Whether income exempt u/s 10 has to be excluded while computing income of charitable institutions exempt u/s 11? Whetherrequirement in section 11 with regard to application

Last updated: 11 April 2015

Court :
Bombay High Court

Brief :
The substantial question of law raised was whether an assessee claiming exemption u/s 11 can claim that income exempt u/s 10(33) and 10(38) to be excluded while computing the application of income for charitable or religious purpose. Held that there is nothing in the language of sections 10 or 11 which says that what is provided by section 10 or dealt with is not to be taken into consideration or omitted from the purview of section 11. If we accept the argument of the Revenue, the same would amount to reading into the provisions something which is expressly not there. The language ofthe two sections is plain and clear. The provisions, namely, sections10 and 11 fall under a Chapter which is titled “Incomes Which Do NotForm Part of Total Expenditure” (Chapter III). Section 10 deals withincomes not included in total income whereas section 11 deals withincome from property held for charitable or religious purposes. In such circumstances, the Tribunal was right in its conclusion that the income which in this case the assessee trust has not included by virtue of section 10, then, that cannot be considered under section 11.

Citation :
The Director of Income Tax (Exemptions) – Appellant- Versus - M/s. Jasubhai Foundation – Respondent

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORIGINAL CIVIL JURISDICTION

INCOME TAX APPEAL NO. 1310 OF 2013

The Director of Income Tax (Exemptions)

6th floor, Piramal Chambers, Lalbaug,

Mumbai – 400 012.

Appellant

Versus

M/s. JasubhaiFoundation

210, D.N. Road, Taj Building,

Fort, Mumbai – 400 001.

Respondent

Mr. A.R. Malhotra with Mr. N.A. Kazi for the Appellant.

Dr. K. Shivram, senior counsel i/b Mr. Rahul K. Hakani and Mr.Paras

S. Savla for the Respondent.

CORAM : S.C. DHARMADHIKARI &

A.K. MENON, JJ.

DATE OF PRONOUNCEMENT:

WEDNESDAY, 1ST APRIL, 2015

ORAL JUDGMENT : [Per S.C. Dharmadhikari, J.]

1. This appeal of the Revenue challenges the order passed by the Income Tax Appellate Tribunal dated 14th November, 2012. The assessment year in question is 2007-08.

2. The Tribunal dealt with an appeal of the Revenue, cross objections of the assessee and an appeal by the assessee. All these were directed against a common order passed by the Commissioner of Income Tax (Appeals) on 14th February, 2011. Mr.Malhotra, the learned counsel appearing on behalf of the Revenue in support of this appeal submits that this appeal raises substantial questions of law.

They are formulated at pages 4 and 5 of the paper-book. They read as under :

“A. Whether, on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in granting exemption u/s.10(33) and 10(38) to the tune of Rs.25.96 lakhs andRs.3.21 lakhs respectively, when this income forms apart of the income from property held under trust and therefore can only be claimed to be exempt u/s.11, if applied for charity and not u/s. 10 of the Act ?

B. Whether, on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in holding that the entire foundation ofsection 11 is based on the premise that the income is otherwise chargeable to tax, which is not supported by the provisions of the Act?

C. Whether, on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in granting exemption u/s. 10, when the same amounts to allowance of exemption within exemption whereby dividend income and long term capital gain derived from property held under trust but not applied for purposes of the trust is held to be exempt?

D. Whether, on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in giving relief to the assessee in respect ofRs.30 lakhs which was accumulated and set as ideu/s. 11(2) of the Act but not utilized for the specified purpose within the stipulated period of five years?

E. Whether, on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal was justified in giving relief to the assessee in respect ofRs.30 lakhs which was accumulated and set as ideu/s. 11(2) of the Act for the purpose of setting up of Digital Research and Training Centre but donated to another Trust i/e. Synapse, which cannot be constructed to have been fulfilled the purpose of accumulation?”

3. In relation to the first three questions Mr.Malhotra would submit that the Assessing Officer committed no mistake and his understanding of the provisions of law was accurate. Chapter III of the Income Tax Act, 1961, according to Mr.Malhotra, is entitled 'Incomes Which Do Not Form Part of Total Income'. Mr.Malhotra submits that the term “total income” appearing in section 10 and the wording of section 11 would indicate as to how what shall not be included in terms of section 10 in computing the total income of a previous year of any person will not govern the interpretation of section 11. That section deals with income from property held for charitable or religious purpose. Sub-section (1) of that section has in clear terms stated that subject to the provisions of sections 60 to 63,the following income shall not be included in the total income of the previous year of the person in receipt of the income offered therein. Therefore, the Assessing Officer held that for the purposes of fulfillment of the conditions of section 11 and section 12, particularly on application of the income derived from property held under trust wholly for charitable or religious purpose had not been further subjected to any exclusion. It is only the exemption in terms of section 11 which would apply and in relation to persons like the assessee before us. From their income there is no scope for exclusion of what is grantable under section 10(33) and section 10(38) of the Income Tax Act. Thus, the assessee would not be entitled to claim these benefits. That would sub-serve the purpose of the Act as well.

To read the full judgment, please find the attached file :

Attached file :

http://bombayhighcourt.nic.in/generatenewauth.php?auth=cGF0aD0uL2RhdGEvanVkZ2VtZW50cy8yMDE1LyZmbmFtZT1PU0lUWEE4MjQxMy5wZGYmc21mbGFnPU4=