Allahabad High Court
Commissioner Of Income-Tax vs Kamla Town Trust on 10 July, 1991
Equivalent citations: [1992]198ITR191(ALL)
JUDGMENT K.P. Singh, J.
1. This reference under Section 256(1) of the Income-tax Act, 1961, has been made by the Appellate Tribunal at the instance of the Commissioner of Income-tax, Kanpur, and the following questions have been referred for the opinion of this court :
"Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding :
(1) that the Income-tax Officer had not properly interpreted and implemented the order of the Income-tax Appellate Tribunal in I. T. A. No. 427 of 1974-75 dated August 13, 1975, and (2) that, while giving effect to the above order of the Tribunal, which had become final, the Income-tax Officer could not have recomputed the total income of the assessee in the manner in which he did it, vide the impugned order."
2. The assessee is a trust which derives income from property, interest and share income from a firm, Messrs. J.K., Calcutta. It had claimed exemption under Section 11(1)(a) of the Income-tax Act, 1961. The Income-tax Officer did not allow the exemption claimed by the assessee. Therefore, the assessee went in appeal and the Appellate Assistant Commissioner held through his order dated September 8, 1972, that the assessee was a charitable trust. Therefore, the provisions of Section 11(1)(a) of the Income-tax Act, 1961, were attracted subject to the conditions mentioned therein.
3. In pursuance of the order of the Appellate Assistant Commissioner, the Income-tax Officer, through his order dated July 27, 1973, determined the income of the assessee-trust at Rs. 2,17,621. He gave exemption to the tune of Rs. 10,000 only under Section 11(1)(a) and included the rest of the income as taxable income on the ground that the same had not been applied to charitable purposes. The income so computed included the share income of Rs. 2,05,150 derived from the firm, Messrs. J.K., Calcutta. Aggrieved by the order of the Income-tax Officer, the assessee went in appeal and contended that the original order of the Appellate Assistant Commissioner had not been properly implemented by the Income-tax Officer. It was further contended that the income of the trust had been attached by the Tax Recovery Officer, vide his order dated September 30, 1967. Therefore, the assessee had not physically received any income so as to satisfy the provisions of Section 11(1)(a) of the Income-tax Act, 1961. The Appellate Assistant Commissioner dismissed the appeal holding that the Income-tax Officer had properly implemented the order of remand and the arguments raised on behalf of the assessee raised fresh grounds which could not be entertained.
4. Against the order of the Appellate Assistant Commissioner, the assessee went to the Income-tax Appellate Tribunal which reversed the order of the Appellate Assistant Commissioner through its order dated August 13, 1975, and held that the assessee's contention did not raise any fresh grounds in appeal and that the Appellate Assistant Commissioner was wrong in not entertaining the grounds raised by the assessee. However, the Income-tax Appellate Tribunal, through its order dated August 13, 1975, set aside the order passed by the authorities below and asked the Income-tax Officer to pass an order under Section 251/154 of the Income tax Act, 1961, in the light of the observations made in the judgment. (See annexure 'D' of the paper book).
5. Thereafter, the Income-tax Officer, through his order dated February 7, 1976, redetermined the taxable income of the assessee and added the share income from Messrs. J.K., Calcutta, on the ground that though the income was subject to attachment it was never paid to the Department. Therefore, the claim of the assessee in this regard did not find favour with the Income-tax Officer.
6. Against the order of the Income-tax Officer dated February 7, 1976, the assessee went in appeal and the Appellate Assistant Commissioner, Special Range, Kanpur, through his order dated August 5, 1976, accepted the claim of the assessee for the assessment year 1968-69, which is under our consideration in this reference and observed as below :
".... However, he is directed to exclude the share income derived from the firm for the assessment year 1968-69 as the share income did not become available to the appellant for being spent on its objects due to the issue of notice under Section 226(3) on September 30, 1967."
7. Against the order of the Appellate Assistant Commissioner dated August 5, 1976, the Department preferred an appeal to the Income-tax Appellate Tribunal, Allahabad Bench, Allahabad, which dismissed the appeal through its order dated February 1, 1978.
8. The Commissioner of Income-tax, Kanpur, applied under Section 256(1) of the Income-tax Act for referring three questions of law, mentioned at pages 2 and 3 of the paper book for the opinion of this court but the Income-tax Appellate Tribunal has referred the two questions mentioned above.
