No.4 OF 2005 ARIISING FROM ORDER ITA 262/Coch/1994 OF I.T.A.TRIBUNAL,COCHIN BENCH APPLICANT: THE COMMISSIONER OF INCOME TAX, COCHIN BY ADVS.SRI.P.K.RAVINDRANATHA MENON,SR.COUNSEL, GOI(TAXES)SRI.GEORGE K. GEORGE, SC, FOR IT RESPONDENT: ST.THOMAS CATHEDRAL CHURCH, IRINJALAKUDA R1 BY ADV. SRI.ANIL D. NAIR R1 BY ADV. SRI.P.JINISH PAULR1 BY ADV. KUM.MEKHALA M.BENNY R1 BY ADV. SRI.R.SREEJITH THIS INCOME TAX REFERENCE HAVING BEEN FINALLY HEARD ON13.11.2019, ALONG WITH ITR.2/2005, ITR.3/2005, ITR.1/2012, THECOURT ON THE SAME DAY PASSED THE FOLLOWING: ITR Nos.2, 3, 4/2005 & 1/2012 IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM & THE HONOURABLE MR. JUSTICE AMIT RAWAL WEDNESDAY, THE 13TH DAY OF NOVEMBER 2019 / 22ND KARTHIKA, 1941 ITR.No.1 OF 2012 ARIISING FROM ORDER ITA 261/Coch/1994 OF I.T.A.TRIBUNAL,COCHIN BENCH APPLICANT: THE COMMISSIONER OF INCOME TAX, COCHIN BY ADVS.SRI.P.K.RAVINDRANATHA MENON, SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT: ST.THOMAS CATHEDRAL CHURCH, TRICHUR R1 BY ADV. SRI.ANIL D. NAIRR1 BY ADV. KUM.MEKHALA M.BENNYR1 BY ADV. SRI.R.SREEJITHR1 BY ADV. KUM.SOUMYA PRAKASH OTHER PRESENT: SC- SRI. P.K.RAVINDRANATHA MENON THIS INCOME TAX REFERENCE HAVING BEEN FINALLY HEARD ON13.11.2019, ALONG WITH ITR.2/2005, ITR.3/2005, ITR.4/2005, THECOURT ON THE SAME DAY PASSED THE FOLLOWING: ITR Nos.2, 3, 4/2005 & 1/2012 C.K. ABDUL REHIM, J. &AMIT RAWAL, J. ------------------------------------------------- I.T.R Nos. 2, 3, 4 OF 2005&I.T.R No. 1 OF 2012 ------------------------------------------------- DATED THIS THE 13[th] DAY OF NOVEMBER, 2019 Abdul Rehim, J.: O R D E R BY ADVS.SRI.P.K.RAVINDRANATHA MENON, SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT: ST.THOMAS CATHEDRAL CHURCH, TRICHUR R1 BY ADV. SRI.ANIL D. NAIRR1 BY ADV. KUM.MEKHALA M.BENNYR1 BY ADV. SRI.R.SREEJITHR1 BY ADV. KUM.SOUMYA PRAKASH OTHER PRESENT: SC- SRI. P.K.RAVINDRANATHA MENON THIS INCOME TAX REFERENCE HAVING BEEN FINALLY HEARD ON13.11.2019, ALONG WITH ITR.2/2005, ITR.3/2005, ITR.4/2005, THECOURT ON THE SAME DAY PASSED THE FOLLOWING: ITR Nos.2, 3, 4/2005 & 1/2012 C.K. ABDUL REHIM, J. &AMIT RAWAL, J. ------------------------------------------------- I.T.R Nos. 2, 3, 4 OF 2005&I.T.R No. 1 OF 2012 ------------------------------------------------- DATED THIS THE 13[th] DAY OF NOVEMBER, 2019 Abdul Rehim, J.: O R D E R These Income Tax Reference cases were registered on thebasis of references made by the Income Tax Appellate Tribunal,Cochin Bench in RA Nos. 332, 333, 334 & 335 (Coch)/1998,arising out of the decision in I.T. Appeal Nos.730, 731, 261 &262 (Coch)/1994. The assessee is common in all these cases andthe assessments are with respect to the years 1986-1987, 1988-1989, 1990-1991 and 1991-1992. The questions of law uponwhich the references were made are common, which is extractedbelow; “1.Whether, on the facts and in the circumstances of thecase and in view of sub-section (4A) of Section 11, theassessee is entitled to exemption u/s.11 of the Income-taxAct? 2.Whether, on the facts and in the circumstancesof the case, the assessee is right in law and fact in holdingthat the assessee is a religious and charitable institutionand carried on kuri business for utilizing the incometherefrom also for the charitable purpose such as medical relief, education etc.? 3.Whether, on the facts and in the circumstancesof the case, the Tribunal is right in holding that theinterest claimed cannot be taxed in the hands of theassessee trust as it is exempt from taxation?” 2.The issue to be decided is, whether the income derived out of Kuri business conducted by the Charitable Trust is eligiblefor exemption or not, in view of sub-section (4A) introduced toSection 11 of the Income Tax Act with effect from 01-04-1984. ADivision Bench of this court in Commissioner of Income TaxV. Dharmodayam Co. (1997) 225 ITR 686 held that, if theKuri business is held in trust, the income therefrom would not begoverned by sub-section (4A) as has been held by the hon'bleSupreme Court in CIT V. Dharmodayam Co. (1977) 109ITR 527 (SC). In the said decision this court held that theTribunal has correctly held that, the assessee is entitled to claimexemption under Section 11 (1) of the Income Tax Act withrespect to its income from Kuri business. It