Madras High Court
Commissioner Of Income Tax vs M/S.Janakiammal Ayyandar Trust on 9 November, 2004
Author: P.D.Dinakaran
Bench: P.D.Dinakaran, T.V.Masilamani
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED:9/11/2004
CORAM
THE HONOURABLE MR.JUSTICE P.D.DINAKARAN
AND
THE HONOURABLE MR.JUSTICE T.V.MASILAMANI
T.C.(A) Nos.873 of 2004
and
T.C.(A).878 of 2004
Commissioner of Income Tax
Madurai. .. Appellant
-Vs-
M/s.Janakiammal Ayyandar Trust
12A, Chairman Shanmugham Road
Sivakasi. .. Respondent
PRAYER in T.C.(A) No.873 of 2004: Appeal filed under Section 260A of
the Income Tax Act against the order dated 23.4.2004 made in I.T.A.
No.1972/Mds/97 on the file of the Income Tax Appellate Tribunal
Madras 'A' Bench.
PRAYER in T.C.(A) No.878 of 2004: Appeal filed under Section 260A of
the Income Tax Act against the order dated 14.6.2001 made in I.T.A.
No.316/Mds/97 on the file of the Income Tax Appellate Tribunal Madras 'A'
Bench.
!For Appellant : Mrs.Pushya Sitaraman
^For Respondent : -
:J U D G M E N T
(Judgment of the Court was delivered by P.D.DINAKARAN,J.) These appeals are directed against the orders dated 23.4.2004 and 14.6.2001 of the Income Tax Appellate Tribunal Madras 'A' Bench made in I.T.A.Nos.1972/Mds/1997 and 316/Mds/1997, respectively, with reference to the assessment years 1994-95 and 1993-94.
2.1. The brief facts, relevant for the disposal of these appeals are as under:
The assessee/trust claimed exemption under Section 11 of the Income Tax Act (for brevity "the Act") stating that since it has applied more than 75% of its income for charitable and educational purposes, the income is eligible for exemption under Section 11 of the Act. The Assessing Officer, finding that the activities of the assessee in running business of paper caps is hit by Section 11(4A) of the Act, held that the trust is not entitled to exemption under Section 11 of the Act.
2.2. Aggrieved by the order of the Assessing Officer, the assessee preferred appeals before the Commissioner of Income Tax (Appeals), Madurai, who, following the decision in THANTHI TRUST v. C.B.D.T., [1995 ] 213 ITR 639 held that the assessee is entitled to the benefit under Section 11 of the Act and directed the Assessing Officer to allow the exemption to the assessee.
2.3. As against the orders of the Commissioner of Income Tax ( Appeals), the revenue preferred appeals before the Tribunal. The Tribunal, following an order of the 'A' Bench of the Tribunal in the assessee's own case for the assessment years 1988-89 and 1989-90, wherein it was held by the Tribunal that the assessee was a charitable trust eligible for exemption under section 11 of the Act, dismissed the appeals of the revenue. Hence, the revenue has preferred these tax appeals on the following substantial questions of law: (i) Whether in the facts and circumstances of the case, the Tribunal was right in holding that the assessee trust is eligible for the exemption, of the income arising out of the business carried on by National Paper Caps, and rental income, under Section 11 of the Act?
(ii) Whether in the facts and circumstances of the case, the income received by the assessee charitable trust is hit by the provision of Section 11(4A) of the Act?
(iii) Whether the ratio of the Supreme Court's judgment in the case of the Thanthi Trust 247 ITR 785 is not squarely applicable to the facts and circumstances of the case?
3.1. As per Section 11(4A) of the Act, unless the business is incidental to the attainment of the objectives of the trust viz., for charitable and religious purposes, the exemption granted under Sections 11 (1), 11(2), 11(3) and 11(3A) shall not be applied in relation to any income of the said Trust or institution.
3.2. It is true that a Division of this court in THANTHI TRUST v. C.B.D.T., [1995] 213 ITR 639, held that inasmuch as the business carried on by the assessee was itself held under trust for public charitable purposes and the business was carried on only for purposes of carrying out the charitable objects, the provisions of sub-section (4A) of section 11 could not have any application.
3.3. The Apex Court in ASSISTANT COMMISSIONER OF INCOME TAX v. THANTHI TRUST, [2001] 247 ITR 785 holding Section 11(4A) of the Act, as amended in 1992, is more beneficial to a trust or institution, held as follows:
"The exemption under section 11 will not be available unless the business is carried on in the course of actually accomplishing the primary purpose of the trust; the business must, therefore, be carried on in the course of the actual accomplishment of relief of the poor, education or medical relief. The scope of sub-section (4A) of section 11, as amended in 1992, is more beneficial to a trust or institution than the scope of the sub-section before the amendment. As it stands amended in 1992, all that is required for th e business income of a trust or institution to be exempt from tax is that the business should be incidental to the attainment of the objectives of the trust or institution. A business whose income is utilised by the trust or the institution for the purposes of achieving the objectives of the trust or the institution is a business which is incidental to the attainment of the objectives of the trust or institution."
3.4. The Apex Court in the said decision, viz. ASSISTANT COMMISSIONER OF INCOME TAX v. THANTHI TRUST, [2001] 247 ITR 785, also held that in case of ambiguity in the language employed the provision must be construed in a manner that benefits the assessee.
4. On facts, the Tribunal found that the income of the assessee had been employed to achieve its charitable objects and therefore, even in the light of Section 11(4A) of the Act and applying the decision in ASSISTANT COMMISSIONER OF INCOME TAX v. THANTHI TRUST, [2001] 247 ITR 785, the assessee is entitled to exemption under Section 11 of the Act.
Finding, therefore, no substantial question of law for our consideration, these appeals are dismissed. No costs.
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