(Judgment of the Court was delivered by K.RAVIRAJA PANDIAN,J.) The revenue has come up on appeal against the order of the Income Tax Appellate Tribunal, Madras 'A' Bench, dated 7.6.2005 passed in I.T.A.No.2311/Mds/2004 in respect of the assessment year 1999-2000 by formulating the following substantial questions of law:
"(1). Whether the Tribunal was right in law in holding that the conditions stipulated for availing the benefit of accumulation of income under
Section 11(2) are not satisfied?
(2). Whether the Tribunal is justified in law in holding that for the purpose of accumulation of the income as provided under
Section 11(2) of the Income Tax Act, requires specification of the purposes?
3. Whether the Tribunal was right in law in holding that the reasons stated in Form 10 are vague and not specific?
4. Whether the Tribunal was right in law in holding that the issue is a debatable one and cannot be subject to rectification under
Section 154 of the Act"
2. The facts of the case are as follows:
The appellant trust filed its return of income declaring "Nil" income after claiming exemption under
Section 11 of the Income-tax Act. Out of this surplus, the accumulation of income under
Section 11(1)(a) and 11(2) of the Income Tax Act has been claimed by the appellant. The appellant also filed form 10 giving reason for accumulating the income stating that the accumulation is for the purpose of contribution to poor feeding and charity donations. The assessing officer while deciding the application of income in Form NO.10 found that the purpose of accumulation mentioned therein are vague and not specific and hence declined the benefit of accumulation under
Section 11(2) of the Act. The accumulation was granted on the gross receipts and not on the net income. The assessee filed a petition under
Section 154 for rectification of the above order which was dismissed by the assessing officer. Aggrieved by the
Section 154 order, the appellant filed an appeal to the Commissioner of Income-tax (Appeals) before whom it was argued that the reason given for accumulation are for specific purposes and there is no dispute that they are not charitable in nature. Further,the trust is under the control of Official Trustee of Tamil Nadu and it has to get the permission from the High Court for spending the amount. The appellant filed a copy of the order of CIT(A) in the assessee's own case for assessment year 2001-2002 in I.T.A.No.87/2002-03 dated 18.3.2003. The CIT(A) rejected the arguments and held that the principle of res judicata does not apply to income tax proceedings and since in another case the CIT(A) has held in favour oft he Department,the issue is debatable one and cannot be subject to rectification under
Section 154 and confirmed the order of the assessing officer. Aggrieved by the said order, the appellant filed appeal to the Income-tax Appellate Tribunal contending that the reasons stated in Form 10 are specific and valid within the objects of the Trust and as per the document, the appellant has to incur the expenses and the appellant has to obtain permission from the High Court of Madras before spending the amount and also the Official Trustee will have to act under the supervision of the High Court. The appellant placed reliance on a decision of the Delhi High Court in the case of Hotel and Restaurant Association (260 ITR 190). The Tribunal after considering the arguments has held that the conditions stipulated in form 10 for availing the benefit of accumulation of income under
Section 11(2) are not satisfied and relied on Madras High Court judgment reported in 245 ITR 400 which is not applicable to the facts of the case. The Tribunal further held that this being a debatable point of law cannot be subject to rectification under
Section 154 and dismissed the appeal filed by the appeal. Aggrieved by the same, the present appeal is filed.
3. The learned counsel appearing for the appellant as well as the counsel for the respondent submits that the issue involved in this appeal is covered by the decision of this Court in the case of Estate of Kadapakam Charities Vs. The Asst.Director of Income Tax (Exemptions) II, Chennai 34 (T.C.(A) No.281 of 2004) dated 15.12.2008,wherein it was observed as follows:
".... 8.The decision of the Calcutta High Court will not strictly apply to this case, since in that case in Form 10, all the objects of the trust had been enumerated and therefore, rejection of Form 10 was not justified. In this case, the purpose has been specified viz., repair and renovation of the building, and the difficulties in immediately starting the renovation have also been brought to the notice of the authorities. But at the same time, we also see that Form 10 has not been duly filled up. Even in the matter decided by the Calcutta High Court, the assessee was allowed to adduce fresh evidence to show the specific purpose for which the trust requires accumulation of the income. In this case too, especially in view of the fact that it is AG & OT who is administering the trust, we feel that the same indulgence could be shown. We are not answering the questions of law raised, however, we remand the matter to the Assessing Officer and the assessee shall specify the purpose in addition to renovation and repair of the building and also the amount and the period for which accumulation is required, and the Assessing Officer shall consider the same in accordance with law...."
4. Having regard to the submission made by the counsel on either side, the order of the Tribunal is hereby set aside and the matter is remitted back to the assessing officer in terms of the direction given in the order dated 15.12.2008 made in T.C.(A) No.281 of 2004 and the tax case is disposed of accordingly. Consequently, the connected miscellaneous petition is closed.
usk Copy to:
1.The Income-tax Appellate Tribunal, Madras A Bench, Chennai
2. The Commissioner of Income Tax (Appeals)-XI Chennai
3.The Asst.Director of Income-tax (Exemptions)-II Chennai