Exemption under Section 11
only When Requirements under Sec. 11(4A) satisfied: Kerala High Court – 12th
December, 2019
only When Requirements under Sec. 11(4A) satisfied: Kerala High Court – 12th
December, 2019
The Kerala High Court has held that, “in order to decide whether
the assessee is entitled to the benefit of the exemption under Section 11, it
is necessary for the Tribunal to determine whether it satisfies the requirement
of Section 11 (4A) of the Income Tax Act”.
the assessee is entitled to the benefit of the exemption under Section 11, it
is necessary for the Tribunal to determine whether it satisfies the requirement
of Section 11 (4A) of the Income Tax Act”.
The Kerala High Court bench consisting of Justice C.K.Abdul
Rehim and Justice Amit Rawal made this observation in the case of The
Commissioner Of Income Tax, V. St.Thomas Cathedral Church which arose out of
the decision in I.T. Appeal Nos.730, 731, 261 &262 (Coch)/1994.
Rehim and Justice Amit Rawal made this observation in the case of The
Commissioner Of Income Tax, V. St.Thomas Cathedral Church which arose out of
the decision in I.T. Appeal Nos.730, 731, 261 &262 (Coch)/1994.
The moot question here was whether the income derived out of
Kuri business conducted by the Charitable Trust is eligible for an exemption or
not, in view of sub-section (4A) introduced to Section 11 of the Income Tax Act
with effect from 01-04-1984.
Kuri business conducted by the Charitable Trust is eligible for an exemption or
not, in view of sub-section (4A) introduced to Section 11 of the Income Tax Act
with effect from 01-04-1984.
The Church argued that the pursuant to the remand made by the
Hon’ble Supreme Court in the matter of Commissioner of Income Tax V.
Dharmodayam Co. (1997) 225 ITR 686 the Income Tax Appellate Tribunal, Cochin
Bench had reconsidered the matter and allowed the exemptions. Hence it was
submitted that the reference needs to be answered in favour of the assessee.
Hon’ble Supreme Court in the matter of Commissioner of Income Tax V.
Dharmodayam Co. (1997) 225 ITR 686 the Income Tax Appellate Tribunal, Cochin
Bench had reconsidered the matter and allowed the exemptions. Hence it was
submitted that the reference needs to be answered in favour of the assessee.
The Revenue contended that the order passed by the Tribunal in
the matter of Dharmodayam Co., cannot as such be taken as a precedent
applicable in the case of the present assessee, because it requires evaluation
of facts and circumstances, in order to hold whether the present assessee would
also satisfy the conditions stipulated under Section 11(4A).
the matter of Dharmodayam Co., cannot as such be taken as a precedent
applicable in the case of the present assessee, because it requires evaluation
of facts and circumstances, in order to hold whether the present assessee would
also satisfy the conditions stipulated under Section 11(4A).
The Court, without answering the questions of law referred,
remitted the appeals filed by The Commissioner Of Income Tax for fresh
consideration and disposal by the Appellate Tribunal on the basis of the
decision rendered by the Hon’ble Supreme Court in Commissioner of Income Tax V.
Dharmodayam Co. and another (2001) 248 ITR 816.
remitted the appeals filed by The Commissioner Of Income Tax for fresh
consideration and disposal by the Appellate Tribunal on the basis of the
decision rendered by the Hon’ble Supreme Court in Commissioner of Income Tax V.
Dharmodayam Co. and another (2001) 248 ITR 816.
——————————————————————
KERALA HIGH COURT
CIT VS ST. Thomas Cathedral Church
DATED : 13/12/2019
IN THE HIGH
COURT OF KERALA AT ERNAKULAM
COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE
MR.JUSTICE C.K.ABDUL REHIM
MR.JUSTICE C.K.ABDUL REHIM
&
THE HONOURABLE
MR. JUSTICE AMIT RAWAL
MR. JUSTICE AMIT RAWAL
WEDNESDAY, THE
13TH DAY OF NOVEMBER 2019 / 22ND KARTHIKA, 1941
13TH DAY OF NOVEMBER 2019 / 22ND KARTHIKA, 1941
ITR.No.2 OF 2005
ARIISING FROM
ORDER ITA 730/Coch/1994 OF I.T.A.TRIBUNAL,
ORDER ITA 730/Coch/1994 OF I.T.A.TRIBUNAL,
COCHIN BENCH
APPLICANT:
THE COMMISSIONER OF INCOME TAX,
COCHIN
BY ADVS.
