Kamma Sangham, Hyderabad V. The Director of Income Tax (Exemptions) Hyderabad

ITTA/21/2014

AI Insights

The case involves M/s Kamma Sangham, Hyderabad, the appellant, contesting the decision of the learned Tribunal which denied them exemption under Section 11 of the Income Tax Act, 1961 for the assessment year 2004-05. The Tribunal had found that the appellant's investments were in commercial activities and that the scholarships provided were to a specific community, which did not align with the broader charitable purposes required for exemption under the Act. The High Court, after reviewing the submissions and evidence, agreed with the Tribunal's findings and dismissed the appeal.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 796312 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 05-02-2014
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: C P RAMASWAMI
• Keywords: Charitable purposes; Commercial Activity; Community; Exemption; Immovable Property; Scholarships; Particular caste
• Section: 11; 11(5)

Judgement Text

"HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A.No.21 of 2014 Date: 05.02.2014 Between: M/s Kamma Sangham, Hyderabad .....Appellant AND The Director of Income Tax (Exemptions) Hyderabad. ...Respondent HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A.No.21 of 2014 JUDGMENT: (per Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta ) This appeal is sought to be preferred and admitted against the judgment and order of the learned Tribunal dated 5th October, 2012 in relation to the assessment year 2004-05 on the following suggested questions of law: (1) On the facts and in the circumstances of the case, whether the Tribunal was correct in law in perversely holding that the investment made in immovable property was a commercial activity despite the provisions of Section 11 (5) of the Income Tax Act, 1961 treating such investment as application for charitable purposes? (2) Whether the learned ITAT was correct in law in denying exemption to the appellant that beneficiaries of scholarships belonged to a particular caste despite the fact that the appellant trust has not been created or established for the benefit of a particular caste nor the scholarships were awarded to beneficiaries belonging to a single community? The short fact is that the assessee is prayed for exemption under Section 11 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). The learned Tribunal has allowed the appeal filed by the Revenue holding that the assessee trust is not entitled to exemption on appreciation of fact. Dr.C.P.Ramaswami, learned Counsel for the appellant submits that this appreciation of fact is absurdly perverse inasmuch as the actual finding is not supported by any material rather the material supports the case of the assessee that it has carrying on charitable activity in the relevant assessment year. Dr.C.P.Ramaswami has drawn our attention to the receipts and payments account for year ending 2003-04, particularly the item of the payments and says that the expenditure incurred on account of the charitable activities, namely, by payment of scholarships and also construction of community hall, amply borne out the fact that the charitable activity was done by the assessee during the aforesaid assessment year. The learned Tribunal has totally overlooked the aforesaid fact. In view of the aforesaid submission, we just quote the fact- findings of the learned Tribunal on this issue. In paragraph-8 of the judgment, the learned Tribunal held as under: “From the facts found on record during the relevant financial year, the assessee has invested major portion of its income in construction of the commercial complex and community hall. Excepting a small amount paid towards scholarship nothing was paid towards charitable purpose as per the objects. Even the scholarships were given to students belonging to a particular community.” According to Dr.C.P.Ramaswami, the use of words ‘small amount’ is not supported by any document. Though, it is not our task to do, we have seen the receipts and payments account, which is referred to by Dr.C.P.Ramaswami, it has to be done because the point of perversity has been taken. It appears, in that year, the assessee trust has received a total sum of Rs.1,34,03,415-99. As against the receipt of the aforesaid amount a sum of Rs.7,04,200-00 has been spent on account of scholarships. Therefore, going by the proportion of the receipts and payments, we think that the learned Tribunal has correctly and modestly recorded as ‘small amount’. Therefore, we record that only very insignificant portion of the amount of receipt has been spent for charitable activities. The learned Tribunal again found on fact that the aforesaid amount spent for scholarships has been given only to a particular community, not the people at large. The object clause of this does not provide so to get information of a particular community. Hence, the very purpose of charitable activity in that particular assessment year is defeated. We, therefore, do not find any merit in this appeal. Accordingly, we dismiss the appeal with costs assessed at Rs.1,000/- (Rupees One thousand only) to be paid by the appellant. Miscellaneous petitions pending, if any, shall also stand closed. ___________________ K.J. SENGUPTA, CJ __________________ SANJAY KUMAR, J 05.02.2014 Gsn NOTE: L.R.COPY TO BE MARKED: NO "