is pointed out thatdecision of this court in (1997) 225 ITR 686 was set aside bythe hon'ble Supreme Court in the decision in Commissioner ofIncome Tax V. Dharmodayam Co. and another (2001) 248ITR 816. It was held that until the introduction of Section 11(4A) with effect from 1[st] April, 1984, the case of the assesse therein was governed by the decision of the Supreme Courtreported in (1977) 109 ITR 527 (SC). But sub-section 11 (4A)has introduced certain conditions in the matter of application ofsub-sections (1), (2) (3) & (3A) of Section 11. The apex courtobserved that, the Tribunal had not applied its mind to thoseconditions; nor the High Court had given due considerations tothose aspects. Therefore inorder to decide whether the assesseeis entitled to the benefit of the exemption under Section 11, it isnecessary for the Tribunal to determine whether it satisfy therequirement of Section 11 (4A). 3.Learned counsel appearing for the respondent hadpointed out that, pursuant to the remand made by the hon'bleSupreme Court in the matter of Dharmodayam Co., the IncomeTax Appellate Tribunal, Cochin Bench had reconsidered thematter and allowed the exemptions. Therefore it is submittedthat the reference need to be answered in favour of the assessee. 3.Learned counsel appearing for the respondent hadpointed out that, pursuant to the remand made by the hon'bleSupreme Court in the matter of Dharmodayam Co., the IncomeTax Appellate Tribunal, Cochin Bench had reconsidered thematter and allowed the exemptions. Therefore it is submittedthat the reference need to be answered in favour of the assessee. 4.Per contra, Sri. P.K. Ravindranatha Menon, SeniorStanding Counsel for Income Tax contended that, the orderpassed by the Tribunal in the matter of Dharmodayam Co.,cannot as such be taken as a precedent applicable in the case ofthe present assessee, because it requires evaluation of facts andcircumstances, inorder to hold whether the present assessee would also satisfy the conditions stipulated under Section 11(4A). 5.Sri. Anil D. Nair, learned counsel for the respondenthad raised a preliminary objection that the amount involved inthe reference cases are far below the limit contained in thelitigation policy declared by the Govt. of India, through circularsissued by the CBDT. Therefore the reference cases itself need tobe dismissed on such basis, is the contention. On the contrarySenior Standing counsel appearing for the revenue contendedthat, in cases where there is cascading effect it is for thedepartment to urge before the court that a decision on theprinciple would be expedient. A decision of this court inCommissioner of Income Tax V. Smt. Vasantha Anirudhan(2018) 401 ITR 279 (Ker.) was relied upon in this regard. 6.We are of the considered opinion that in view of theremand made by the hon'ble Supreme Court in DharmodayamCo. case, the matter requires reconsideration by the Tribunal. Ofcourse, we take note of the fact that in the case ofDharmodayam Co. the Tribunal had ultimately found the issuein favour of the assessee therein. But question as to whether asimilar situation prevails in the instant case which would satisfythe different conditions stipulated under sub-section (4A), is a ITR Nos.2, 3, 4/2005 & 1/2012 matter which requires examination. Since some of the referencecases are of the year 2005, we do not think it appropriate todismiss them on the basis of the litigation policy of theGovernment. Instead we leave it open to the respondent to takeup such contention before the Tribunal, at the time when thematter is considered afresh. 7.Under the above mentioned circumstances, instead ofspecifically answering question of law referred, we think it onlyappropriate to remit the income tax appeals for freshconsideration and disposal by the Appellate Tribunal on the basisof the decision rendered by the hon'ble Supreme Court inCommissioner of Income Tax V. Dharmodayam Co. andanother (2001) 248 ITR 816. While considering the matter, itis needless to observe that, the Tribunal shall take note of itsconsequential decision in the case of Dharmodayam Co. inI.T.A. Nos.681(Coch)/87 and connected cases, dated 11-02-2002.The Income Tax Reference cases are disposed of as above. Sd/-C.K.ABDUL REHIMJUDGE Sd/-AMIT RAWALJUDGE