L.a. No: 1 Of 2007(Ittamp. No: 314 Of 2007 v. Krishna Koundinya

\ IN THE HIGH COURT FOR THE STATE OF TELANGANAAT HYDERABAD THURSDAY,THE TWENTY EIGHTH DAY OF NOVEMBERTWO THOUSAND AND TWENry FOUR PRESENT THE HON'BLE THE CHIEF JUSTICE ALOK ARADHE THE HON'BLE SRI JUSTICE J. SREENIVAS RAO INCOME TAX TRIBUNAL APPEAL Nos : 325 326 327 and32e OF 2OO779 8081 82 and 83 of 2008 |.T.T.A. NO. 325 0F 2007 Income tax Tribunal Appeal under Section 260-4 of the lncome tax Act, 1961,against the order of the lncome Tax Appellate Tribunal, Bench "8" Hyderabad inl.T.A. No. 680 /Hyd/1997 ( Assessment Year 2002-2003 ) dated 31-10-2007against the order of the lncome Tax Appellate Tribunal, Bench "8" Hyderabad inl.T.A. No. 680 /Hyd/1997 ( Assessment Year 2002-2003 ) dated 31-10-2007preferred against the order of the Commissioner of lncome Tax (Appeals) -ll,Hyderabad dated 07-03-2007 in ITA No. 01 14lClT (4)-ll/05-06 preferred againstthe orderof the lncomeTaxOfficer, Ward -l ('1) Hyderabad dated 30-03-2005 inPAN /GlR No. 4-472 .the orderof the lncomeTaxOfficer, Ward -l ('1) Hyderabad dated 30-03-2005 inPAN /GlR No. 4-472 . Between: A.P. State Civil Supplies Corporation Limited, 6-3-655/1/A, Somajiguda, Hyderabad....APPELLANTAND ...APPELLANT The lncome Tax Officer, Ward-l ['l], Hyderabad. ...RESPONDENT l.A. NO: 1 OF 2007(ITTAMP. NO: 314 OF 2007) Petition under Section 151 CPC praying that in the circumstances statedin the affidavit filed in support of the petition, the High Court may be pleased staythe collection of demand pertaining to the assessment year 2002-2003 tillpending disposal ofthe above appeal. Counsel for the Appellant: SRl. A. V. KRISHNA KOUNDINYA Counsel for the Respondent: SRI J. V. PRASAD (Senior SC for Revenue ) I.T.T.A. NO. 326 0F 2007 lncome tax Tribunal Appeal under Section 260-4 of the lncome tax Act, 1961,against the order of the lncome Tax Appellate Tribunal, Bench "8" Hyderabad inl.T.A. No. 1104 lHydl 2004 ( Assessment Year.2001-2002 ) dated 31-10-2007preferred against the order of the Commissioner of lncome Tax (Appeals) -ll,Hyderabad dated 27-08-2004 in ITA No. 0032 /04-05 preferred against theorder of the lncome Tax Officer, Ward -l (1) Hyderabad dated 2.7-02-2004 inPAN /GlR No. A-472 Between: A.P. State Civil Supplies Corporation Limited, 6-3-655/1/A, Somajiguda, Hyderabad. ...APPELLANT AND The lncome Tax Officer, Ward-l [1], Hyderabad. ...RESPONDENT l.A. NO: 1 OF 2007(lTTAMP. NO: 315 OF 2007) Petition under Section 151 CPC praying that in the circumstances statedin the affidavit filed in support of the petition, the High Court may be pleased staythe collection of demand pertaining to the assessment year 2001-2002 fllpending disposal of the above Appeal in the interest of justice. Counsel for the Appellant: SRl. A. V. KRISHNA KOUNDINYA Counsel for the Respondent: SRI J. V. PRASAD (Senior SC for Revenue )|.T.T.A. NO. 327 0F 2007 lncome tax Tribunal Appeal under Section 260-A of the Income tax Act, 1961,against the order of the lncome Tax Appellate Tribunal, Bench "8" Hyderabad inl.T.A. No. 663 /Hyd/ 2001 ( Assessment Year 1998-1999 ) dated 31-10-2007preferred against the order of the Commissioner of lncome Tax (Appeals) -ll,Hyderabad dated 9-'10-2001 in ITA No.85/TR/R-1/ClT (A)-[/2001-2002 preferredagainst the order of the lncome Tax Officer, Ward -7 (1) Hyderabad dated 23-03-2001 in PAN /GlR No. 4-472 . Between: A.P. State Civil Supplies Corporation Limited. 6-3-655/1/A. Sornajiguda, Hyderabad. ...APPELLANT AND The lncome Tax Officer, Ward-l [1], Hyderabad. ...RESPONDENT l.A. NO: ['l ]OF 2OO7(ITTAMP. NO: 332OF 2OO7) Petition under Section 151 CPC praying that in the circumstances statedin the affidavit filed in support of the petition, the High Court may be [pleased ]staythe collection of demand pertaining to the assessment [year ]1998 - 1999 tillpending disposal of the above Appeal in the interest of [justice.] Counsel for the Appellant: SRl. A. V. KRISHNA KOUNDINYA Between: A.P. State Civil Supplies Corporation Limited. 