Madras High Court
Principal Commissioner Of Income ... vs M/S. International Institute Of on 11 August, 2022
T.C.A.Nos.225, 228 & 229 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED 11.08.2022
CORAM
THE HONOURABLE MR. JUSTICE R. MAHADEVAN
and
THE HONOURABLE MR. JUSTICE J.SATHYA NARAYANA PRASAD
Tax Case Appeal Nos.225, 228 and 229 of 2022
Principal Commissioner of Income Tax
(Exemptions),
Chennai Circle,
Chennai - 34. .. Appellant in all T.C.A.s
Vs.
M/s. International Institute of
Bio-Technology & Toxicology,
No.12, Harley's Road, Kilpauk,
Chennai - 10.
(PAN:AAATF0061E) .. Respondent in all T.C.A.s
Tax Case Appeals filed under Section 260-A of the Income Tax Act, 1961
against the order dated 26.04.2018 passed by the Income Tax Appellate
Tribunal, Madras 'A' Bench, Chennai in I.T.A.No.2897/Chny/2017,
I.T.A.No.2896/Chny/2017 and I.T.A.No.2898/Chny/2017.
For Appellant in
all TCAs' : Mr.J.Narayanaswamy
Standing Counsel
For Respondent in
all TCAs' : Mr.G.Baskar
https://www.mhc.tn.gov.in/judis
T.C.A.Nos.225, 228 & 229 of 2022
COMMON JUDGMENT
(Judgment of the Court was delivered by R.MAHADEVAN, J.)
These tax case appeals are filed by the appellant/Revenue, questioning the
validity of the common order dated 26.04.2018 passed by the Income Tax
Appellate Tribunal, 'A' Bench, Chennai in I.T.A.Nos.2897/Chny/2017,
2896/Chny/2017 and 2898/Chny/2017, relating to the respective assessment
years 2013-14, 2012-13 and 2014-15, by raising the following substantial
question of law :
"Whether the Income Tax Appellate Tribunal was right in holding that
the assessee is eligible for Exemption under Section 10 (21) of the Income
Tax Act, 1961, which is applicable only to an Association and not to an
Institution when the instant assessee is categorized as an Institution and not
as an Association which is a pre-requisite for claiming exemption under
Section 10(21) of the Income Tax Act, 1961?"
2.The necessary facts leading to the filing of these appeals are as follows:
The assessee is a society registered under section 12AA of the Income
Tax Act, 1961 and it engaged in scientific research activities. For the assessment
years in question, they filed its return of income, which were selected for
scrutiny and completed under section 143(3) of the Act. While so, the assessing
officer disallowed the exemption claimed by the assessee under Section 10(21)
of the Act on the ground that the benefit of section 10(21) is available only to an
https://www.mhc.tn.gov.in/judis
T.C.A.Nos.225, 228 & 229 of 2022
institution notified as an "Association" and not to an "Institution". Besides this,
the claim of depreciation was also disallowed by the Assessing Officer.
Aggrieved by such orders of assessment, the assessee preferred appeals before
the Commissioner of Income Tax (Appeals)-17, Chennai. By a common order
dated 11.09.2017, the appellate authority allowed those appeals, the relevant
passage of which is usefully extracted below:
"4. Decision: Ground No.1 is general in nature and calls
for no adjudication. Ground No.2 is with regard to rejection of
claim under section 10(21) of the appellant by the Assessing
Officer. The Assessing Officer observes that the benefit of section
10(21) is available only to an institution notified as an
"Association" and not to an "Institution". Whereas, relying on the
decisions of the Hon'ble ITAT in its own case for earlier
assessment years, the appellant contends that they are eligible for
the exemption under section 10(21).
The relevant part of section 10(21) reads as follows:
10(21) any income of a research association for the time
being approved for the purpose of clause (ii) or clause (iii) of
sub-section (1) of section 35:
And the relevant part of section 35(1) is as follows:
35. (1) In respect of expenditure on scientific research, the
following deductions shall be allowed-
(i) any expenditure (not being in the nature of capital
expenditure) laid out or expended on scientific research related
to the business.
(ii) an amount equal to one and three-fourth times of any
sum paid to a research, association which has as its object the
undertaking of scientific research or to a university, college or
other institution to be used for scientific research.
(iii) an amount equal to one and one -fourth times of any
sum paid to a company to be used by it for scientific research.
Thus, irrespective of the nomenclature any research association
approved under section 35(1) is eligible for the exemption under
section 10(21). In fact, the Finance Act, 2010, expanded the
https://www.mhc.tn.gov.in/judis
T.C.A.Nos.225, 228 & 229 of 2022
scope of exemption by substituting the word "scientific research
association" with "research association".
