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Income Tax Appellate Tribunal - Ahmedabad

Sarabhai Foundation vs Income-Tax Officer. on 14 March, 1989

Equivalent citations: [1989]30ITD23(AHD)

ORDER

Per Shri K. R. Dixit, Judicial Member - The central issue in this appeal is in respect of the claim to exemption as a public charitable trust made by the Sarabhai Foundation, the appellant before us. The question are :

1. Whether the assessee can be called a public charitable trust

2. If so, whether it is entitled to exemption under section 11 in respect of its income.

The second question gives rise to a further question :

"Whether the grant of exemption is forfeited on the ground that the property or income of the Trust have been used for the benefit of the trustees or any concerns in which they have a substantial interest by application of sub-sections (1) (c) and (3) of section 13."

2. There are no less than 83 grounds of appeal but they all converge on the above points.

3. Briefly stated, the facts which have given rise to these questions are that the Inspecting Assistant Commissioner (IAC) disallowed the claim of exemption under sec. 11 in respect of all the items on the ground that the income was not set for charitable purpose and that the income was not spent for charitable purpose and that the Trust property or income was used for the benefit of persons maintained in sec. 13(3). The Commissioner confirmed it in respect of all except three items on the ground that conditions under section 11 were not satisfied and those under section 13 were violated.

4. The investigation by the IAC which resulted in the assessment proceeded in three stages i.e., (1) examination of the return, which led to (2) a visit to the assessees premises and property which further led to (3) a "detailed investigation."

5. While making the assessment the IAC noticed that the assessee had received large donations towards its corpus. The IAC remarked that "the department was accepting the version of the assessee at its face value since the beginning till last year. "He has noted that during the year the family members of the Sarabhai group wanted to transfer antique pieces of the Calico Museum in the possession of the Calico Mills to the premises of the assessee and that some one had obtained a stay order from the Gujarat High Court against that transfer. He has further noted that "large amounts of assets" owned by the assessee were being used by its trustees and their close relatives for personal amusement and that no outsider was allowed to enter, visit and use these assets although the appellant was registered as a charitable institution since 1959. The IAC thereupon scrutinised old assessment records and noticed that the appellant owned a farm which always showed losses and that since the assessment year 1980-81 the entire expenditure of the assessee was on establishment, repairs and buildings and other objects of public utility while the assessee had stopped spending on all the other objects. Thereupon in November, 1984 the IAC accompanied by an Income-tax Officer, tried to visit the premises of the Foundation, at first as ordinary members of the public and failing that, on 6th December, 1984, visited the place with the help of one P.M. Mehta, the constituted Attorney of the Foundation and examined a number of persons working in the premises. The IAC has given certain findings against the assessee as a result of this visit. He also visited the aforesaid farm, recorded statements of persons working there or connected with it and has again given findings against the assessee. Thereupon he undertook, what he has called, "detailed investigation" starting with a letter dated 4-1-1985 requesting the assessee to furnish detail regarding stocks of various articles. He has recorded that the details were not furnished even after repeated reminders. Thereupon he has take an "adverse view" and pointed out discrepancies in the books of account. He has then stated that in these circumstances he was constrained to reject the book results and to estimate the income and expenditure on the basis of the material available on record and that collected by marking enquiries. Thereafter he has proceeded to examine various items of expenditure to ascertain whether they are incurred on the objects of the Trust.

6. The Commissioner has, however, not examined the evidence. In para 19 of his order he has stated as follows :

"..... Therefore, on the basis of the facts brought on record in the assessment order it can be concluded that except for the potential for performing any charitable activity, the appellant Sarabhai Foundation had totally failed for assessment year 1981-82 to have any credibility capability or intention to do charity in terms of section 11 of the Income-tax Act."

In para 22, he has stated :

"Be that as it may, on the basis of the facts brought on record I hold that the Sarabhai Foundation did not do any charity nor fits Trusts had any intentions (as against the pretension) to do the same".