SRI.P.K.RAVINDRANATHA MENON,SR.COUNSEL, GOI(TAXES)
SRI.GEORGE K. GEORGE, SC, FOR IT
RESPONDENT:
ST.THOMAS CATHEDRAL CHURCH,
IRINJALAKUDA
R1 BY ADV.
SRI.ANIL D. NAIR
SRI.ANIL D. NAIR
R1 BY ADV.
SRI.P.JINISH PAUL
SRI.P.JINISH PAUL
R1 BY ADV.
KUM.MEKHALA M.BENNY
KUM.MEKHALA M.BENNY
R1 BY ADV.
SRI.R.SREEJITH
SRI.R.SREEJITH
THIS INCOME TAX REFERENCE HAVING BEEN FINALLY HEARD
ON
ON
13.11.2019, ALONG WITH ITR.3/2005, ITR.4/2005,
ITR.1/2012, THE
ITR.1/2012, THE
COURT ON THE SAME DAY PASSED THE FOLLOWING:
ITR Nos.2, 3, 4/2005 & 1/2012 -2-
IN THE HIGH
COURT OF KERALA AT ERNAKULAM
COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE
MR.JUSTICE C.K.ABDUL REHIM
MR.JUSTICE C.K.ABDUL REHIM
&
THE HONOURABLE
MR. JUSTICE AMIT RAWAL
MR. JUSTICE AMIT RAWAL
WEDNESDAY, THE
13TH DAY OF NOVEMBER 2019 / 22ND KARTHIKA, 1941
13TH DAY OF NOVEMBER 2019 / 22ND KARTHIKA, 1941
ITR.No.3 OF 2005
ARIISING FROM
ORDER ITA 731/Coch/1994 OF I.T.A.TRIBUNAL,
ORDER ITA 731/Coch/1994 OF I.T.A.TRIBUNAL,
COCHIN BENCH
APPLICANT:
THE COMMISSIONER OF INCOME TAX,
COCHIN
BY ADVS.
SRI.P.K.RAVINDRANATHA MENON,SR.COUNSEL, GOI(TAXES)
SRI.GEORGE K. GEORGE, SC, FOR IT
RESPONDENT:
ST.THOMAS CATHEDRAL CHURCH,
IRINJALAKUDA
R1 BY ADV.
SRI.ANIL D. NAIR
SRI.ANIL D. NAIR
R1 BY ADV.
SRI.P.JINISH PAUL
SRI.P.JINISH PAUL
R1 BY ADV.
KUM.MEKHALA M.BENNY
KUM.MEKHALA M.BENNY
R1 BY ADV.
SRI.R.SREEJITH
SRI.R.SREEJITH
THIS INCOME TAX REFERENCE HAVING BEEN FINALLY HEARD
ON
ON
13.11.2019, ALONG WITH ITR.2/2005, ITR.4/2005,
ITR.1/2012, THE
ITR.1/2012, THE
COURT ON THE SAME DAY PASSED THE FOLLOWING:
ITR Nos.2, 3, 4/2005 & 1/2012 -3-
IN THE HIGH
COURT OF KERALA AT ERNAKULAM
COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE
MR.JUSTICE C.K.ABDUL REHIM
MR.JUSTICE C.K.ABDUL REHIM
&
THE HONOURABLE
MR. JUSTICE AMIT RAWAL
MR. JUSTICE AMIT RAWAL
WEDNESDAY, THE
13TH DAY OF NOVEMBER 2019 / 22ND KARTHIKA, 1941
13TH DAY OF NOVEMBER 2019 / 22ND KARTHIKA, 1941
ITR.No.4 OF 2005
ARIISING FROM
ORDER ITA 262/Coch/1994 OF I.T.A.TRIBUNAL,
ORDER ITA 262/Coch/1994 OF I.T.A.TRIBUNAL,
COCHIN BENCH
APPLICANT:
THE COMMISSIONER OF INCOME TAX,
COCHIN
BY ADVS.
SRI.P.K.RAVINDRANATHA MENON,SR.COUNSEL, GOI(TAXES)
SRI.GEORGE K. GEORGE, SC, FOR IT
RESPONDENT:
ST.THOMAS CATHEDRAL CHURCH,
IRINJALAKUDA
R1 BY ADV.
SRI.ANIL D. NAIR
SRI.ANIL D. NAIR
R1 BY ADV.
SRI.P.JINISH PAUL
SRI.P.JINISH PAUL
R1 BY ADV.
KUM.MEKHALA M.BENNY
KUM.MEKHALA M.BENNY
R1 BY ADV.
