Delhi High Court
Commissioner Of Income-Tax vs Shri Ram Memorial Foundation on 6 May, 2004
Equivalent citations: [2004]269ITR35(DELHI)
Author: Badar Durrez Ahmed
Bench: Badar Durrez Ahmed
JUDGMENT B.C. Patel, C.J.
1. The following two questions have been raised in I. T. R. No. 396 of 1985 which are as under :
"1. Whether the assessed institution could be said to have applied (within the meaning of Section 11(1)(a) of the Income-tax Act) to its specified charitable purposes the entire amount of Rs. 12 lakhs each gifted by the assessed to two donee trusts with the specific direction that in each donee's case Rs. 8 lakhs was to form part of the corpus of the respective donees trust ?
2. Whether the assessed-trust could be held to have lent the sum of Rs. 77,000 to the Delhi Cloth and General Mills Ltd. without adequate security within the meaning of Section 13(2)(a) of the Act and hence the interest income of Rs. 5,200 wherefrom was rightly brought to tax by the Income-tax Officer for the assessment year 1977-78 ?"
2. In I. T. R, No. 193 of 1985, the following question is raised :
"Whether, on the facts and in the circumstances of the case, the asses-see-trust could be held to have lent the sum of Rs. 82,000 to DCM Limited without adequate security within the meaning of Section 13(2)(a) of the Income-tax Act, 1961 ?"
3. In I. T. R. No. 189 of 1986, the following two questions have been raised :
"1. Whether the Tribunal was correct in law in holding that the deposit of Rs. 6,61,043* with Delhi Cloth and General Mills Ltd., was adequately secured in terms of Section 13(2)(a) and thereby holding that the income of the trust was exempt under Section 11 of the Income-tax Act ? (*The correct amount is Rs. 90,000 and not Rs. 6,61,043).
2. Whether the provision of Section 13(2)(a) would be treated as complied with if the deposit is either with adequate interest or with adequate security ?"
4. So far as I. T. R. No. 189 of 1986 is concerned, it appears that instead of the correct figure of Rs. 90,000, in the question the figure is incorrectly referred to as Rs. 6,61,043. The figure is required to be corrected. All the references raise a common question and, therefore, we have taken the facts from I. T. R. No. 396 of 1985.
5. The assessed--Shri Ram Memorial Foundation, was registered in the year 1966 as a society under the Societies Registration Act, 1860. The assessed was a charitable trust. During the assessment year 1977-78 (accounting year ending on December 31, 1976), the assessed received the following amounts :
Rs.
1. Interest from Delhi Cloth and General Mills 5,200
2. Donation from Delhi Cloth and General Mills 24,00,000 ___________ 24,05,200 ___________
6. The assessed made donations of Rs. 12,00,000 to Bhartiya Kala Kendra Trust and Rs. 12,00,000 to Indian National Theatre Trust. At the time of donations given by the assessed to the aforesaid trusts, it appears that a sum of Rs. 4,00,000 was given to each of the above mentioned trusts for the purpose of meeting the current contingent expenses and the balance of Rs. 8,00,000 was given with the condition that it would form part of the corpus of the trusts. The Assessing Officer held that a sum of Rs. 16,00,000 which was given to the above mentioned two trusts to form a part of their corpus could not be considered to have been applied by the assessed-trust for charitable purposes within the meaning of Section 11(1)(a). A copy of the resolution passed by the board of directors of Shri Ram Memorial Foundation at their meeting held on February 18, 1975, is placed at page 35 of the paper book. The said resolution is as under ;
"I. Resolved that :
(i) a lump sum grant of Rs. 16 lakhs be made to Bhartiya Kala Kendra Trust which form part of the corpus of the trust, and shall be utilised for capital expenditure projects only and not on day-to-day working activities.
II. Revolved that :
(i) a lump sum grant of Rs. 16 lakhs be made to the Indian National Theatre Trust which shall form part of the corpus of the trust; and shall be utilised for capital expenditure projects only and not on day-to-day working activities.
III. Resolved that:
(i) out of the proposed lumpsum grant of Rs. 16 lakhs each to Bhartiya Kala Kendra and the Indian National Theatre Trust, Rs. 8 lakhs be paid to each of them by the end of February, 1975."
7. The matter was ultimately carried before the Income-tax Appellate Tribunal and the Tribunal held against the Revenue and it is in view of this that question No. 1 in I. T. R. No. 396 of 1985 has been framed. We are not required to discuss this aspect in detail, in view of the fact that the Division Bench of the Gujarat High Court in the case of CIT v. Sarladevi Sarabhai Trust (No. 2) [1988] 172 ITR 698 had occasion to consider the identical question wherein the court pointed out as under (page 708) :
"We respectfully agree with the view expressed by the Bombay High Court on the point. Our attention was also invited by Mr. Patel for the assessed to a decision of the Calcutta High Court in the case of CIT v. Hindusthan Charity Trust [1983] 139 ITR 913. In that case, a Division Bench of the Calcutta High Court consisting of Sabyasachi Mukharji J. (as he then was) and Suhas Chandra Sen J. had to consider the question whether donation given by one charitable trust to another trust under the bona fide belief that the donee was a charitable trust would be covered by the provisions of Section 4(3) of the Indian Income-tax Act, 1922, which is the forerunner of Section 11 of the Income-tax Act, 1961. The Calcutta High Court, speaking through Sabyasachi Mukharji J., in terms, held that the assessed donor trust was entitled to exemption under Section 4(3) of the Income-tax Act. It must, therefore, be held that when a donor trust which is itself a charitable and religious trust donates its income to another trust, the provisions of Section 11(1)(a) can be said to have been met by such donor trust and the donor trust can be said to have applied its income for religious and charitable purposes, notwithstanding the fact that the donation is subjected to any conditions that the donee trust will treat the donation as towards its corpus and can only utilise the accruing income from the donated corpus for religious and charitable purposes, and that the question whether the gifted income is to be utilised by the donee trust fully for its religious and charitable purposes or whether the donee trust had to keep intact the corpus of the donation and has to utilise only the income there from for its religious and charitable purposes, would not make the slightest difference, so far as entitlement of the donor trust for exemption under Section 11(1) goes."
8. We are in full agreement with the views expressed by the Gujarat High Court and, therefore, we answer the aforesaid question No. 1 in I. T. R. No. 396 of 1985 against the Revenue and in favor of the assessed.
9. So far as the other question is concerned, it is common in all references only the amounts are different. It is the case of the Revenue that though the amount has been paid by the trust to the donor, the benefit cannot be granted in view of the provisions contained in Section 13. We have heard counsel appearing for the parties in the facts and circumstances of these cases. It is clear that the donor DCM has donated huge amounts to the assessed-trusts and the Tribunal on the facts had arrived at the conclusions looking to the small amounts and that adequate interest was provided. It may be relevant to note that so far as the adequacy of interest is concerned, the Revenue is not disputing the same. Therefore, in view of the peculiar facts and circumstances of these cases we are of the view that the second question is purely on the facts and it cannot be said to be a question of law and, therefore, the question is not required to be answered.
10.The references are disposed of accordingly.