4.1 The Chennai "A" Bench of the ITAT in the appellant's own
case for the assessment year 1997-98 in ITA No.2309/Mds/2005
observed as follows:
The ld.Counsel for the Assessee has drawn our attention and
submitted that in sec.35(1)(ii) of the Act, the wordings '
Association, Institution and University have been used
interchangeably and the Assessee has also referred to definition
of these terms in dictionaries. Further, she submitted as under:
"The above would indicate that the terms
"Association" and Institution" in themselves have been
used in a wider sense and interchangeably. While the
benefit of Section 10(21) is available to an "Association"
as set out in sub-clause (ii) of section 35(1), the applicant
as per the definition of an "Association". Its bye-laws and
the ratio of the decisions cited clearly qualifies to be an
"Association" as it was designated in the first notification
issued".
It is seen from the Certificate of Registration of Societies that
except the change in the name, there is no change in the
objectives of the Assessee-society since its inception and this
change was effected by the Registrar of Societies on 24th May,
2002 wherein it is certified that the Society "Fredrick Institute of
Plant Protection And Toxicology (FIPPAT) changed its name as
International Institute of Bio Technology And Toxicology
(IIBAT)". It is a fact that the Assessee-society is a registered
society engaged in scientific research activities and ever since its
inception it is engaged with the objectives of the research in plan
protection, toxicology and related areas which take out from the
object of the Society reads as under:
1. To conduct studies on plant protection,
dissipation/environmental fate and characterize
chemistry of plant protection substances covering
biological, microbial, botanical and synthetic pesticides.
2. To elucidate possible toxicological consquences
due in the use of agrochemicals such as pesticides and
Drugs/Pharmaceuticals includes Natural/Ayurvedic
Drugs.
3. To analyze and evaluate bio safety of transgenic
crops/food.
https://www.mhc.tn.gov.in/judis
T.C.A.Nos.225, 228 & 229 of 2022
4. To compute risk assessment, based upon bio
safety investigations, of transgenic crops, recombinant
DNA and other biotech based products.
5. To identify and search for natural/biological
agents which can alleviate the possible toxicological
manifestations caused by chemical pesticides.
6. To conduct basis research studies to develop,
characterize and test in vitro cell line models to assess
toxicity of environmental agents
7. To establish and conduct non-clinical safety
assessment of environmental agents under the principles
of Good Laboratory Practices (GLP)"
The denial of exemption by the Assessing officer is based on the
fact that the Assessee is classified as an Institution. It is the case
of the Department that the Assessee-society is classified as an
Institution and not as an Association and as per the provisions of
section 10 (21) of the Act, exemption is available only to an
Association. But once the fact that the Assessee-society is
engaged in research work regarding agriculture related activities
and it is recognized as a leading National Body in the filed of
Research in Bio-Technology and Toxicology. Further, the
Central Board of Direct Taxes has classified the Assessee-society
as an Association in the year 1997, after due verification of its
object as well as its activities and there is no change in the
objectives of the assessee-society from its inception till date. In
view of these facts and circumstances of the case and respectfully
following the Tribunal's decision cited supra, we hold that the
Assessee is entitled to exemption under Section 10(21) of the Act
as the Assessee-society is engaged in research work in
agriculture related activities.
Respectfully following the decision of the Hon'ble ITAT in
the appellant's own case for the assessment year 1997-98 in ITA
No.2309/Mds/2005 I hold that the appellant is entitled to
exemption under section 10(21) of the Act as the appellant-
society is engaged in research work related to agriculture. The
appellant succeeds on this ground."
Being dissatisfied with the order of the appellate authority, the Revenue
preferred appeals before the Income Tax Appellate Tribunal. By order dated
https://www.mhc.tn.gov.in/judis
T.C.A.Nos.225, 228 & 229 of 2022
26.04.2018, the Tribunal dismissed the appeals filed by the Revenue, with the
following observations:
"3.We heard Shri Prabhu Mukunth Arun Kumar, the
learned Standing counsel for the Revenue and Shri G.Baskar, the
learned counsel for the assessee. During the course of hearing,
it was brought to the notice of the Bench that the CIT (Appeals)
has followed the order of this Tribunal in the assessee's own case
for the assessment year 1997-98 in which this Tribunal found that
the assessee is eligible for exemption under section 10(21) of the
Act. This order of the Tribunal for the assessment year 1997-98
was subsequently followed by this Tribunal in the assessee's own
case for assessment years 1998-99 and 2000-01. Even though an
appeal was said to be filed before the High Court, the learned
counsel submitted that the appeal was not numbered till date by
the High Court and it was returned for rectification of certain
errors. By producing a copy of the assessment order for the
assessment year 2015-16, the learned counsel for the assessee
submitted that the Assessing Officer at para 4.8 of his order for
the assessment year 2015-16 has extracted a letter said to be
written by the Sr. Standing Counsel for the Revenue saying that
these appeals were represented before the High Court. Be that as
it may, this Tribunal is of the considered opinion that when the
co-ordinate Bench of this Tribunal for assessment years 1997-98,
1998-99 and 2000-01 found that the assessee is eligible for
exemption under Section 10(21) of the Act, this Tribunal do not
find any reason to interfere with the order of the lower authority
and accordingly the order of the CIT (Appeals) is confirmed."
