THE COMMISSIONER OF INCOME TAX HYD V. M/S.GURUKUL GHATKESAR TRUST HYD

RC/232/1996

AI Insights

The case involves the Commissioner of Income-Tax, A.P.1, Hyderabad as the applicant and M/s.Gurukul Ghatkesar Trust, Hyderabad as the respondent. The Income Tax Appellate Tribunal referred two questions to the High Court regarding the trust's entitlement to exemption under Section 10(22) of the Income Tax Act and compliance with Sections 11 & 13 concerning investments. The court relied on a previous judgment which found that the trust's activities did not solely serve educational purposes, thus not qualifying for the exemption under Section 10(22). Additionally, the trust's investments were found to violate Section 13(1)(c), leading to the conclusion that the trust was not exempt under Sections 11 and 12 for the relevant assessment years.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 719228 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 23-11-2011
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax v Gurukul Ghatkeswar Trust
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Keywords: Educational Purpose; Exemption; Income Tax; Investment Violation; Trust
• Section: 148; 142(1); 11; 13; 13(1)(c); 13(1)(d); 256(1); 10(22); 139(8); 217

Judgement Text

"THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERENCE CASE No.232 of 1996 Dated:23.11.2011 Between: Commissioner of Income-Tax, A.P.1, Hyderabad. …Applicant and M/s.Gurukul Ghatkesar Trust, Hyderabad. …Respondent THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA REFERENCE CASE No.232 of 1996 ORDER: (Per Hon’ble Sri Justice V.V.S.Rao) The reference application under Section 256(1) of the Income Tax Act, 1961 (the Act), having been made by the Commissioner of Income Tax, the Income Tax Appellate Tribunal, Hyderabad Bench ‘B’, referred the following two questions for the decision of this Court. 1. Whether, on the facts and in the circumstances of the case, the Tribunal is justified in holding that the assessee-trust is entitled for exemption u/s.10(22) of the I.T.Act? 2. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the assessee- trust had not violated the provisions of sections 11 & 13 of the I.T.Act in investing a portion of its funds in M/s.B.K.Industries, Nizamabad and with Smt.Janakidevi, one of the trustees and widow of the founder of the Trust? The respondent (assessee) claims to be a Trust. For the assessment years 1986-1987 and 1987-1988 the Assistant Commissioner of Income Tax, Circle-1(4), Hyderabad, issued a notice under Section 148 of the Act to file a return of income, in vain. The Assessing Officer, therefore, issued notice under Section 142(1) of the Act calling upon the Trust of the assessee to file the return of the income and produce the relevant books of accounts. When the case was heard, earlier Trust sent a letter dated 02.02.1990 stating that under bona fide impression that there was no liability of income tax, they did not file the returns; registration granted by the Commissioner was cancelled; the appeals filed were pending before the Appellate Tribunal; and that there was no statutory obligation to respond to the notices. After conducting enquiry, the Assessing Officer assessed the total income at Rs.2,70,000/- and levied the tax and interest under Sections 139(8) and 217 of the Act. The Assessing Officer observed that the Trust funds were invested in M/s.B.K.Industries and that loans were advanced to Sri B.Kishanlal in violation of Section 13(1)(d) of the Act, and therefore, the Trust is not exempted under Sections 11 and 12 of the Act for the relevant assessment year. A similar order was passed for the assessment year 1987-1988 also. The appeals filed by the assessee-Trust were allowed by the Commissioner of Income Tax (Appeals), and the appeals of the Revenue before the Appellate Tribunal met failure. In spite of service of notice, none appears for the respondent, and therefore, the respondent is set ex parte. The Junior Standing Counsel for Income Tax Department placed reliance on a recent judgment of a Division Bench of this Court to which one of us (VVSRJ) is a member in Commissioner of Income Tax v Gurukul Ghatkeswar Trust [1], which was a case which dealt with two similar questions referred to this Court for the assessment years 1983-1984 to 1985- 1986. The first question was answered in the negative against the assessee-trust and in favour of the Revenue observing that the objects of the Trust are alien to educational purposes and exemption under Section 10(22) of the Act is available only if the assessee-Trust is an educational institution existing solely for educational purposes and not for purposes of profit, and as the existence of the assessee-Trust is not solely for educational purposes, the benefit of Section 10(22) of the Act would not be available to them. Insofar as the second question is concerned, this Court observed that by advancing monies to M/s.B.K.Industries and others the assessee violated the provisions of Section 13(1)(c) of the Act, and accordingly, answered the question in the negative against the assessee and in favour of the Revenue. As the similar two questions have already been answered in favour of the Revenue, this Reference Case shall stand disposed of answering both the questions in the negative against the assessee and in favour of the Revenue. There shall be no order as to costs. _______________ (V.V.S.RAO, J) ____________________ (B.N.RAO NALLA, J) 23.11.2011 vs [1] (2011) 332 IT R 611 (AP) "