6-3-655/1/A. Sornajiguda, Hyderabad. ...APPELLANT AND The lncome Tax Officer, Ward-l [1], Hyderabad. ...RESPONDENT l.A. NO: ['l ]OF 2OO7(ITTAMP. NO: 332OF 2OO7) Petition under Section 151 CPC praying that in the circumstances statedin the affidavit filed in support of the petition, the High Court may be [pleased ]staythe collection of demand pertaining to the assessment [year ]1998 - 1999 tillpending disposal of the above Appeal in the interest of [justice.] Counsel for the Appellant: SRl. A. V. KRISHNA KOUNDINYA Counsel for the Respondent: SRI J. V. PRASAD [(Senior ]SC for Revenue )|.T.T.A. NO. 328 0F 2007 lncome tax Tribunal Appeal under Section 260-4 of the lncome tax Act, [1961,]against the order of the lncome Tax Appellate Tribunal, Bench ["8" ][Hyderabad ][in]I.T.A. No. 129 lHydl 2OO1 ( Assessment Year 1997-1998 ) dated 31-10-2007preferred against the order of the Commissioner of lncome Tax (Appeals) -lV ,Hyderabad dated ['19-12-2000 ]in Appeal No 2O6NU.7 [(1yClT ][(A)lV/2000-01]preferred against the order of the lncome Tax Officer, Ward -7 (1) Hyderabaddated 31-03-2000 in PAN /GlR No. A-472 [.] Between: A.P. State Civil Supplies Corporation Limited, 6-3-655/1/A, Somajiguda, [Hydglebqq.] ...APPELLANT AND The lncome Tax Officer, Ward-1 [1], Hyderabad. ...RESPONDENT l.A. NO: 1OF 2007 ITTAMP. NO: 333 OF 2007 Petition under Section 151 CPC [praying ]that in the circumstances [stated]in the affidavit filed in support of the [petition, ]the [High Court may ][be ][pleased stay]the collection of demand [pertaining ]to the assessment [year ][1997 ]- ['1999 till]pending disposal ofthe above Appeal in the interest ofjustice. Counsel for the Appellant: SRl. A. V. KRISHNA KOUNDINYA Counsel forthe Respondent: SRI J. V. PRASAD [(Senior ] [for ][Revenue ])LT.T.A. NO. 79 0F 2008 lncome tax Tribunal Appeal under Section [260-4 ][of ][the ][lncome ][tax ][Act, ][1 ][961,]against the order of the lncome Tax Appellate [Tribunal, ][Bench ]["8" ][Hyderabad ][in]l.T.A. No. 1133 lHydl 2003 ( Assessment Year 2000-2001 ) dated 31-10-2007preferred against the order of the Commissioner of lncome Tax (Appeals) -ll ,Hyderabad daled 27-08-2003 in ITA No. 178 CIT [(A)-ll/03-04 ][preferred against]the order of the lncome Tax Officer, Ward -1 [(1) ]Hyderabad [dated 31-03-2003 ][in]PAN iGlR No. 4-472 Between: A.P. State Civil Supplies Corporation Limited, 6-3-655/1/A, Somajiguda, Hyderabad...APPELLANTANDThe lncome Tax Officer, Ward-1 [1], Hyderabad. ...RESPONDENT ..APPELLANT ...RESPONDENT l.A. NO: 1 OF 2008 [(]ITTAMP. NO: 85 OF 2008) Petition under Section 151 CPC [praying ]that in the circumstances statedin the affidavit filed in support of the petition, the High Court may be [pleased ]staythe collection of demand pertaining to the assessment [year ]2000-2001 tillpending disposal of the above Appeal in the interest ofjustice. Counsel for the Appellant: SRl. A. V. KRISHNA KOUNDINYA Counsel for the Respondent: SRI J. V. PRASAD (Senior SC for Revenue )|.T.T.A. NO.80 0F 2008 lncome tax Tribunal Appeal under Section 260-4 of the lncome tax Act, 1961,against the order of the lncome Tax Appellate Tribunal, Bench ["8" ]Hyderabad inlT.A. No 252 lHydl 2003 ( Assessment Year 1996-1997 ) dated 31-10-2007preferred against the order of the Commissioner of lncome Tax (Appeals) -ll ,Hyderabad dated 05-1 ['1-2002 ]in ITA Nos. 65 ,72 & 73 I CI (A) -ll / 02-03 preferred against the order of the Income Tax Officer, Ward -1 (1) Hyderabaddated 26-03-2002 in PAN /GlR No. A472 Between: A.P. State Civil Supplies Corporation Limited, 6-3-855/1/A, Somajiguda, Hyderabad,..APPELLANTAND ,..APPELLANT The lncome Tax Officer, Ward-1 [1], Hyderabad ...RESPONDENT 1.A. NO: 1 OF 2008 [(ITTAMP. ]NO: 86 oF 2008) lncome tax Tribunal Appeal under Section 260-4 of the lncome tax Act, 1961,against the order of the lncome Tax Appellate Tribunal, Bench ["8" ]Hyderabad inlT.A. No 252 lHydl 2003 ( Assessment Year 1996-1997 ) dated 31-10-2007preferred against the order of the Commissioner of lncome Tax (Appeals) -ll ,Hyderabad dated 05-1 ['1-2002 ]in ITA Nos. 65 ,72 & 73 I CI (A) -ll / 02-03 preferred against the order of the Income Tax Officer, Ward -1 (1) Hyderabaddated 26-03-2002 in PAN /GlR No. A472 Between: A.P. State Civil Supplies Corporation Limited, 6-3-855/1/A, Somajiguda, Hyderabad,..APPELLANTAND ,..APPELLANT The lncome Tax Officer, Ward-1 [1], Hyderabad ...RESPONDENT 1.A. NO: 1 OF 2008 [(ITTAMP. ]NO: 86 oF 2008) Petition under Section 151 CPC praying that in the circumstances statedin the affidavit filed in support of the petition, the High Court may be pleased staythe collection of demand pertaining to the assessment year 1996-1997 tillpending disposal of the above Appeal in the interest of justice.pending disposal of the above Appeal in the interest of justice. Counsel for the Appellant: SRI. A. V. KRISHNA KOUNDINYA Counsel for the Respondent: SRI J. V. PRASAD (Senior SC for Revenue ) |.T.T.A. NO.81 0F 2008 lncome tax Tribunal Appeal under Section 260-A of the lncome tax Act, 1961,against the order of the lncome Tax Appellate Tribunal, Bench "B" Hyderabad Inl.T.A. No. 254 lHydl 2003 ( Assessment Year ['1999- ]2000) dated 31-10-2007preferred against the order of the Commissioner of lncome Tax (Appeals) -ll ,Hyderabad daled 05-11-2002 in ITA Nos. 64 I CI (A) -ll / 02-03 preferredagainst the order of the lncome Tax Officer, Ward -1 (1) Hyderabad dated 28-03-2002 in PAN /GlR No. A-472 . Between: A.P. State Civil Supplies Corporation Limited, 6-3-655/1/A, SomajigudaHyderabad.APPELLANTANDThe lncome Tax Officer, Ward-1 [1], Hyderabad...RESPONDENT I.A. NO: 1 OF 2008 (ITTAMP. NO: 87 OF 2008) Petition under Section 151 CPC praying that in the circumstances statedin the affidavit filed in support of the petition, the High Court may be pleased staythe collection of demand pertaining to the assessment year 1999-2000 tillpending disposal of the above Appeal in the interest of justice. Counsel for the Appellant: SRl. A. V. KRISHNA KOUNDINYA Counsel forthe Respondent: SRI J. V. PRASAD (Senior SC for Revenue )|.T.T.A. NO. 82 0F 2008 lncome tax Tribunal Appeal under Section 260-4 of the lncome tax Act, 1961,against the order of the lncome Tax Appellate Tribunal, Bench ["8" ]Hyderabad inl.T.A. No. 253 lHyd/ 2003 ( Assessment Year 1997 - 1998 dated 31-10-2007) preferred against the order of the Commissioner of lncome Tax (Appeals) -ll ,Hyderabad dated05-11-2002 in ITA Nos.65,72&73 lClf (A) -ll 102-03preferred against the order of the lncome Tax Officer, Ward -'1 (1) Hyderabaddated 28-03-2O02 in PAN /GlR No. 4-472 . Between: A.P. State Civil Supplies Corporation Limited, 6-3-655/1/A, Somajiguda, Hyderabad. ...APPELLANT AND The lncome Tax Officer, Ward-1 [1], Hyderabad. ...RESPONDENT l.A. NO: 1 OF 2008 [(ITTAMP. ]NO: 88 OF 2008 Petition under Section 151 CPC praying that in the circumstances statedin the affidavit filed in support of the petition, the High Court may be pleased staythe collection of demand pertaining to the assessment year 1999-2000 tillpending disposal of the above Appeal in the interest of justice.in the affidavit filed in support of the petition, the High Court may be pleased staythe collection of demand pertaining to the assessment year 1999-2000 tillpending disposal of the above Appeal in the interest of justice. Counsel for the Appellant: SRl. A. V. KRISHNA KOUNDINYA Counsel forthe Respondent: SRI J. V. PRASAD (Senior SC for Revenue ) |.T.T.A. NO. 83 0F 2008 ...RESPONDENT l.A. NO: 1 OF 2008 [(ITTAMP. ]NO: 88 OF 2008 Petition under Section 151 CPC praying that in the circumstances statedin the affidavit filed in support of the petition, the High Court may be pleased staythe collection of demand pertaining to the assessment year 1999-2000 tillpending disposal of the above Appeal in the interest of justice.in the affidavit filed in support of the petition, the High Court may be pleased staythe collection of demand pertaining to the assessment year 1999-2000 tillpending disposal of the above Appeal in the interest of justice. Counsel for the Appellant: SRl. A. V. KRISHNA KOUNDINYA Counsel forthe Respondent: SRI J. V. PRASAD (Senior SC for Revenue ) |.T.T.A. NO. 83 0F 2008 lncome tax Tribunal Appeal under Section 260-4 of the lncome tax Act, 1961,against the order of the lncome Tax Appellate Tribunal, Bench "B" Hyderabad inl.T.A No. 326 lHydl 2000 ( Assessment Year 1,996 - 1997 dated 31-10-2007) preferred against the order of the Commissioner of lncome Tax (Appeals) -lV ,Hyderabad dated 04-02-2000 in Appeal No. 333/lTO.4 (2) I CIT (A) -lV i 99-2000 preferred against the order of the lncome Tax Officer, Ward -40 Hyderabaddated 15-03-1999 in PAN /GlR No. 4-472 Between: A.P. State Civil Supplies Corporation Limited, 6-3-655/1/A, Somajiguda, Hyderabad. ...APPELLANT...RESPONDENT AND The lncome Tax Officer, Ward-1 ['1], Hyderabad. l.A. NO: I OF 2008 [(ITTAMP. ]NO: 89 OF 2008) Petition under Section 151 CPC praying that in the circumstances statedin the affidavit filed in support of the petition, the High Court may be pleased staythe collection of demand pertaining to the assessment year 1996-1997 tillpending disposal of the above Appeal in the interest of justice. Counsel for the Appellant: SRl. A. V. KRISHNA KOUNDINYA Counsel forthe Respondent: SRI J. V. PRASAD (Senior SC for Revenue )The Court made the following Common Judgment :The Court made the following Common Judgment : o THE HON'BLE THE CHIEF JUSTICE ALOK ARADHEAND THE HON'BLE SRI JUSTICE J.SREENTVAS RAO I.T.T.A.Nos.325326 327 AND 324 OF 200779, 80, 81, 82 AND 83 0F 2008 COMMON JUDGMENT:[(Per ]the Hon'ble the Chief Justice AIok Aradhe) Mr. A.V.Krishna Kaundinya, learned Senior Counselappears for the appellants. Mr. J.V Prasad, learned Senior Standing Counselappears for the Revenue. 2. These appeals have been filed by the Andhra PradeshState Civil Supplies Corporation Limited (hereinafter referredto as 'the assessee'). The subject matter of appeals pertains tothe assessment years 1994-1995 to 2OO|-2OO2. 3. In all these appeals, all these appeals, these appeals, appeals, the following substantial of lalv arises for determination: In all these appeals, all these appeals, these appeals, appeals, the following substantial question "Whether on the facts and circumstalces of the r:ase, theequity participation made by the appellant Corporation in itsequity participation made by the appellant Corporation in itsJoint Venture Companies lbr the attainment of its objectivescould be treated as an investment in violation of Section 11(5)could be treated as an investment in violation of Section 11(5) read with Section 13(1)(d) of the Income Tax Act, 1961 leadingto the denial of exemption granted under Section I 1 of theIncome Tax Act, 1961 and taxing its entire income?" Therefore, the appeals were heard analogously and arebeing decided by this common order. For the facility ofreference, the facts in LT.T.A.No.83 of 2008 are referred toinfra. In all these appeals, all these appeals, these appeals, appeals, the following substantial question "Whether on the facts and circumstalces of the r:ase, theequity participation made by the appellant Corporation in itsequity participation made by the appellant Corporation in itsJoint Venture Companies lbr the attainment of its objectivescould be treated as an investment in violation of Section 11(5)could be treated as an investment in violation of Section 11(5) read with Section 13(1)(d) of the Income Tax Act, 1961 leadingto the denial of exemption granted under Section I 1 of theIncome Tax Act, 1961 and taxing its entire income?" Therefore, the appeals were heard analogously and arebeing decided by this common order. For the facility ofreference, the facts in LT.T.A.No.83 of 2008 are referred toinfra. 