Big relief to Tata Trusts as Tribunal quashed revised assessment order

Sir Dorabji Tata Trust Vs DCIT (ITAT Mumbai)

Conclusion: The investment in Tata Sons by assessee trust was not thus for the purpose of investment in shares, but this shareholding being held by the assessee trust was undisputedly for the purpose of sharing the fruits of the success, of the Tata Group, for the benefit of the general public at large. The investments made by a charitable institution in furtherance of its objects, and the investments being held by a charitable institution, as its core corpus, for the furtherance of its objects were qualitatively very different. Thus, revision by CIT for violating the provisions of section 13(1)(d) was not justified.

Held: Assessee was a public charitable trust  registered as a charitable institution under section 12A. It had filed its return of income and its assessment, under section 143(3) was completed determining ‘Nil’ taxable income. Subsequently, CIT (Exemptions) issued a show cause notice requiring assessee to show cause as to why this order not be subjected to revision under section 263. CIT had taken a view that Trusts might have violated the provisions of section 13(1)(d) during the assessment year 2014-15 and  AO did not probe the breach adequately. It was held that during the course of the assessment proceedings, AO had sought information on both the points mentioned in the notice u/s. 263. All the information required by AO was submitted during the course of the proceedings. Thus, AO had complete information during assessment proceedings and had applied his mind and therefore the order passed by AO was not erroneous. Further, all the payments made to Trustees were in accordance with the provisions of Trust Deed and the Act, even assuming that it was held that the payment was in contravention of the Act, there would not be eligible for the exemption. Considering that assesseee had already applied more income than was required as per the provisions of the Act and without prejudice been allowed to accumulate the surplus, the assessed income would continue to be at NIL. Consequently, there would be no tax effect and thus, the order of the AO could not be said to be prejudicial to the interest of the revenue. The investment in Tata Sons by the assessee trust was not thus for the purpose of investment in shares, but this shareholding being held by the assessee trust was undisputedly for the purpose of sharing the fruits of the success, of the Tata Group, for the benefit of the general public at large. The investments made by a charitable institution in furtherance of its objects, and the investments being held by a charitable institution, as its core corpus, for the furtherance of its objects were qualitatively very different.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

1. By way of this appeal, the assessee appellant has challenged the correctness of the order dated 29th March 2019 passed by the learned Commissioner of Income Tax (Exemptions) under section 263 r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’), for the assessment year 2014-15.

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