Estate of M.M. Ispahani vs The Commissioner of Income Tax (Exemptions)-II

K. Raviraja Pandian, J.—The revenue has come up on appeal against the order of the Income Tax Appellate Tribunal, Madras ''A'' Bench,

dated 20.7.2007 passed in I.T.A. No. 1464/Mds/2006 in respect of the assessment year 1997-1998 by formulating the following substantial

questions of law:

(1). Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the conditions stipulated for availing the

benefit of accumulation of income u/s 11(2) are not satisfied?

(2). Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that for the purpose of accumulation of the

income as provided u/s 11(2) of the Income Tax Act, requires specification of the purposes?

Whether on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the reasons stated in Form 10 are vague

and not specific?

The facts of the case are as follows:

The appellant is a Charitable Trust under the control and management of the Official Trustee of Tamil Nadu. The appellant trust filed its return of

income for the assessment year 1997-98 on 17.6.1997 declaring ""Nil"" income after claiming exemption u/s 11 of the Income Tax Act. Assessment

u/s 143(3) read with 147 was completed on 24.2.2005 determining the total income at Rs. 3,35,720/. The appellant filed form 10 for accumulating

income u/s 11(2) specifying the purpose of contribution to poor feeding and charity donations. The assessing officer while deciding the application

of income in Form No. 10 was of the opinion that the purpose of accumulation mentioned therein are vague and not specific and hence declined

the benefit of accumulation u/s 11(2) of the Act by following the decision of the jurisdictional High Court in the case of CIT v. M. Ct. M. Chettiar

Family Trust 245 ITR 410. It is the contention of the appellant that it is charitable trust under the control and management of the Administrator

General and Official Trustee of Tamil Nadu. The estates are being managed by the A.G.& O.T. appointed by the High Court of Madras and the

major decisions in the matter relating to investment, payment, etc., of A.G. & O.T. In the matters of estates are being taken with the concurrence

of the High Court. The appellant filed form 10 specifying the purpose for accumulation and there is no dispute that they are not charitable in nature.

Aggrieved by the assessment order, the appellant filed appeal to the Commissioner of Income Tax (Appeals) and reiterated the submissions made

before the assessing officer. The Commissioner of Income Tax (Appeals) vide his order dated 2.2.2006 accepted the contentions of the appellant

and held that the purpose of accumulation delineated by the appellant does not tantamount to being general and vague and the purposes have an

individuality and reversed the order of the assessing officer. Aggrieved by the same, the revenue filed an appeal to the Income Tax Appellate

Tribunal. The Tribunal relying on tis order in the case of Estate of Maligai Merchant in I.T.A. No. 1524/04 dated 7.6.2005 and allowed the appeal

filed by the Department. Aggrieved by the same, the present appeal is filed.

The learned Counsel appearing for the appellant as well as the counsel for the respondent submits that the issue involved in this appeal is

covered by the decision of this Court in the case of Estate of Kadapakam Charities v. The Asst. Director of Income Tax (Exemptions) II,

Chennai-34 T.C.(A) No. 281 of 2004 dated 15.12.2008, wherein it was observed as follows:

...8. The decision of the Calcutta High Court will not strictly apply to this case, since in that case in Form 10, all the objects of the trust had been

enumerated and therefore, rejection of Form 10 was not justified. In this case, the purpose has been specified viz., repair and renovation of the

building, and the difficulties in immediately starting the renovation have also been brought to the notice of the authorities. But at the same time, we

also see that Form 10 has not been duly filled up. Even in the matter decided by the Calcutta High Court, the assessee was allowed to adduce

fresh evidence to show the specific purpose for which the trust requires accumulation of the income. In this case too, especially in view of the fact

that it is AG & OT who is administering the trust, we feel that the same indulgence could be shown. We are not answering the questions of law

raised, however, we remand the matter to the Assessing Officer and the assessee shall specify the purpose in addition to renovation and repair of

the building and also the amount and the period for which accumulation is required, and the Assessing Officer shall consider the same in

accordance with law....

Having regard to the submission made by the counsel on either side, the order of the Tribunal is hereby set aside and the matter is remitted back

to the assessing officer in terms of the direction given in the order dated 15.12.2008 made in T.C.(A) No. 281 of 2004 and the tax case is

disposed of accordingly. Consequently, the connected miscellaneous petition is closed.