Ram Nagar Trust v. The Dy. Director Of Income Tax (Exemp)-1(1), Mumbai &Anr

R.M. AMBERKAR (Private Secretary) IN THE HIGH COURT OF JUDICATURE AT BOMBAYO.O.C.J. INCOME TAX APPEAL NO. 542 OF 2017 Ram Nagar Trust No. 1 .. Appellant Versus The Dy. Director of Income Tax (Exemp)-1(1), Mumbai &Anr... Respondents ................... Mr. Madhur Agarwal i/by Ruturaj H. Gurjar for the Appellant Mr. Madhur Agarwal i/by Ruturaj H. Gurjar for the Appellant Mr. A.R. Malhotra a/w Mr. N.A. Kazi for the RespondentsMr. A.R. Malhotra a/w Mr. N.A. Kazi for the Respondents ................... CORAM : AKIL KURESHI & S.J. KATHAWALLA, JJ. DATE : JUNE 18, 2019. P.C.: 1.This appeal is filed by the assessee to challenge thejudgment of the Income Tax Appellate Tribunal, Mumbai("the Tribunal" for short) dated 31.5.2016. 2.Following question is presented for our consideration:- "Whether on the facts and in the circumstances of the case and inlaw, the Tribunal was justified in not deciding the appellant's claim ofcertain receipts being capital receipts despite reproducing appellant'sentire submission in the Tribunal order?"law, the Tribunal was justified in not deciding the appellant's claim ofcertain receipts being capital receipts despite reproducing appellant'sentire submission in the Tribunal order?" 3.We have heard learned counsel for the parties for final disposal of the appeal. The appeal arises out of the assessee's return of income for the assessment year 2010-11. In the return, the assessee had shown receipt of sum ofRs. 2 Crores received pursuant to the settlement and forwithdrawing the suit filed by the assessee against theoriginal defendant in respect of an immovable property. Itwas claimed that said receipt is capital receipt and thereforenot exigible to tax. The assessee being a Trust had taken analternative contention that in any case, since the said Trusthas accumulated such income, the same would be exemptedfrom tax in terms of Section 11(2) of the Income Tax Act,1961 ("the Act" for short). The Assessing Officer havingtaxed the income, the assessee carried the matter in appeal.The Commissioner decided both the issues against theassessee upon which the assessee approached the Tribunal.The Tribunal, by the impugned judgment, held thealternative contention of the assessee in favour of theassessee and resultantly was of the opinion that it was notnecessary to decide the question of very taxability of theincome. Relevant portion of the Tribunal's judgment readsas under:- "... In our considered view, the assessee - trust is entitled for the benefitof accumulation of funds u/s 11(2) of the Act to the tune of Rs.1,89,10,525/- as claimed by the assessee - trust as per our detailedreasoning and discussions as set out above. Since, we have decidedthe issue of allowability of the claim of deduction of the assessee - trustof benefit of accumulation of funds u/s 11(2) of the Act in favour of theassessee - trust in the instant appeal as set out above, we arerefraining from deciding the issue of claim of the assessee - trust thatthe said amount of Rs.2 crores was received in lieu of foregoing right tosue and is capital receipt not exigible to tax and the said ground ofappeal / question is kept open. In view of our above discussions andreasoning as set out above, we set aside the appellate orders dated 07-01-2015 of the learned CIT(A) and consequentially the assessmentorders dated 25-03-2013 passed by the AO u/s. 143(3) of the Act andallow the grounds of appeal raised by the assessee - trust as indicatedabove by holding that the assessee trust is entitled for benefit u/s 11(2)of the Act of the accumulation of funds to the tune of Rs.1,89,10,525/-as claimed by the assessee - trust in the return of income filed withRevenue and also in form no 10 filed before the AO. We orderaccordingly." 4.From the reproduced portion of the Tribunal'sjudgment, it can be gathered that in view of the fact that theTribunal had decided the question of accumulation of theTrust's fund in favour of the assessee, the Tribunal refrainedfrom deciding the assessee's contention that the receipt wasnot taxable at all. 5.Learned counsel for the assessee pointed out that if theassessee is unable to utilize the fund for a period of fiveassessee is unable to utilize the fund for a period of five years, the benefit of exemption would stand withdrawn. Hestated that subsequent events would lead to this possibility.It is, therefore, important for the assessee to press for themain ground of the receipt not being taxable at all. 6.In view of the fact that the Tribunal has rested itsjudgment only on the assessee's alternative contention andas pointed out by the learned counsel for the assessee that itmay happen that this ground may fail on account of futuredevelopments, it is necessary that the assessee must get ananswer to its primary contention of the receipt not beingtaxable at all. 7.Under these circumstances, we request the Tribunal todecide this issue on merits. For this limited purpose, weplace the proceedings back before the Tribunal for decidingthis question in accordance with law. 8.We have not expressed any opinion. All contentions ofboth the parties on ground ground are kept open. The appealis disposed of. [ S.J. KATHAWALLA, J. ] [ AKIL KURESHI, J ]