SRI.R.SREEJITH
SRI.R.SREEJITH
THIS INCOME TAX REFERENCE HAVING BEEN FINALLY HEARD
ON
ON
13.11.2019, ALONG WITH ITR.2/2005, ITR.3/2005,
ITR.1/2012, THE
ITR.1/2012, THE
COURT ON THE SAME DAY PASSED THE FOLLOWING:
ITR Nos.2, 3, 4/2005 & 1/2012 -4-
IN THE HIGH
COURT OF KERALA AT ERNAKULAM
COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE
MR.JUSTICE C.K.ABDUL REHIM
MR.JUSTICE C.K.ABDUL REHIM
&
THE HONOURABLE
MR. JUSTICE AMIT RAWAL
MR. JUSTICE AMIT RAWAL
WEDNESDAY, THE
13TH DAY OF NOVEMBER 2019 / 22ND KARTHIKA, 1941
13TH DAY OF NOVEMBER 2019 / 22ND KARTHIKA, 1941
ITR.No.1 OF 2012
ARIISING FROM
ORDER ITA 261/Coch/1994 OF I.T.A.TRIBUNAL,
ORDER ITA 261/Coch/1994 OF I.T.A.TRIBUNAL,
COCHIN BENCH
APPLICANT:
THE COMMISSIONER OF INCOME TAX,
COCHIN
BY ADVS.
SRI.P.K.RAVINDRANATHA MENON, SR.COUNSEL, GOI(TAXES)
SRI.JOSE JOSEPH, SC, FOR INCOME TAX
RESPONDENT:
ST.THOMAS CATHEDRAL CHURCH,
TRICHUR
R1 BY ADV.
SRI.ANIL D. NAIR
SRI.ANIL D. NAIR
R1 BY ADV.
KUM.MEKHALA M.BENNY
KUM.MEKHALA M.BENNY
R1 BY ADV.
SRI.R.SREEJITH
SRI.R.SREEJITH
R1 BY ADV.
KUM.SOUMYA PRAKASH
KUM.SOUMYA PRAKASH
OTHER PRESENT:
SC- SRI. P.K.RAVINDRANATHA MENON
THIS INCOME TAX REFERENCE HAVING BEEN FINALLY HEARD
ON
ON
13.11.2019, ALONG WITH ITR.2/2005, ITR.3/2005,
ITR.4/2005, THE
ITR.4/2005, THE
COURT ON THE SAME DAY PASSED THE FOLLOWING:
ITR Nos.2, 3, 4/2005 & 1/2012 -5-
C.K. ABDUL REHIM,
J.
J.
&
AMIT RAWAL, J.
————————————————-
I.T.R Nos. 2, 3,
4 OF 2005
4 OF 2005
&
I.T.R No. 1 OF
2012
2012
————————————————-
DATED THIS THE
13th DAY OF NOVEMBER, 2019
13th DAY OF NOVEMBER, 2019
ORDER
Abdul Rehim, J.:
These Income Tax
Reference cases were registered on the basis of references made by the Income
Tax Appellate Tribunal, Cochin Bench in RA Nos. 332, 333, 334 & 335
(Coch)/1998, arising out of the decision in I.T. Appeal Nos.730, 731, 261 &
262 (Coch)/1994. The assessee is common in all these cases and the assessments
are with respect to the years 1986-1987, 1988- 1989, 1990-1991 and 1991-1992.
The questions of law upon which the references were made are common, which is
extracted below;
Reference cases were registered on the basis of references made by the Income
Tax Appellate Tribunal, Cochin Bench in RA Nos. 332, 333, 334 & 335
(Coch)/1998, arising out of the decision in I.T. Appeal Nos.730, 731, 261 &
262 (Coch)/1994. The assessee is common in all these cases and the assessments
are with respect to the years 1986-1987, 1988- 1989, 1990-1991 and 1991-1992.
The questions of law upon which the references were made are common, which is
extracted below;
“1.
Whether, on the facts and in the circumstances of the case and in view of
sub-section (4A) of Section 11, the assessee is entitled to exemption u/s.11 of
the Income-tax Act?
Whether, on the facts and in the circumstances of the case and in view of
sub-section (4A) of Section 11, the assessee is entitled to exemption u/s.11 of
the Income-tax Act?
2. Whether, on
the facts and in the circumstances of the case, the assessee is right in law
and fact in holding that the assessee is a religious and charitable institution
and carried on kuri business for utilizing the income therefrom also for the
charitable purpose such as medical relief, education etc.?
the facts and in the circumstances of the case, the assessee is right in law
and fact in holding that the assessee is a religious and charitable institution
and carried on kuri business for utilizing the income therefrom also for the
charitable purpose such as medical relief, education etc.?
