High Court Of Madras
CIT vs. Seethakathi Trust
Section 10(22), 11(5), 260A
Asst. Year 1996-97, 1997-98
P.D. Dinakaran & P.P.S. Janarthana Raja, JJ.
Tax Case (Appeal) Nos. 2608 & 2609 of 2006
4th December, 2007
Counsel Appeared :
N. Murali Kumaran, for the Appellant
JUDGMENT
P.D. DINAKARAN, J. :
The above tax case appeals are directed against the common order of the Tribunal in ITA Nos. 1188 and 1189/Mds/2004, dt. 8th March, 2006, raising the following substantial questions of law :
“1. Whether in the facts and circumstances of the case, the Tribunal was right in holding that the assessee is entitled for exemption under s. 10(22) of the IT Act ?
2. When the assessee has utilised the funds of the trust for purposes that are not in consonance with the objects of the trust, is not the AO right in denying exemption to the assessee under s. 10 (22) of the IT Act ?”
The Revenue is the appellant. The relevant assessment years are 1996-97 and 1997-98. The assessee is a public charitable trust, which runs three educational institutions and a medical centre. They claimed exemption under s. 10(22) of the IT Act for three assessment years, viz., 1995-96, 1996-97 and 1997-98. For the asst. yr. 1996-97, the assessee filed a return on 5th Feb., 1997 declaring excess of expenditure over income of Rs. 1,05,25,645. Since the similar expenditure was disallowed for the asst. yr. 1995-96, the AO denied the exemption for the asst. yr. 1996-97 also by order dt. 31st March, 2003. The AO was of the opinion that the assessee has violated the provisions of s. 11(5) r/w s.13(1)(d) of the Act and accordingly, denied the benefits of ss. 11 and 12 of the Act, consequent to which, the AO computed the income of the assessee at Rs. 73,25,645. Similarly, for the asst. yr. 1997-98, the assessee filed a return on 15th April, 1998 declaring excess of expenditure over income of Rs. 80,50,210 and for the same reason that weighed the AO with regard to the rejection of exemption under s. 10(22) of the Act for the asst. yr. 1996-97, the AO denied the exemption under s. 10(22) of the Act and also denied the benefits of ss. 11 and 12 of the Act holding that the assessee violated the provisions of s. 11(5) r/w s. 13(1)(d) of the Act for the asst. yr. 1997-98 also, by the same order dt. 31st March, 2003.
Aggrieved by the said order of the AO dt. 31st March, 2003, the assessee preferred appeals before the CIT(A), who, by order dt. 12th Feb., 2004, held that the assessee is entitled to exemption under s. 10(22) of the Act since educational institutions are entitled for the benefit under s. 10(22), 10(22A) and 10(23C) of the Act, and for the said purpose, it is not necessary to consider the assessee’s claim for deduction under s. 11 of the Act. Against the said order of the CIT (A), the Revenue went on appeal and the Tribunal, by order dt. 8th March, 2006, confirmed the order of the CIT taking note of its earlier order dt. 5th Jan., 2004 in the assessee’s own case for the asst. yr. 1998-99, wherein it was held that since the assessee trust had been maintaining separate statement of accounts for educational and charitable activities and were not mingled with both activities and as such, the assessee trust being carrying on the activity of educational purposes, it is entitled for exemption under s. 10(22), 10(22A) and 10(23C) of the Act and in which case, it is not necessary to pass an order in respect of the alternative plea of the assessee trust in regard to the deduction under s. 11 of the Act.
That part, the CBDT, themselves, issued a circular bearing No. 712, dt. 25th July, 1995 to the effect that the educational institutions are entitled for exemption under s. 10(22) of the Act and consequently, the benefit conferred under s. 10(22) cannot be denied on the ground of violation of s. 11(5) of the Act. The said circular reads as follows : Circular No. 712, dt. 25th July, 1995. Sub.: Investment of funds by educational institutions covered under s. 10(22) of the IT Act— Clarification regarding. Under s. 10(22) of the IT Act, any income of a university or other educational institution, existing solely for educational purposes and not for purposes of profit, is exempt from tax.
2. The Board have received representations from various institutions which fulfil the conditions laid down under s. 10(22) of the Act, but are denied exemption because their funds are not invested in accordance with the provisions of s. 11(5) of the Act. It is hereby clarified that since s. 10(22) does not impose any restriction regarding mode of investment of funds, such institutions are not required to invest their funds in the modes specified under s. 11(5) of the IT Act. This clarification will not apply to the institutions seeking exemption under s. 11 of the Act. (sd.) Under Secretary to the Government of India.”
5. Since the substantial questions of law raised in these appeals are centrifuged on the point whether the assessee is entitled for the benefit of s. 10(22) of the Act in view of the alleged violation of s. 11(5) r/w s. 13(1)(d) of the Act, in view of the above circular of the CBDT dt. 25th July, 1995, we do not see any substantial question of law that arises for our consideration.
Accordingly, finding no substantial question of law arises for consideration, the appeals stand dismissed.
[Citation : 295 ITR 520]