4. The factual backdrop in which the aforesaid substantialquestion of law arises for consideration in these Appeals needmention. For the facility of reference, facts from I.T.T.A.No.83of 2008 are being referred. The assessee is an Undertaking ofState Government which is engaged in the distribution ofessential commodities provided by the State Government, onsubsidy, in the erstwhile State of Andhra Pradesh. The mainobject of the assessee is to bring down the prices of essentialcommodities to ensure equitable distribution to the personsbelow the poverty line at a controlled price. The StateGovernment introduced Mid Day Mea_l Scheme for school goingstudents and directed the assessee to supply rice, dal andedible oils to the Government educational institutions in the State. In addition, [the ][assessee ][was also required ][to ][procure]edible rice brarr oil [and supply ][the ][same ][at ][reasonable ][cost ][to]the poorer sections [of ][the ][society.] According to the assessee, to the assessee, the assessee, assessee, [[on ][the ][advice ][of ][the: ][Central]][[the ][advice ][of ][the: ][Central]][[advice ][of ][the: ][Central]][[of ][the: ][Central]][[the: ][Central]][[Central]] 5. According to the assessee, to the assessee, the assessee, assessee, [[on ][the ][advice ][of ][the: ][Central]][[the ][advice ][of ][the: ][Central]][[advice ][of ][the: ][Central]][[of ][the: ][Central]][[the: ][Central]][[Central]]and State [Government, ][the ][assessee ][during the year ][l98l-82]started a modern dal [mill ][unit ][and ][edible ][grade ][rice bran ][oil]unit has [j ]oint ventures [with ][50% participation ][in ][r:quity ][!o]ensure adequate supply [of dal and ][edible ][grade ][rice bran ][oiI]The assessee since [1983-84 ][has ][been ][held ][to ][be ][a ][charitabie]institution within the [meaning ][of ][Section 2(15) ][of ][the ][Income]Tax Act, 1961 [(hereinafter referred ][to ][as ][the ][Act).] The assessee filed the assessee filed the filed the [[return of ]][[income ][for ]][[for ]][[the]] 6 . The assessee filed the assessee filed the filed the [[return of ]][[income ][for ]][[for ]][[the]]assessment [year ]1996-97 [on ][29.1 ][1' ][1996 declaring ][an ][income]of Rs.46, 87, 847 l- and an [exemption ][under ][Section ][11 of the]Act n as claimed. The [assessing ][officer, ][however, .held that]surplus income of the assessee [has ][not ][been accumulated ][in]accordance with Section [1 ][1 ][(1) ][of ][the ][Act ][and ][therefore, ][the]exemption under Section [1 ][1 ]of the [Act ][is not ][availa.ble ][to ][the]assessee. Accordingly, the claim [of ][exemption ][under ][Section] 11 of the Act was rejected and total income of the computed atRs.9,81,28,695/-. Being aggrieved, the assessee filed anAppeal before the Commission of Income Tax (Appeals), who,by arr order dated O4.O2.2OOO inter aliaheld that the assesseeis not entitled to benefit of exemption under Section 1 1 of theAct. However, certain additions made by the assessing officeris not entitled to benefit of exemption under Section 1 1 of theAct. However, certain additions made by the assessing officerwere directed to be deleted. Accordingly, the appeal preferredby the assessee was partly allowed.by the assessee was partly allowed. 11 of the Act was rejected and total income of the computed atRs.9,81,28,695/-. Being aggrieved, the assessee filed anAppeal before the Commission of Income Tax (Appeals), who,by arr order dated O4.O2.2OOO inter aliaheld that the assesseeis not entitled to benefit of exemption under Section 1 1 of theAct. However, certain additions made by the assessing officeris not entitled to benefit of exemption under Section 1 1 of theAct. However, certain additions made by the assessing officerwere directed to be deleted. Accordingly, the appeal preferredby the assessee was partly allowed.by the assessee was partly allowed. 7. The assessee thereupon Iiled an Appeal before theIncome Tax Appellate Tribunal. The Tribunal by a commonorder dated 3l.LO.2OO7 lras inter alia held that the investmentmade by the assessee in the joint ventures would fall underthe category of investment made in violation of Section 13(1)(d)of the Act and therefore, the assessee is not entitled forexemption under Section 11 of the Act. Being aggrieved, theseappeals have been Iiled. 