9. Learned counsel for the Department has contended before us that the Income-tax Appellate Tribunal did not record any finding and the Income-tax Officer was justified in making the fresh assessment on the assessee. According to him, the casual observation in the order of the Appellate Tribunal dated August 13, 1975, would not help the assessee and the referred questions should be answered in favour of the Department. . . .
10. Learned counsel for the assessee drew our attention to paragraph 3 of the Tribunal's judgment dated August 13, 1975, wherein a plea has been raised to the effect that the entire income of the trust was attached under Section 226(3) and thus it was not possible for the trust to utilise its income for charitable purposes. In the aforesaid paragraph, the word "receipt" has been stressed and it has been indicated that, unless the trust physically received the income, it could not apply it on charitable purposes.
11. The Tribunal, while meeting the contentions of learned counsel for the assessee, has observed in paragraph 5 of the judgment as below :
". . . . Secondly, he was to decide as to whether the income of the trust was received by the assessee and could have been applied for it and if it was not so done, to what extent it was accumulated. We agree with Shri Upadhyaya that unless the trustees actually and physically receive the income of the trust, they cannot be expected to apply it on the objects of the trust. The question of application of an income can arise only when it has been actually received. This aspect, therefore, was not a new point raised on behalf of the assessee. ..."
". . . . We, therefore, do not agree with the Appellate Assistant Commissioner that in its appeal before him the assessee raised new points. They were not new points and the Appellate Assistant Commissioner should have gone into this question."
12. In our opinion, the contention of learned counsel for the Department that the Tribunal had only casually observed in favour of the assessee does not appear as correct. A perusal of the judgment of the Income-tax Appellate Tribunal dated August 13, 1975, indicates that the Tribunal recorded a categorical finding that, unless the income was physically received by the assessee, it could not be treated as income of the assessee and no question of spending it on charitable purposes would arise.
13. The word "finding" has been interpreted in a number of cases such as Pt. Hazari Lal Hatia v. ITO [1960] 39 ITR 265 ; AIR 1960 All 97 and ITO v. Murlidhar Bhagivan Das [1964] 52 ITR 335 ; AIR 1965 SC 342. A perusal of the judgment of the Income-tax Appellate Tribunal dated August 13, 1975, indicates that the Tribunal came to the conclusion that, unless the trustees actually and physically received the income of the trust, they cannot be expected to apply it on the objects of the trust. It is well-known by now that an erroneous decision operates as res judicata between parties. (See Mohanlal Goenka v. Benoy Kishna Muhherjee, AIR 1953 SC 65). If the Department was aggrieved by the judgment of the Income-tax Appellate Tribunal dated August 13, 1975, it should have pursued the matter further.
14. The Tribunal, in its judgment dated February 1, 1978, has interpreted the order dated August 13, 1975, in Income-tax Appeal No. 427 (All) of 1974-75 as below, vide paragraph 6 of the judgment :
"We have carefully examined the rival submissions. In our opinion, there is merit in the contention of the assessee, for, the directions of the Tribunal, while setting aside the orders of authorities below, were 'to pass the order under Section 251/154 of the Act in the light of the observations made by us above'. The observations of the Tribunal have already been extracted above. The case was, therefore, not of setting aside and redetermination of the issue in accordance with law. The issue had been decided by the Tribunal and the matter was restored to the Income-tax Officer only to give effect to the observations of the Tribunal. It was, therefore, in our opinion, not open to the Income-tax Officer to have travelled beyond the four corners of the said direction while recomputing the quantum of income. In so far as he did so, he, apparently, went beyond his mandate and so his order cannot be restored".
15. In our opinion, the findings recorded by the Tribunal in its order dated August 13, 1975, are binding between the parties and the Income-tax Officer had not properly interpreted and implemented that order which had become final between the parties in the facts and circumstances of the present case. The Income-tax Officer has erred in recomputing the total income of the assessee in the manner in which he has done. We agree with the reasonings and conclusions of the Tribunal.
16. For the foregoing discussion, we answer questions Nos. 1 and 2 in the affirmative, against the Department and in favour of the assessee. In the facts and circumstances of the case, parties are directed to bear their own costs.