Itta/21/2014 Of M/S. Kamma Sangham v. The Director Of Income Tax (Exemptions)

HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTAANDHON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A.No.21 of 2014 Date: 05.02.2014 Between: M/s Kamma Sangham, Hyderabad .....Appellant AND The Director of Income Tax (Exemptions)Hyderabad. ...Respondent HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTAANDHON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A.No.21 of 2014 JUDGMENT:(per Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta ) This appeal is sought to be preferred and admitted againstthe judgment and order of the learned Tribunal dated 5[th] October,2012 in relation to the assessment year 2004-05 on the followingsuggested questions of law: (1) On the facts and in the circumstances ofthe case, whether the Tribunal was correct in law inperversely holding that the investment made inimmovable property was a commercial activitydespite the provisions of Section 11 (5) of the IncomeTax Act, 1961 treating such investment as applicationfor charitable purposes? (2) Whether the learned ITAT was correct inlaw in denying exemption to the appellant thatbeneficiaries of scholarships belonged to a particularcaste despite the fact that the appellant trust has notbeen created or established for the benefit of aparticular caste nor the scholarships were awarded tobeneficiaries belonging to a single community? The short fact is that the assessee is prayed for exemptionunder Section 11 of the Income Tax Act, 1961 (hereinafter referredto as ‘the Act’). The learned Tribunal has allowed the appeal filedby the Revenue holding that the assessee trust is not entitled toexemption on appreciation of fact. Dr.C.P.Ramaswami, learned Counsel for the appellantsubmits that this appreciation of fact is absurdly perverseinasmuch as the actual finding is not supported by any materialrather the material supports the case of the assessee that it hascarrying on charitable activity in the relevant assessment year. Dr.C.P.Ramaswami has drawn our attention to the receipts andpayments account for year ending 2003-04, particularly the item ofthe payments and says that the expenditure incurred on account ofthe charitable activities, namely, by payment of scholarships andalso construction of community hall, amply borne out the fact thatthe charitable activity was done by the assessee during theaforesaid assessment year. The learned Tribunal has totallyoverlooked the aforesaid fact. In view of the aforesaid submission, we just quote the fact-findings of the learned Tribunal on this issue. In paragraph-8 ofthe judgment, the learned Tribunal held as under: “From the facts found on record during therelevant financial year, the assessee has investedmajor portion of its income in construction of thecommercial complex and community hall. Exceptinga small amount paid towards scholarship nothing waspaid towards charitable purpose as per the objects. Even the scholarships were given to studentsbelonging to a particular community.” According to Dr.C.P.Ramaswami, the use of words ‘smallamount’ is not supported by any document. Though, it is not ourtask to do, we have seen the receipts and payments account,which is referred to by Dr.C.P.Ramaswami, it has to be donebecause the point of perversity has been taken. It appears, in thatyear, the assessee trust has received a total sum ofRs.1,34,03,415-99. As against the receipt of the aforesaid amounta sum of Rs.7,04,200-00 has been spent on account ofscholarships. Therefore, going by the proportion of the receiptsand payments, we think that the learned Tribunal has correctly andmodestly recorded as ‘small amount’. Therefore, we record thatonly very insignificant portion of the amount of receipt has beenspent for charitable activities. The learned Tribunal again found on According to Dr.C.P.Ramaswami, the use of words ‘smallamount’ is not supported by any document. Though, it is not ourtask to do, we have seen the receipts and payments account,which is referred to by Dr.C.P.Ramaswami, it has to be donebecause the point of perversity has been taken. It appears, in thatyear, the assessee trust has received a total sum ofRs.1,34,03,415-99. As against the receipt of the aforesaid amounta sum of Rs.7,04,200-00 has been spent on account ofscholarships. Therefore, going by the proportion of the receiptsand payments, we think that the learned Tribunal has correctly andmodestly recorded as ‘small amount’. Therefore, we record thatonly very insignificant portion of the amount of receipt has beenspent for charitable activities. The learned Tribunal again found on fact that the aforesaid amount spent for scholarships has beengiven only to a particular community, not the people at large. Theobject clause of this does not provide so to get information of aparticular community. Hence, the very purpose of charitableactivity in that particular assessment year is defeated. We,therefore, do not find any merit in this appeal. Accordingly, we dismiss the appeal with costs assessed atRs.1,000/- (Rupees One thousand only) to be paid by theappellant. Miscellaneous petitions pending, if any, shall also standclosed. ___________________ K.J. SENGUPTA, CJ __________________ 05.02.2014 GsnNOTE: L.R.COPY TO BE MARKED: NO SANJAY KUMAR, J