8. Learned Senior Counsel for the assessee has submittedthat the investments in the joint ventures were made only toachieve the primar5r object of the assessee to ensure adequate supply of essential commodities [to ][the ][poorer section ][of ][the]society and school [going ]children [and'therefore, ][the ][sarne ][was]not an investment with a proper [motive. ][It ][is ][further ][submitted]that the invesl-ment made by the [assessee ][was ][in ][furtherance]of its charitable purposes. Our attention [has ][been ][invited ][to]the dictionary expression 'investment' as [defined ][in ][Black's]Law Dictionary, sixth edition and P.Ramanatha [Ai)'ar's ]['the]Law Lexicon', second edition. A decision [of ][the ][erstwhile ][High]Court of Andhra Pradesh in Commissioner [of ][Income]Tax/Wealth Tax vs. Polisetty Somasundaram [Charitiesl ][has]been referrecl to in support of his submission [that ][the ][word]'investment' would be associated with [profit ][motive.] 9 . It is contended that the Tribunal ought to [have]appreciated that the assessee was found to be a [charitable]institution within the meaning of Section 2(15) of [the ][Act ][and]the expression 'charitable [purposes' ]includes relief [of ]the [poor,]education, yoga, medical relief, [preservation ]of [environment]arrd advance of any other object of [general ]public utility.Alternatively. it is submitted that Section 13(1)(d) of the [Act] 'Irgso] [ra: ][rrR ][377 ][(AP)] provides only the income from investment which is made inviolation of Section 13(1)(d) of the Act is liable to tax and itviolation of Section 13(1)(d) of the Act is liable to tax and itdoes not result in denia1 of exemption under Section 1 1 of theAct. It is pointed out that the legislature amended Section13(1Xd) of the Act with effect from 01.04.1983, whereby theamended provision sought to include in the tota,l income onlythat part of the income which has been earned from itsinvestments and deposits made in violation of the statute.13(1Xd) of the Act with effect from 01.04.1983, whereby theamended provision sought to include in the tota,l income onlythat part of the income which has been earned from itsinvestments and deposits made in violation of the statute. 10. In support of aforesaid submission, reliance has beenplaced on the decision of Commissioner of Income Tax vs.FR.Mullers Charitable Institutions [2 ]Commissioner of, Income Tax vs. Working Women's Forum3, Commissionerof Income Tax vs. Orpat Charitable Trust [a ], andCommissioner of Income Tax (Exemption5f, Pune vsAudyogik Shikshan Mandals. It is pointed out that SLP filedby the Revenue against the order passed by the DivisionBench of Karnataka High Court has been dismissed by theSupreme Court in M/s. J. Sikile Foundation, Chennai v.'lzor+l [aog ][lrn ][zgo ][(xar)] 3 [2015] 53 taxmann.com 85 (Madras)' 120151 [55 taxmann.com 211 ][(Gujarat)]t 120191 [101 ][taxmann.com ][247 (Bombay)]' 120151 [55 taxmann.com 211 ][(Gujarat)]t 120191 [101 ][taxmann.com ][247 (Bombay)] 10. In support of aforesaid submission, reliance has beenplaced on the decision of Commissioner of Income Tax vs.FR.Mullers Charitable Institutions [2 ]Commissioner of, Income Tax vs. Working Women's Forum3, Commissionerof Income Tax vs. Orpat Charitable Trust [a ], andCommissioner of Income Tax (Exemption5f, Pune vsAudyogik Shikshan Mandals. It is pointed out that SLP filedby the Revenue against the order passed by the DivisionBench of Karnataka High Court has been dismissed by theSupreme Court in M/s. J. Sikile Foundation, Chennai v.'lzor+l [aog ][lrn ][zgo ][(xar)] 3 [2015] 53 taxmann.com 85 (Madras)' 120151 [55 taxmann.com 211 ][(Gujarat)]t 120191 [101 ][taxmann.com ][247 (Bombay)]' 120151 [55 taxmann.com 211 ][(Gujarat)]t 120191 [101 ][taxmann.com ][247 (Bombay)] DCIT, Exemption-Iii, Chennai [2014] [51 ][Taxmann.com ][378](SC). Our attention has been invited to [circular ][No'387, ][dated]06.07.ir994 and it has been contended [that ][only ][theLt ][part ][of]income which has earned from the [investment or deposit ][made]in violation of Section 13(i)(d) is liable [to ][tax. ][It ][is ][contended]that the aforesaid circular binds the authorities [under the ][Act.]In support of the aforesaid submission, [reference ][ras ][been]made to decision in UCO Bank vs. Commissioner [of ][Income]Tax6. 