3. Whether, on
the facts and in the circumstances of the case, the Tribunal is right in
holding that the interest claimed cannot be taxed in the hands of the assessee
trust as it is exempt from taxation?”
the facts and in the circumstances of the case, the Tribunal is right in
holding that the interest claimed cannot be taxed in the hands of the assessee
trust as it is exempt from taxation?”
2. The issue to
be decided is, whether the income derived out of Kuri business conducted by the
Charitable Trust is eligible for exemption or not, in view of sub-section (4A)
introduced to Section 11 of the Income Tax Act with effect from 01-04-1984. A
Division Bench of this court in Commissioner of Income Tax V. Dharmodayam Co.
(1997) 225 ITR 686 held that, if the Kuri business is held in trust, the income
therefrom would not be governed by sub-section (4A) as has been held by the
hon’ble Supreme Court in CIT V. Dharmodayam Co. (1977) 109 ITR 527 (SC). In the
said decision this court held that the Tribunal has correctly held that, the
assessee is entitled to claim exemption under Section 11 (1) of the Income Tax
Act with respect to its income from Kuri business. It is pointed out that
decision of this court in (1997) 225 ITR 686 was set aside by the hon’ble
Supreme Court in the decision in Commissioner of Income Tax V. Dharmodayam Co.
and another (2001) 248 ITR 816. It was held that until the introduction of
Section 11 (4A) with effect from 1st April, 1984, the case of the assesse
therein was governed by the decision of the Supreme Court reported in (1977)
109 ITR 527 (SC). But sub-section 11 (4A) has introduced certain conditions in
the matter of application of sub-sections (1), (2) (3) & (3A) of Section
11. The apex court observed that, the Tribunal had not applied its mind to those
conditions; nor the High Court had given due considerations to those aspects.
Therefore inorder to decide whether the assessee is entitled to the benefit of
the exemption under Section 11, it is necessary for the Tribunal to determine
whether it satisfy the requirement of Section 11 (4A).
be decided is, whether the income derived out of Kuri business conducted by the
Charitable Trust is eligible for exemption or not, in view of sub-section (4A)
introduced to Section 11 of the Income Tax Act with effect from 01-04-1984. A
Division Bench of this court in Commissioner of Income Tax V. Dharmodayam Co.
(1997) 225 ITR 686 held that, if the Kuri business is held in trust, the income
therefrom would not be governed by sub-section (4A) as has been held by the
hon’ble Supreme Court in CIT V. Dharmodayam Co. (1977) 109 ITR 527 (SC). In the
said decision this court held that the Tribunal has correctly held that, the
assessee is entitled to claim exemption under Section 11 (1) of the Income Tax
Act with respect to its income from Kuri business. It is pointed out that
decision of this court in (1997) 225 ITR 686 was set aside by the hon’ble
Supreme Court in the decision in Commissioner of Income Tax V. Dharmodayam Co.
and another (2001) 248 ITR 816. It was held that until the introduction of
Section 11 (4A) with effect from 1st April, 1984, the case of the assesse
therein was governed by the decision of the Supreme Court reported in (1977)
109 ITR 527 (SC). But sub-section 11 (4A) has introduced certain conditions in
the matter of application of sub-sections (1), (2) (3) & (3A) of Section
11. The apex court observed that, the Tribunal had not applied its mind to those
conditions; nor the High Court had given due considerations to those aspects.
Therefore inorder to decide whether the assessee is entitled to the benefit of
the exemption under Section 11, it is necessary for the Tribunal to determine
whether it satisfy the requirement of Section 11 (4A).
3. Learned
counsel appearing for the respondent had pointed out that, pursuant to the
remand made by the hon’ble Supreme Court in the matter of Dharmodayam Co., the
Income Tax Appellate Tribunal, Cochin Bench had reconsidered the matter and
allowed the exemptions. Therefore it is submitted that the reference need to be
answered in favour of the assessee.
counsel appearing for the respondent had pointed out that, pursuant to the
remand made by the hon’ble Supreme Court in the matter of Dharmodayam Co., the
Income Tax Appellate Tribunal, Cochin Bench had reconsidered the matter and
allowed the exemptions. Therefore it is submitted that the reference need to be
answered in favour of the assessee.
