Judgment in T.C.A.Nos.268 of 2016 [C.I.T., -Vs- M/s.Four M Maritime Pvt Ltd.,] dated 12.03.2020 IN HIGH COURT OF JUDICATURE AT MADRAS DATED : 12.03.2020 CORAM HON'BLE DR.JUSTICE VINEET KOTHARI AND HON'BLE MR.JUSTICE R.SURESH KUMAR T.C.A.Nos.268 and 269 of 2016 and C.M.P.No.5840 of 2016 M/s.CNN Educational Trust 2/47, Dr.Basuvaiah Nagar Adasholai, Ooty, Nilgiris-643 001. PAN : AAATC8167G Appellant in both TCAs -Vs- Income Tax Officer Ward I(1), Ooty. Respondent in both TCAs For Appellant : Mr.S.Sridhar For Respondent : Mr.J.Narayanasamy, Senior Standing Counsel Prayer : Appeals under Section 260A of Income Tax Act, 1961 against order dated 23.09.2015 in I.T.A.Nos.2683 & 2684/Mds/2014 passed by Income Tax Appellate Tribunal 'A' Bench, Chennai. COMMON JUDGMENT (Judgment of Court was delivered by DR.VINEET KOTHARI, J.) Assessee, C.N.N.Educational Trust has filed these appeals under Section 260A of Income Tax Act, 1961 aggrieved by order passed by learned Income Tax Appellate Tribunal 'A' Bench, Chennai on 23.09.2015, raising purported questions of law Page 1 of 8 http://www.judis.nic.in Judgment in T.C.A.Nos.268 of 2016 [C.I.T., -Vs- M/s.Four M Maritime Pvt Ltd.,] dated 12.03.2020 arising from said order. appeals were admitted by Coordinate Bench of this Court on 13.04.2016 on following substantial questions of law. "(1) Whether Appellate Tribunal is correct in law in their action to reject and to sustain denial of tax exemption claimed in terms of Section 11 of Act consequent to non acceptance of plea for accumulation of income as per Section 11(2) of Act read with Form No.10 on presumption of wrong facts establishing perversity in such findings recorded in relation thereto? (2) Whether Appellate Tribunal is correct in not considering power vested with First Appellate Authority for entertaining plea for accumulation of income as per Section 11(2) of Act read with Form No.10 even after noticing compliance of defects pointed out in making said plea in statutorily prescribed Form No.10 filed before Original Authority? And (3) Whether Appellate Tribunal was correct in law in rejecting plea for accumulation of income, which resulted in denial of tax exemption under Section 11 of Act even though purpose of accumulation was clearly communicated to Original Authority proving violation of principles of legitimate expectation at every stage of proceedings?" 2.The relevant findings of learned Tribunal denying exemption to Assessee under Section 11 of Income Tax Act, 1961, are quoted below for ready reference. Page 2 of 8 http://www.judis.nic.in Judgment in T.C.A.Nos.268 of 2016 [C.I.T., -Vs- M/s.Four M Maritime Pvt Ltd.,] dated 12.03.2020 " 6. We have heard both parties and perused material on record. As seen from above, it is necessary that AO must have information under Form-10 at time of completion of assessment and in its absence, it is not possible for assessing authority to give benefit of such exclusion. We are completely in agreement with above judgment. But in present case, though assessee filed Form-10, it should be considered rectified in view of resolution passed. resolution passed does not show name of assessee as well as period. Thus, resolution is also defective and it is not having all information required. Further, it did not comply with requirements of Sec.11(2) of Act, which reads as follows: "11(2) [Where [eighty five] per cent of income referred to in clause (a) of sub-section(1) read with Explanation to that sub-section is not applied, or is not deemed to have been applied, to charitable or religious purposes in India during previous year, but is accumulated or set apart either in whole or in part, for application to such purposes in India, such income so accumulated or set apart shall not be included in total income of previous year of person in receipt of income, provided following conditions are complied with, namely:--] (a) such person specifies, by notice in writing given to [Assessing] Officer in prescribed manner, purpose for which income is being accumulated or set apart and period for which income is to be accumulated or set apart, which shall in no case exceed ten years; Page 3 of 8 http://www.judis.nic.in Judgment in T.C.A.Nos.268 of 2016 [C.I.T., -Vs- M/s.Four M Maritime Pvt Ltd.,] dated 12.03.2020 (b) money so accumulated or set apart is invested or deposited in forms or modes specified in sub-section (5)]" 7. There is no dispute that it is mandate of Sec.11 of Act to specify purpose and period for which accumulation is sought for. above position was upheld by Jurisdictional High Court in case of CIT Vs. MCT Muthiah Chettiar Family Trust (245 ITR 400), wherein it was held as under: "The trust is allowed to accumulate its income for maximum period of ten years. condition is that trust should specify in prescribed form purpose for which income is accumulated or set apart. It is not enough for trustees to repeat objects of trust, but they must specify particular purpose for which income is being accumulated." 