Case Law Details
CIT Vs St. Thomas Cathedral Church (Kerala High Court)
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 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 satisfy the requirement of Section 11 (4A).
FULL TEXT OF THE HIGH COURT ORDER /JUDGEMENT
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, 19881989, 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?
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.?
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?”
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 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 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.
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).
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.
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.
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.
