Skip to content


Commissioner of Income-tax, Tamil Nadu-i, Madras Vs. Investment and Commercial Corporation (P.) Ltd. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberTax Case No. 1259 of 1977
Judge
Reported in[1984]150ITR639(Mad)
ActsIncome Tax Act, 1961 - Sections 11, 11(1), 11(2), 104, 104(1) and 104(2)
AppellantCommissioner of Income-tax, Tamil Nadu-i, Madras
Respondentinvestment and Commercial Corporation (P.) Ltd.
Appellant AdvocateJ. Jayaraman, Adv.
Respondent AdvocateR. Santhana Krishnan, Adv.
Excerpt:
- - (1) if he is satisfied that at least seventy-five per cent......the act contending that 75% of the share capital was held by s.rm.m.ct thiruppani trust, that the trust was charitable institution and, therefore, no order could be passed under s. 104 of the act. the ito, however, did not accept the contention of the assessee, as he had already held that the aforesaid trust was not entitled to exemption under s. 11 of the i.t. act, 1961. he, therefore, by an order dated december 30, 1967, levied penal super tax of rs. 7,257. 3. aggrieved by the aid order, the assessee preferred an appeal to the aac reiterating the same contentions as were urged before the ito. the aac, however, rejected the assessee's contentions. thereupon, the assessee preferred an appeal to the income-tax appellate tribunal. the tribunal taking note of its earlier order dated.....
Judgment:

Ramanujam, J.

1. The assessee, in this case, is a private limited company. For the assessment year 1963-64, it was assessed on a total income of Rs. 70,404 and the tax payable thereon was determined as Rs. 24,641. The ITO noticed that after deducting the aforesaid amount of tax, the surplus left with the assessee-company was Rs. 45,763 and that the sum of Rs. 31,250, being the dividends actually declared during the year of account, fell short of 90% of the surplus which should have been distributed by it as dividend, it being an investment company. He, therefore, initiated action under s. 104 of the I.T. Act, 1961, and required the assessee to show cause against the levy of penal super-tax.

2. The assessee resisted the proceedings initiated under s. 104 of the Act contending that 75% of the share capital was held by S.RM.M.Ct Thiruppani Trust, that the trust was charitable institution and, therefore, no order could be passed under s. 104 of the Act. The ITO, however, did not accept the contention of the assessee, as he had already held that the aforesaid trust was not entitled to exemption under s. 11 of the I.T. Act, 1961. He, therefore, by an order dated December 30, 1967, levied penal super tax of Rs. 7,257.

3. Aggrieved by the aid order, the assessee preferred an appeal to the AAC reiterating the same contentions as were urged before the ITO. The AAC, however, rejected the assessee's contentions. Thereupon, the assessee preferred an appeal to the Income-tax Appellate Tribunal. The Tribunal taking note of its earlier order dated February 8, 1972, wherein the said trust had been exempted in respect of the accumulated income under s. 11(2) of the I.T. Act, 1961, during the assessment years 1963-64 to 1965-66, upheld the assessee's contention that no order under s. 104(1) of the Act could be made. Aggrieved by the decision of the Tribunal, the Revenue has sought and obtained a reference on the following question of law.

'Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that no order under section 104(1) of the Income-tax Act, 1961, could be made in this case for the assessment year 1963-64 ?'

4. The Tribunal, as already stated, has relied on its own earlier decision dated February 8, 1972, in I.T.A. Nos. 684 to 686 of 1970-71, holding that the said trust is entitled to exemption in respect of its accumulated income under s. 11(2) of the I.T. Act for the assessment years 1963-64 to 1965-66 in support of its view that no order under s. 104 of the Act could be made against the assessee. It is seen that the said order of the Tribunal dated February 8, 1972, was the subject-matter of a reference in this court in T. Cs. Nos. 211 and 262 of 1975 [CIT v. S.R.M.C.T.M. Tiruppani Trust : [1984]150ITR642(Mad) (Appendix)]. This court relying on the decision reported in Second ITO v. M.C.T. Trust : [1976]102ITR138(Mad) , held that the trust is entitled to exemption under s. 11(2) of the Act in respect of the accumulated income. But the exemption granted to the trust in relation to the earlier assessment year 1963-64 to 1965-66, in respect of the accumulated income under s. 11(2) of the Act, cannot be taken to be decisive one way or the other, and the Tribunal may not be exact when it said that no order could be passed, merely because the trust has been exempted in respect of the accumulated income in respect of some assessment years. But the fact remains that the finding of the Tribunal and of this court with reference to the earlier assessment years that the trust is entitled to exemption in respect of the accumulated income under s. 11(2) of the Act is based on the assumption that the assessee is a charitable institution as contemplated by s. 11(1) of the Act. Therefore, the earlier decision of the Tribunal and of this court holding that the trust is entitled to exemption under s. 11(2) of the Act in respect of the accumulated income can be taken as a decision that the trust is a charitable institution as contemplated by s. 11(1) of the Act, for the unless the trust comes under s. 11(1) of the Act, it is not entitled to claim exemption under s. 11(2) in respect of its accumulated income. Since the decision of this court in T. Cs. Nos. 211 and 262 of 1975 proceeds on the basis that the trust is a charitable institution under s. 11(1) of the Act, for the purpose of s. 104(2)(ii) also, it has to be taken that the trust is a charitable institution. Section 104(2)(iii) of the I.T. Act, 1961, inter alia, says that the ITO shall not make an order under sub-s. (1) if he is satisfied that at least seventy-five per cent. of the share capital of the company is throughout the previous year beneficially held by an institution or fund for a charitable purpose the income from dividend whereof is exempt under s. 11. Since the decision of this court in T.

5. Cs. Nos. 211 and 262 of 1975 involves an inferential finding that the trust is a charitable institution as contemplated by s. 11(1) of the Act, we are of the view that s. 104(2)(iii) of the Act is a bar for passing an order levying penal super tax in this case. We have, therefore, to answer the question in the affirmative and against the Revenue. There will be no order as to costs.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //