IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 11.03.2011 Coram : THE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMAN and THE HONOURABLE MR.JUSTICE P.P.S.JANARTHANA RAJA Tax Case (Appeal) Nos.809 to 813 of 2010 M/s Ramalingam Charities, Salem. Appellant in all TCs v. The Commissioner of Income Tax, Salem-7. Respondent in all TCs Appeals in T.C.(A) Nos.809 to 813 of 2010 are filed under section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras 'B' Bench, Chennai dated 03.03.2004 made in ITA Nos.847 to 851/Mds/2003, against the order of the Commissioner of Income Tax (Appeals) No.3, Gandhi Road, Salem 636 007 dated 11.2.2003 and made in ITA.No.185/02-03 186/02-03, 187/02-03, 188/02-03 & 189/02-03 against the order of the Income Tax Officer, Ward I (4) Salem dated 17.11.2003 in 14AR0001/14P/R0001/95- 96 to 99-2000 respectively. For appellant : Mr.K.Ramachandran, S.C. for Dr.Anitha Sumanth For respondent : Mr.K.Subramaniam COMMON JUDGMENT (Judgment of the Court was delivered by CHITRA VENKATARAMAN,J.) The assessee has come on appeal as against the order of the Income Tax Appellate Tribunal, Madras "B" Bench, Chennai, dated 03.03.2004 made in ITA Nos.847 to 851/Mds/2003 for the assessment years 1995-1996 to 1999-2000 by raising the following substantial questions of law. "1. Whether in the facts and circumstances of the case, the Tribunal erred in law in upholding the reassessment when no case was made out for invoking the provisions of Section 147 and Section 148 of the Income Tax Act, 1961? 2. Whether in the facts and circumstances of the case, https://hcservices.ecourts.gov.in/hcservices/ the Tribunal was justified in denying exemption under Section 11 even though corpus donations were received which are capital receipts not liable for taxation? 3. Whether the Tribunal was justified in denying exemption under Section 10(22) without directing the lower authorities to go into the facts of the case? 4. Whether the Tribunal was justified in considering the applicability of Section 10(22) when the departmental appeal merely disputed the action of CIT (Appeals) in setting aside the assessment without giving a finding himself? 5. Whether the Tribunal was justified in law in overlooking the fact that the deposits in Ramalingam Investments were received by the Trust as bequest as per the Wills executed by the wife and the brother of the testator? 2. Having regard to the common issues involved, common judgment is passed. 3. The assessee herein is a Trust created under the Trust Deed dated 07.06.1989 and the rectification deed dated 18.09.1989. A perusal of the Trust Deed shows that the object is not just restricted to advancement of education alone. The Trust deed reads that apart from providing education, the Trust has objects to construct, renovate, revive or contribute or help in any manner places of education, public halls, choultries, Thirumana mandapams, schools and Colleges etc, to establish, run and maintain the educational institutions, orphanages and to do all activities in advancement of education. 4. It is stated that during the relevant assessment years, the Trust was running two schools for primary and higher education in Salem. The Trust received corpus donations as per the Will dated 01.07.1994 executed by R.Susila, wife of Ramalingam, the author of the Trust and under the will dated 25.05.1995, executed by Shanmugam, brother of Ramalingam. The Trust received donations to the tune of Rs.8,81,500/-, which was lying in deposit in the respective names of the testators with M/s.Ramalingam Investments. These deposits were made by the testators themselves and not by the Trust. 5. It is stated that the Trust enjoyed exemption under Section 11 of the Act for all the years. As regards the assessment years in question viz., 1995-1996 to 1999-2000, the 'nil' returns filed by the assessee were processed under Section 143(1)(a) accepting the same. However, the assessments were sought to be re-opened under Section 147 of the Act on the ground that the Trust had made deposits in a sister firm in which the Trustees were interested and hence, there was violation of the provisions of Section 11(5) of the Act, thereby attracting the provisions of Section 13(1)(d) of https://hcservices.ecourts.gov.in/hcservices/ the Act. The assessee, however, pleaded that the Trust received contributions to the corpus only and as per Section 12, such capital receipts should not be brought to tax. The objection taken by the assessee was however rejected by the Assessing Officer. This resulted in the assessee preferring the appeals before the Commissioner of Income Tax (Appeals). The assessee challenged the assessment that Section 147 was not attracted to the facts and hence, the reassessments were illegal. Further, the assessee took the contention that as the assessee was running two recognised schools, exemption under Section 10(22) and 10(23C) ought to have been granted even if Section 11 was not applicable. The Commissioner of Income Tax (Appeals) remanded the matter back to the Assessing Authority to consider the case of the assessee with reference to the object clause contained in the Trust deed to examine the claim of exemption under Section 10(22) of the Act. 6. Aggrieved by the same, the assessee as well as the Revenue came on appeal before the Tribunal. In the appeal preferred by the assessee, it was contended that the first appellate authority had failed to consider the legality of the reopening of the assessment. On its part, in the appeal preferred by the Revenue, it was contended that without a finding given on the issues, the remand order passed by the Commissioner of Income Tax was unsustainable. By a common order, the Tribunal considered the claim of the Revenue as well as the assessee and pointed out that having regard to the fact that the Trust was not existing 'solely' for educational purposes and that the Trust had other objects to engage itself in running orphanages, Kalyana Mandapam, money lending business, etc., it could not be held that the Trust was one solely carrying on the educational activities. Thus the assessee had not satisfied the prerequisites for getting the benefit under Section 10(22) and Section 10(23C). The Tribunal further pointed out that having regard to the fact that the assessee had not fulfilled the conditions laid down under Section 11(5) of the Act and had diverted the