4. Per contra,
Sri. P.K. Ravindranatha Menon, Senior Standing Counsel for Income Tax contended
that, the order passed by the Tribunal in the matter of Dharmodayam Co., cannot
as such be taken as a precedent applicable in the case of the present assessee,
because it requires evaluation of facts and circumstances, inorder to hold
whether the present assessee would also satisfy the conditions stipulated under
Section 11 (4A).
Sri. P.K. Ravindranatha Menon, Senior Standing Counsel for Income Tax contended
that, the order passed by the Tribunal in the matter of Dharmodayam Co., cannot
as such be taken as a precedent applicable in the case of the present assessee,
because it requires evaluation of facts and circumstances, inorder to hold
whether the present assessee would also satisfy the conditions stipulated under
Section 11 (4A).
5. Sri. Anil D.
Nair, learned counsel for the respondent had raised a preliminary objection
that the amount involved in the reference cases are far below the limit
contained in the litigation policy declared by the Govt. of India, through
circulars issued by the CBDT. Therefore the reference cases itself need to be
dismissed on such basis, is the contention. On the contrary Senior Standing
counsel appearing for the revenue contended that, in cases where there is
cascading effect it is for the department to urge before the court that a
decision on the principle would be expedient. A decision of this court in
Commissioner of Income Tax V. Smt. Vasantha Anirudhan (2018) 401 ITR 279 (Ker.)
was relied upon in this regard.
Nair, learned counsel for the respondent had raised a preliminary objection
that the amount involved in the reference cases are far below the limit
contained in the litigation policy declared by the Govt. of India, through
circulars issued by the CBDT. Therefore the reference cases itself need to be
dismissed on such basis, is the contention. On the contrary Senior Standing
counsel appearing for the revenue contended that, in cases where there is
cascading effect it is for the department to urge before the court that a
decision on the principle would be expedient. A decision of this court in
Commissioner of Income Tax V. Smt. Vasantha Anirudhan (2018) 401 ITR 279 (Ker.)
was relied upon in this regard.
6. We are of the
considered opinion that in view of the remand made by the hon’ble Supreme Court
in Dharmodayam Co. case, the matter requires reconsideration by the Tribunal.
Of course, we take note of the fact that in the case of Dharmodayam Co. the
Tribunal had ultimately found the issue in favour of the assessee therein. But
question as to whether a similar situation prevails in the instant case which
would satisfy the different conditions stipulated under sub-section (4A), is a
matter which requires examination. Since some of the reference cases are of the
year 2005, we do not think it appropriate to dismiss them on the basis of the
litigation policy of the Government. Instead we leave it open to the respondent
to take up such contention before the Tribunal, at the time when the matter is
considered afresh.
considered opinion that in view of the remand made by the hon’ble Supreme Court
in Dharmodayam Co. case, the matter requires reconsideration by the Tribunal.
Of course, we take note of the fact that in the case of Dharmodayam Co. the
Tribunal had ultimately found the issue in favour of the assessee therein. But
question as to whether a similar situation prevails in the instant case which
would satisfy the different conditions stipulated under sub-section (4A), is a
matter which requires examination. Since some of the reference cases are of the
year 2005, we do not think it appropriate to dismiss them on the basis of the
litigation policy of the Government. Instead we leave it open to the respondent
to take up such contention before the Tribunal, at the time when the matter is
considered afresh.
7. Under the
above mentioned circumstances, instead of specifically answering question of
law referred, we think it only appropriate to remit the income tax appeals for
fresh consideration and disposal by the Appellate Tribunal on the basis of the
decision rendered by the hon’ble Supreme Court in Commissioner of Income Tax V.
Dharmodayam Co. and another (2001) 248 ITR 816. While considering the matter,
it is needless to observe that, the Tribunal shall take note of its
consequential decision in the case of Dharmodayam Co. in I.T.A.
Nos.681(Coch)/87 and connected cases, dated 11-02-2002. The Income Tax
Reference cases are disposed of as above.
above mentioned circumstances, instead of specifically answering question of
law referred, we think it only appropriate to remit the income tax appeals for
fresh consideration and disposal by the Appellate Tribunal on the basis of the
decision rendered by the hon’ble Supreme Court in Commissioner of Income Tax V.
Dharmodayam Co. and another (2001) 248 ITR 816. While considering the matter,
it is needless to observe that, the Tribunal shall take note of its
consequential decision in the case of Dharmodayam Co. in I.T.A.
Nos.681(Coch)/87 and connected cases, dated 11-02-2002. The Income Tax
Reference cases are disposed of as above.
Sd/-
C.K.ABDUL REHIM
JUDGE Sd/-
JUDGE Sd/-
AMIT RAWAL JUDGE
AMG
AMG