Aggrieved over the aforesaid order of the Tribunal, the Revenue is before this
court with the present tax case appeals.
3. Today, when the matters were taken up for consideration, the learned
counsel appearing for both sides submitted that the substantial question of law
raised herein, is covered in favour of the assessee, as per the judgment dated
15.02.2021 rendered by a Co-ordinate Bench of this Court in T.C.A.Nos.54 to
https://www.mhc.tn.gov.in/judis
T.C.A.Nos.225, 228 & 229 of 2022
56 of 2021 in respect of the assessee's own case relating to the assessment years
2010-2011, 2011-12 & 2015-16. The relevant passage of the said judgment is
extracted below for ready reference:
"12. Be that as it may, the Tribunal rightly took note of the
objectives of the assessee and their activities, which have been
carried out ever since their inception in the year 1987. They are
engaged in the research work in agricultural related activities and
it is recognized as a leading nationally acclaimed society engaged
in the field of research in Bio-Technology and Toxicology and
they undertake various aspects including research and
development studies that directly impact the safety in non-clinical,
health and environmental areas and the Tribunal has rightly
accepted the stand taken by the assessee and consequently
reversed the finding of the Assessing Officer who treated the
assessee acclaimed to have been a contractor.
13. Mr.J.Narayanasamy, learned Senior Standing Counsel
appearing for the appellant would vehemently contend that the
provisions of Section 10(21) of the Act is applicable only to
research association and not to institutions. The Assessing Officer
treated the assessee as an institution while granting approval
under Section 35(1)(ii) by the competent authority as well as by
the Directorate of Income Tax (Exemption) (DITE) and not as an
association and therefore, the assessee cannot claim the benefit
under Section 10(21) of the Act.
14. The above submission cannot be countenanced for more
than one reason. Firstly, ever since the inception of the assessee
society, they have been treated as an association. It is not disputed
by the Revenue that the assessee is registered under the provisions
of Tamil Nadu Societies Registration Act, 1975 and it has been
treated as an association/society since 1987. The change done in
the interregnum was set aside by the Tribunal, which decision
stands confirmed as on date, in the light of the various orders
passed by the Tribunal, which we have referred above. Therefore,
the contention raised by the Revenue does not merit acceptance.
15. In our considered view, the observation made by the
Assessing Officer is wholly unsustainable, going by the objectives,
for which, the assessee association had been established. Thus, in
the light of the above undisputed position, we find no good ground
https://www.mhc.tn.gov.in/judis
T.C.A.Nos.225, 228 & 229 of 2022
to interfere with the order passed by the Tribunal.
16. Accordingly, the appeals fail and they are dismissed
and the substantial question of law is answered against the
Revenue. No costs. Consequently, connected miscellaneous
petitions are closed."
4. In the light of the aforesaid decision, which is squarely applicable to the
facts of the present case, the substantial question of law raised in all these
appeals is answered in favour of the assessee and against the Revenue.
Accordingly, all the Tax case Appeals filed by the Revenue stand dismissed. No
costs.
[R.M.D., J.] [J.S.N.P.,
J.]
11.08.2022
Internet : Yes
Index : Yes / No
av/r n s
https://www.mhc.tn.gov.in/judis
T.C.A.Nos.225, 228 & 229 of 2022
To
1. The Income Tax Appellate Tribunal,
'A' Bench, Chennai.
2. The Principal Commissioner of Income Tax
(Exemptions),
Chennai Circle,
Chennai - 34.
3. The Deputy Commissioner of Income Tax
(Exemptions),
Chennai Circle,
Chennai - 34.
4. The Commissioner of Income Tax (Appeals) - 17,
Chennai.
https://www.mhc.tn.gov.in/judis
T.C.A.Nos.225, 228 & 229 of 2022
R. MAHADEVAN, J.
AND
J.SATHYA NARAYANA PRASAD, J.
av/rns
Tax Case Appeal Nos.225, 228 and
229 of 2022
11.08.2022
https://www.mhc.tn.gov.in/judis
