Nizam Mukarram Jah Trust for Education and Learning wins tax fight

By S A Ishaqui

Hyderabad, Dec 19: The Andhra Pradesh High Court has put an end to a 30 year-old legal tangle between the trustees of the Nizam Mukarram Jah Trust for Education and Learning and the income-tax department by justifying an order of the I-T Appellate Tribunal setting aside the orders of the I-T commissioner to impose tax on the Trust.

There was a dispute between the Trust and the I-T department regarding tax on Kothi Asafia, known as King Koti Palace, from 1982.

The Trust had acquired the palace as an oral gift from Prince Mukarram Jah on December 29, 1972. He had got the property as inheritance after the death of his grandfather Nizam Osman Ali Khan and had to pay the estate duty owed by his grandfather.

The Andhra Pradesh government had acquired the King Koti palace under the provisions of Land Acquisition Act, 1894, and had taken possession on September 23, 1981, by awarding a compensation of Rs 30.19 lakh in 1983. The entire compensation was appropriated as estate duty.

The Trust in its assessment proceedings for the years 1982-83 and 1983-84, had claimed that it had not violated the provisions of Section 13 (1) (c) of the Income Tax Act and, therefore, it was eligible for exemption under Section 11 of the Act.

The inspecting assistant commissioner had held that the Trust had not violated the provisions of the Act and extended the benefit to the Trust.

However, this decision was set aside by the I-T commissioner who held that the appropriation of the compensation amount was tantamount to application of the property of the Trust, and consequently provisions of Section 13 (1) (c) and Section 13 (3) were applicable.

While applying the above provisions, the commissioner had charged Rs 19,60,693 as tax on the capital gains arising from the transaction in the assessment year 1982-83 and 1983-84.

The order of the commissioner was set aside by the Income-Tax Appellate Tribunal and the matter was referred to the High Court in 1993.

After hearing the case, a division Bench comprising Chief Justice Kalyan Jyoti Sengupta and Justice K.C. Bhanu justified the order of the tribunal.