funds to its sister concern, the assessee was not entitled to the exemption under Sections 11 and 12 of the Act. To claim exemption under Section 10(2) or Section 10(23C), the assessee has to carry on solely educational activities. In the case on hand, the assessee is existing not only for educational activities but also carrying on other activities like construction of Kalyana Mandapam, running orphanages etc. Hence, the assesseeis not eligible for the benefit of Section 10(22) or 10(23) of the Act. 7. However, as regards the finding of the Tribunal that the Trust was constructing Kalyana Mandapam and running orphanages, the assessee filed a petition in M.P.No.110/Mds/2004 in ITA Nos.847 to 851/Mds/2003 & Co. Nos.85 to 89/Mds/2003 under Section 254(2) to set right the factual errors in the order. By order dated 23.08.2004, the Tribunal held that having regard to the terms of the Trust deed and the facts and circumstances of the case, it was clearly established that the assessee was not engaged in the educational https://hcservices.ecourts.gov.in/hcservices/ activities alone but engaged in other activities also. The assessee has preferred the appeals under Section 260A as against the main order passed in the appeals. 8. Learned Senior counsel for the assessee pointed out that the Tribunal committed a serious error in not considering the claim of the assessee under Section 10(22) of the Act. That apart, he further pointed out that the amount that was given to the assessee towards the capital of the Trust under the testamentary dispositions were all deposits held by the testators in the sister concern and that the deposits were not one made by the Trust so as to attract the compliance of the provisions of Section 11(5) of the Act. Consequently, the question of rejecting the claim of the assessee herein does not arise. In any event, he pointed out that the claim made under Section 10(22) cannot be rejected outright by the Tribunal. 9. As far as the issue raised as to the correctness of the reassessment proceedings are concerned, learned Senior counsel pointed out that the assessee has not made any serious dispute. Consequently, the issue now raised before this Court is only with reference to the applicability of Section 11(5) and 12 of the Act and in the event of the assessee failing to satisfy the Court with reference to the above Sections, the question has to be considered as regards the availability of exemption under Section 10(22) of the Act. 10. Learned Senior Standing Counsel appearing for the Revenue took us through the order of the Tribunal only to point out the findings as regards the violation of the requirement under Section 11(5) of the Act to reject the claim of the assessee to claim the benefit under Section 12 of the Act. He also referred to the order of the Tribunal in the M.P. as regards the findings of fact that the assessee-Trust was not solely engaged for educational purposes. Having regard to the above- said facts, learned Senior Standing counsel submitted that no question of law arises for consideration of this Court. 11. Heard the learned counsel appearing on either side. 12. A perusal of the order of the Tribunal, particularly paragraph 8, shows that the Tribunal found as a matter of fact that the assessee Trust could not be considered as one existing solely for educational purposes. Quite apart from what has been stated in the order of the Tribunal regarding the activities explained in the Trust deed, the order passed in the Miscellaneous Petition further reaffirmed the findings of the Tribunal that the assessee has not been carrying on its activities solely on educational front. Thus, having arrived at the finding, the Tribunal further found that the assessee has not fulfilled the conditions laid down under Section 11 of the Act. Consequently, going by the facts, the question of https://hcservices.ecourts.gov.in/hcservices/ any benefit to be given under Section 11(5) and 12 of the Act does not arise. 13. A perusal of the order of the Tribunal shows that both on the aspect of Section 11(5) as well as Section 12, the factual issues remain unchallenged before this Court. Consequently, the findings are thus binding on the assessee. We do not find there exists any necessity to remand the matter for consideration of the claim under Section 11(5) by the Assessing Authority. 14. The only other point remaining for consideration is the entitlement of the assessee to fall under Section 10(22) of the Act. The Tribunal had not adverted to this aspect in the order as to the applicability of provisions of Section 10(22). In the background of the findings of the Tribunal and affirmed by this Court on the claim falling under Section 11(5) and 12 of the Act, the proper course herein would be to leave this question open for the assessee to canvass before the authority. If any question is raised as regards the applicability of Section 10(22) or any other provisions under the Act to claim exemption, it is open to the assessee to approach the authority concerned to consider the claim in accordance with law. For the present, we do not agree with the assessee's contention to grant the benefit under Section 11(5) of the Act. On the question of limitation as the learned Senior Counsel submitted that they are not seriously disputing the limitation, the findings on the Tribunal on this aspect stands confirmed. Accordingly, Question No.1 is answered against the assessee. As regards Question Nos.2 and 5, we confirm the findings of the Tribunal. 15. As regards question Nos.3 and 4, they are left open for the assessee to agitate before the authority concerned by producing necessary material in support of the claim. Consequently, the same stands remanded to the Assessing Authority. In the result, these appeals are disposed of with the directions as stated above. No costs. raa Sd/- Asst. Registrar //True Copy// Sub Asst. Registrar https://hcservices.ecourts.gov.in/hcservices/ To 1.The Commissioner of Income Tax, Salem-7. 2.The Assistant Registrar, Income Tax Appellate Tribunal, 'B' Bench, Chennai. 3.The Commissioner of Income Tax (Appeals) No.3, Gandhi Road, Salem 636 007. 4.The Income Tax Officer, Ward I (4) Salem. + 5 ccs to Dr. Anitha Sumanth, Advocate SR No.17923 + 5 ccs to Mr. K. Subramaniam, Advocate SR No.18299 to 18303 GV(CO) SR/6.5.2011 T C (A) Nos.809 to 813 of 2004 https://hcservices.ecourts.gov.in/hcservices/