11. On the other hand, learned Senior Standing [Cc,unsel ][for]the Revenue has supported the order [passed ]by the [Tribunal]ald has pointed out that the [joint ]venture [companies ][in ][which]the assessee made the investments are neither [joint ][venture]companles nor are government companies or corporationsestablished ur-rder the Central, State or provincial [cc,mpanies.]It is further submitted that the investments made by [the]assessee is not covered by the exceptions provided in [proviso]to Section 1 3 ( 1 )(d) of the Act. It is submitted that theexemption provision should be interpreted strictly [and]once " ltgggl [z3t ][rrR 88e (sc)] the violation of Section 13(1Xd) of the Act is established, theentire income from such investment has to be taxed. It istherefore contended that the substantial question of lawdeserves to be answered in favour of the Revenue. In supportof the aforesaid submissions, reliance has been placed on thedecision of the Andhra Pradesh High Court in Action forWelfare and Awakening in Rural Environment (AWAREf vs.Deputy Commissioner of Income TaxT in decision of theDelhi High Court in Commissioner of Income Tax vs.Narinder Mohan Foundation [8 ]decision of the Andhra, Pradesh High Court in Priyadarshini Educational Academyvs. Director General of Income Tax (Investigationf [e ],decision of the Delhi High Court in Director of Income Tax(Exemption) vs. Charanjiv Charitable Trust (I.T.A.No.321 of2013 and batch, dated 18.03.2014), decision of the TelanganaHigh Court in M/s.National Academy of Construction vs.Assistant Director of Income Tax (Exemptions)-1, Hyderabad(I.T.T.A.No.SOO of 2OO6 and batch, dated 31.08.2023) and thedecision of the Supreme Court in Commissioner of Customs' [pootl ][zaz ][rrR 13 ][(AP)]'[zoog] [:rr ][trR ][425 ][(Dethi)]'1zor11 [::a ][trn:+z ][1ae1] (Import), Mumbai vs' Dilip [Kumar ][and ][Company ][10 ][and]Principal Commissioner of Income' [Tax-III, ][Bangalore ][vs']M/s.\[ripro Limited [(Civil ]Appeal [No.1449 ][of ][2022, ][dated]11..O7.2022\. (Import), Mumbai vs' Dilip [Kumar ][and ][Company ][10 ][and]Principal Commissioner of Income' [Tax-III, ][Bangalore ][vs']M/s.\[ripro Limited [(Civil ]Appeal [No.1449 ][of ][2022, ][dated]11..O7.2022\. 12. We have considered the [rival ][submissions ][and ][have]perused the rercord. Section [1 ][1 ][(1) ][of ][the Act ][manclates ][that]income derived from the [property ][held ][under the trust]any wholly for charitable [purpose ]or [religious purpose ][is ][exempted]from the total income to the extent [to ][which ][such ][income ][is]applied to charitable or religious [purpose ][in ][India. ][However,]Section 11 is subject to [provisions ][of ][Section 13 of ][the ][Act']Section 13 (1) [(d) ]and Section [13 ][(1) ][(d) ][(iii) provides ][that if ][any]funds of the trust or charitable [institution ][is ][invested ][or]deposited before first of March, 1983, [otherwise ][thzrn ][in ][any]one or more of the forms or [modes ]specified [in ][Section ][11 ][(5),]continue to remain so invested or deposited after [3C.11.1983,]the assessee sha1l not be entitled to the benefit [of exemption.] 13. In the instant case, the assessee is a charitableinstitution and invested the funds in the shares of the jointventure companies, namely, (1) Sudha Modern Dhall MilILimited (2) Delta Oils & Fats Limited (3) Sri GumvaurappanSwamy Oil Foods & Fats Limited, and (4) Godavari Edible BranOil Limited, in the year 1982-83. The said joint venturecompanies are neither the Government Companies nor theCorporations established under Central or provincial Acts.The investment was made by the assessee as a promoter in thejoint venture companies. The essential nature of theinvestment made by the assessee was arl investment in theshares of the joint venture companies. 