Madras High Court
Commissioner Of Income Tax vs Indian Institute Of Engineering ... on 10 September, 2024
Bench: R.Suresh Kumar, C.Saravanan
T.C.A.No.134 of 2015
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 10.09.2024
CORAM :
THE HON'BLE MR.JUSTICE R.SURESH KUMAR
AND
THE HON'BLE MR.JUSTICE C.SARAVANAN
T.C.A.No.134 of 2015
Commissioner of Income Tax,
Chennai. .. Appellant
-vs-
Indian Institute of Engineering Technology,
363, Arcot Road, Kodambakkam,
Chennai 600 024. .. Respondent
Prayer: Appeal filed under Clause 15 of the Letters patent against the order
dated 27.05.2014 passed in ITA No.318/Mds/2014 by the Income Tax
Appellate Tribunal, 'D' Bench, Chennai.
For the Appellant : Mrs.V.Pushpa
Sr. Standing Counsel
For the Respondent : Mr.R.Veniatanarayanan
for M/s.Subbaraya Aiyar
Padmanabhan
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T.C.A.No.134 of 2015
JUDGMENT
(Judgment of the Court was made by R.Suresh Kumar, J.)
This appeal has been directed against the order passed by the Income
Tax Appellate Tribunal in ITA No.318/Mds/2014 dated 27.05.2014 for the
Assessment Year 2010-2011.
2. Though Mr.Venkatanarayanan, learned counsel appearing for the
respondent/assessee, has stated that this appeal is covered by low tax effect,
Mrs.V.Pushpa, learned senior standing counsel for the appellant/Revenue,
has stated that there has been no instructions from the Department with
regard to the low tax effect and therefore, the issue raised in this appeal has
to be decided on merits.
3. We have heard learned counsel for the appellant/Revenue as well as
learned counsel for the respondent/Assessee.
4. The respondent/Assessee is a charitable trust basically runs an
educational institution at Chennai. In fact, the assessee trust was established
in the year 1961, that is, on 01.02.1961, that is before the commencement of
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the Income Tax Act, 1961.
5. As per the Memorandum of Association of the assessee trust,
especially under clauses 36-41, there have been provisions available to pay
honorarium to the trust members or their family members.
6. Herein the case on hand, during the previous year of Assessment
Year 2010-2011, the revenue of the Trust was Rs.6,11,56,935/-. Since the
assessee trust already registered under Section 12A(a) of the Act, it claims
total exemption under Section 11 of the Act for the income registered by the
assessee trust. That, in fact, was considered and rejected by the Assessing
Authority on the ground that the trust had spent a sum of Rs.1,13,400/-
towards one Meenakshi Sundararajan, who is the wife of the founder of the
trust. By virtue of the said amount of Rs.1,13,400/- having been spent to the
individual, it was considered to be violation of Section 13(1)(c) of the Act,
thereby, according to the Assessing Authority, the assessee Trust had lost
the entitlement of claiming exemption under Section 11 of the Act.
Therefore, the income of Rs.6,11,56,935/- was to be considered as a taxable
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income.
7. The other issue that was also raised in the case was that there has
been a depreciation sought for which also had been considered and rejected
by the Assessing Authority.
8. When appeal had been carried by the assessee to the CIT
(Appeals), the order of the Assessing Authority has been confirmed as
against which the assessee preferred the appeal before the Income Tax
Appellate Tribunal.
9. The Income Tax Appellate Tribunal has held that the first issue
with regard to the rejection of the claim made by the assessee trust for
getting exemption under Section 11 of the Act is concerned, the payment of
Rs.1,13,400/- to the said Meenakshi Sundararajan cannot be construed as a
violation of Section 13(1)(c) of the Act because the trust was established
well before the Act came into force, that is, on 01.02.1961 and the
Memorandum of Association of the trust had paved the way for making this
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amount of honorarium to the trustees. When that being so, it is strictly in
consonance with the Memorandum of Association and therefore, it cannot
be construed as a violation of Section 13(1)(c).
10. The Income-tax Appellate Tribunal also has considered this aspect
within the meaning of Sections 13(1)(c), 13(2) and 13(3) of the Act and has
dealt with the issue in the following manner:
"8. It is the case of the assessee that the lower
authorities have erred in holding that sec.13(1)(c), 13(2) and
13(3) are attracted in respect of honorarium, ex-gratia and
medical expenses of Rs.1,13,400/- paid to Ms.Meenakshi
Sundararajan, who is the wife of the founder of the trust. It is
the case of the assessee that the lower authorities have
overlooked the first proviso to sec.13(1)(c)(ii), which provides
that the provisions of sub-clause(ii) shall not apply, to a trust
or institution created or established before the commencement
of this Act, to any use or application, whether directly or
indirectly, of any part of such income or any property of the
trust or institution for the benefit of any person referred to in
sub-sec.(3), if such use or application is by way of compliance
with a mandatory term of the trust or a mandatory rule
governing the institution.
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9. In the present case, the assessee trust has been
cretaed on 1.2.1961. This is before the commencement of the
Income-tax Act, 1961. As per clauses 36 to 41 of the
Memorandum of Association of the assessee trust,
Ms.Meenakshi Sundararajan is entitled for honorarium in
rendering services to the benefits of the assessee society.
Therefore, as rightly argued by the learned counsel, the
payment made to Ms.Meenakshi Sundararajan is covered by
the said exemption. Therefore, we hold that the lower
authorities have grossly erred in holding that the assessee is
not entitled for exemption under sec.11 of the Act."
Therefore, the Tribunal has come to the conclusion that the assessee is
entitled to claim exemption under Section 11 of the Act. When that being
so, the Assessing Authorities' move to treat the entire income as a taxable
income is erroneous and therefore, the assessment order passed by the
Assessing Authority as confirmed by the CIT (Appeals) has been reversed.
11. Insofar as the other issue with regard to the claim of depreciation
is concerned, the Tribunal followed its own decision in M/s.Mohamed
Sathak Trust in ITA.Nos.1436 and 2159/Mds/2012 dated 30.10.2013 and
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also decided the said issue in favour of the assessee.
12. We have gone through the decision and the reasoning given by the
Tribunal in the order impugned to decide both the issues in favour of the
assessee, with which, we are in full agreement and therefore, we do not find
any plausible reason to interfere with the said decision of the Tribunal.
Hence, the substantial questions of law are to be decided and answered in
favour of the assessee. Accordingly, the substantial questions of law are
answered in favour of the respondent/assessee and against the
appellant/Revenue.
Resultantly, the tax case appeal fails and is, accordingly, dismissed.
However, there is no order as to costs.
(R.S.K., J.) (C.S.N., J.)
10.09.2024
Index : Yes/No
NC : Yes/No
sra
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R.SURESH KUMAR, J.
AND
C.SARAVANAN,J.
(sra)
To
1. The Registrar,
Income Tax Appellate Tribunal,
'D' Bench, Chennai.
2. The Commissioner of Income-tax
(Appeals)-VII, Chennai.
3. The Deputy Director of Income-tax
(Exemptions)-III, Chennai.
10.09.2024
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