7.1. Similar view was also expressed by High Court of Calcutta in case of DIT(E) Vs. Singhania Charitable Trust (199 ITR 189)(Cal), wherein it was held as under: "Doubtless, it is not necessary that assessee has to mention only one specific object. There can be setting apart and accumulation of income for more objects than one but whatever objects or purposes might be, assessee must specify in notice concrete nature of purposes, for which Page 4 of 8 http://www.judis.nic.in Judgment in T.C.A.Nos.268 of 2016 [C.I.T., -Vs- M/s.Four M Maritime Pvt Ltd.,] dated 12.03.2020 accumulation is being made. Plurality of purposes for accumulation may not be precluded but it must depend on exact and precise purposes for which accumulation is intended for statutory period of ten years. generating of objects of trust cannot take place of specificity of need for accumulation." 8. Further, it is pertinent to note that assessee has not complied with provisions of Sec.11(5) of Act. Considering totality of facts and circumstances of case, in our opinion, orders of lower authorities are justified in dismissing appeal of assessee. Accordingly, we are inclined to dismiss appeals for assessment years 2008-09 and 2009-10." 3. Learned counsel for Assessee Mr.S.Sridhar however submitted that except for these two assessment years in question ie., A.Y.2008-09 and 2009-10, Assessee Trust has been assessed by Department as 'Charitable Trust' under Section 11 of Income Tax Act. He submitted that accumulation of surplus funds of Rs.59,13,658/- was resolved to be spent for purpose of construction of building and purchase of assets for usage of Trust and corrected Form No.10 dated 01.09.2008, along with said Resolution was furnished before learned Tribunal, but learned Tribunal has failed to appreciate same in correct perspective. Page 5 of 8 http://www.judis.nic.in Judgment in T.C.A.Nos.268 of 2016 [C.I.T., -Vs- M/s.Four M Maritime Pvt Ltd.,] dated 12.03.2020 4. Per contra, Mr.J.Narayanasamy, learned Senior Standing Counsel for Revenue has submited before us that, said Resolution does not specify any details about alleged future use of said accumulated surplus funds and said Resolution has been considered by learned Tribunal in Para 6 of learned Tribunal's order quoted above. He therefore submitted that those findings of learned Tribunal do not require any interference by this Court. 5. Having heard learned counsel for parties, we are of opinion that, matter would deserve remand to learned Income Tax Appellate Tribunal. As matter of fact, Assessee could have approached learned Tribunal by way of Miscellaneous Application if document like Form No.10 along with Resolution filed before learned Tribunal contained all details and evidence of such accumulation set apart by Assessee Trust for purpose of construction of building etc., in terms of provisions of Section 11 permitted by law. We find from paragraph 6 of learned Tribunal's order that, though learned Tribunal has referred to said Resolution dated 01.09.2008 passed by Assessee Trust, without finding it to be defective, they have not given any benefit of same to Assessee Trust. Whether said surplus fund has been really spent by Assessee Trust for such construction or not for charitable purposes of Trust contained in its Trust Deed or not might be subsequent fact, which may be relevant for Tribunal to consider, coupled with fact that Assessee Trust has been assessed as such in Page 6 of 8 http://www.judis.nic.in Judgment in T.C.A.Nos.268 of 2016 [C.I.T., -Vs- M/s.Four M Maritime Pvt Ltd.,] dated 12.03.2020 'Exempted Category' for subsequent Assessment Years as stated by learned counsel for Assessee. 6. Therefore, in light of these facts, learned Tribunal should re-examine Form No.10 furnished by Assessee along with Resolution and additional evidence, which may be produced by Assessee Trust before learned Tribunal. Therefore, we dispose of present appeals without answering questions of law as such and request learned Tribunal to reconsider said Form No.10 dated 01.09.2008 and Resolution along with evidence of surplus amount having been spent by Assessee Trust for purposes of Trust. With above observations, appeals are disposed of. No costs. (V.K., J.) (R.S.K.,J.) 12-03-2020 Index : Yes/No Internet : Yes/No KST To Income Tax Appellate Tribunal 'A' Bench, Chennai. Page 7 of 8 http://www.judis.nic.in Judgment in T.C.A.Nos.268 of 2016 [C.I.T., -Vs- M/s.Four M Maritime Pvt Ltd.,] dated 12.03.2020 DR.VINEET KOTHARI, J. AND R.SURESH KUMAR, J. KST T.C.A.Nos.268 & 269 of 2016 12.03.2020 Page 8 of 8 http://www.judis.nic.in CNN Educational Trust v. Income-tax Officer, Ward-I(1), Ooty