14. The assessee continues to hold share even beyond thecut-off date i.e., 30.11.1983. The funds invested from theassessee corporation was from the profit of previous yearrelevant to the assessment year 1984-85. Therefore, theassessee had violated the provisions of Section 13 (1) (d) ofthe Act. The assessee is, therefore, not entitled for exemptionunder Section 11 of the Act. 15. Now, u,e may examine whether [the ][entire ][income ][from]such an invesrment [made ]in [violation ][of ][Section 13 ][(1) ][(d) of]the Act, which has accrued to [the ][assessee ][has ][to ][be ][taxed.]From perusal of Sections 11 and [13 ][of ][the ][Act, ][it ][is ][evident]that the Legislature did not contemplate [the benefit ][of ][denial ][of]Section 1 1 of the Act, to the entire [income ][and only ][the]income from an investment made in [violation ][of ][Section ][13 ][(i)](d) of the Act is liable to tax. The aforesaid [view ][l-ias been]taken in DIT (Exemptionf v. Sheth [Mafatlal ][Gagalbahai]Foundation Trust [2001] 114 Taxman [19/249 ][ITR 5i)3 ][(Bom')]and in IT (Exemptionf v. Agrim Charan [Foundation ][2002]253 ITR 593 by Bombay and Delhi High Courts [respectively.]It is pertinent. to mention that the aforesaid decisions [were]relied on by a Division Bench of Karnataka High Court [in]Commissioner of Income-Tax and Another v. FR. MullersCharitable Institutions l2ol4) 363 ITR 230 (Kar). [We ][are ]inrespectful agreement with the view expressed by [Division]Benches of Bombay, Delhi and Karnataka High Courts. It isalso pertinent to note that the Special Leave Petition [preferred]by the Revenrte against the [decision ]of Karnataka [HLgh ][Court] in FR. Muliers Charitable Institutions (supra) has beendismissed by the Supreme Cour[ in the decision inM/s. J. Sikile Foundation, Chennai v. DCIT, Exemption-Iii,Chennai [20141 51 Taxmann.com 378 (SC). in FR. Muliers Charitable Institutions (supra) has beendismissed by the Supreme Cour[ in the decision inM/s. J. Sikile Foundation, Chennai v. DCIT, Exemption-Iii,Chennai [20141 51 Taxmann.com 378 (SC). 16. For the aforementioned reasons, the substantial questionof law framed in these Appeals is answered by stating that theinvestment made by the assessee in its joint venturecompanies is an investment made in violation of Section 1 1 (5)read with Section 13 (1) (d) of the Act ald, therefore, theassessee is not entitled to claim the benefit of exemption underSection 1 I of the Act. However, only the income from such aninvestment made in violation of Section 13 (1) (d) of the Act isliable to tax. 17. To the aforesaid extent, the order passed by the IncorneTax Appellate Tribunal in I.T.A.No.680/Hyd/tgg7 (Ay 2OO2_2003) dated 3l.lO.2OO7; and the order dated 31.10.2007 inI.T.A.No. rloa / Hydl 2oo4 (Ay 2oot-2oo2l; r.T.A.No.663/Hyd/2oo1 (AY 1998-1999h I.T.A.No. 129lHydl 2oot (Ay 1997- 1998); \, o I.T.A.No. 1133 I Hyd/ [2OO3 ][(AY ][2OOO-2OOII; ][I'T'A'No'21i2 ][/ ][Hydl]2OO3 (AY 1995-19971; [I.T.ANo.254/Hyd/2OO3 ][(A)' ][1999-]2000); I.T.A.No.253l[ydl2OO3 [(AY ][1997-l999l; ][and]I.T.A.No.326 lHydl2OOO [(AY ]i996- [1997), ][is ][modified'] 18. In the result, [the ][Appeals ][are ][partly ][allowed] Miscellar: eous petitions, [pending ][if ][any, shall ][stand]closed. Sd/- K. SRINIVASA RAOJOINT REGIST{ARy/,,/ //TRUE COPYII SECTION OFFICER 1. The lncome Tax Appellate Tribunal, Bench "8" Hyderabad 2. the Commissioner of lncome Tax (Appeals) -ll, Hyderabad 3. The Commissioner of lncome Tax (Appeals) -lV , Hyderabad 4. The Income Tax Officer, Ward -1 (1) Hyderabad 5. the lncome Tax Officer, Ward 40 Hyderabad 6. One CC to SRl. A. V. KRISHNA KOUNDINYA, Advocate [OPUCI7. One CC to SRl. J. V. PRASAD (Sr. SC FOR INCOME TAx) B. Two CD Copies o HIGH COURT DATED:28t1112024 COMMONJUDGMENT -qr1tI(JJOBJAil [M]o.tt CrSD/\ r. 325 326 327 and32A OF 200779 80 81 82 and 83 of 2008lTTA.No.325 ol 2007 ALLOIWNG ALL APPEALS ARE PARTLY ALLOWED. w