7. Therefore, we have to consider mainly the IACs order for appreciation of the evidence. Before doing that, however, it is necessary to ascertain whether the assessee is a public Charitable Trust. That depends only on the objects of the Trust. The IAC in para 21 of the order, has set out the objects as per the Trust Deed, viz. -

(a) Relief of the poor

(b) Education

(c) Medical Relief, and

(d) advancement and promotion of any other object of general public utility including promotion of science, art and literature.

These objects satisfy the requirements of sec. 2(15) and, therefore, it has to be held that the assessee is a charitable trust.

8. The assessees counsel made the following submissions :

1. There was an understanding with the department that the assessee was entitled to exemption under sec. 11 as contained in the letter dated 29-7-86 from the assessees counsel to the Commissioner and that there was a direction from the Central Board of Direct Taxes to that effect which had the force of instructions under sec. 119.

2. The Commissioner of Income-tax, vide his letter dated 14-4-1975 had registered the application of the assessee under section 12A (a) and vide his letter dated 17-1-1981 stated that donation to the assessee trust would entitle the donor to exemption under sec. 80G and this was valid from 1-4-1981 to 31-3-1982. The assessee-trust had been granted registration under the Bombay Public Trusts Act from June, 1958.

3. From the assessment year 1960-61 the assessee has been held to be a charitable trust as shown by the assessment orders for those years particularly the assessment order for the assessment year 1969-70 where the purchase of agricultural land was considered to be for the object of the trust and the opening sentence itself says that the assessee is a public charitable trust. The order states that the claim of the assessee is in order.

4. The very fact that the section 13(1) (c) had been applied meant that applicability of section 11 was admitted. Therefore, all that the assessee had to prove was that the said section 13 was not applicable. However, the assessee cannot be expected to prove the negative that there had not been any use of the trust funds or facilities for the benefit of the trustees or their relatives etc. For this purpose the following observations of the Supreme Court in the case of K. P. Varghese v. ITO [1981] 131 ITR 597 at pages 613 were relied upon :

"..... Moreover to throw the burden of showing that there is no understatement of the consideration would be to cast an almost impossible burden upon him to establish a negative, namely, that he did not receive any consideration beyond that declared by him."

9. We are of the view that the understanding with the CBTD or the department is not relevant for our purpose. Its only value would be to show that the department has not kept good faith with the assessee but that is a matter between the assessee and the department. Regarding the registration under the Bombay Public Trusts Act, although it might have some evidentiary value it must be remembered that the ITO is not a party before the Charity Commissioner and so for income-tax purposes a separate decision has to be arrived at. However, the earlier assessment orders, the registration under section 12A (a) and certificate under sec. 80G are very relevant. This Tribunal, Ahmedabad Bench B, vide its order in the case of Ambalal Sarabhai Trust No. 19 [IT Appeal Nos. 708, 1271 and 1739 (Ahd.) of 1983 dated 23-10-1984] has held that the above factors would operate as res judicata. Further the Delhi High Court in the case of CIT v. Shree Ram Memorial Foundation [1986] 158 ITR 3 has rejected the application under sec. 256(2) on the ground that the assessee had been recognised as a charity for several years. The above decision support our view that the assessee is a public charitable trust. Moreover the Ford Foundation had given a substantial grant of $ 38,700 to the assessee under their letter dated 13th September, 1983 which is before the IACs visit. It shows their recognition and appreciation of the assessee as a public charitable trust.

10. The learned Standing Counsel argued that in this connection it has to be seen whether the income had been spent for charitable purpose a d if not then the trust would not be a charitable trust. We do not agree with him. As stated above, the question whether a trust is a charitable trust or not has to be decided only on the basis of the objects specified in the trust deed. If we were to accept the contention of the Standing Counsel it would mean that in the year in which the income is went for a charitable purpose the trust would be a charitable one while in the year in which it is not so spent it would not be a charitable trust. Further if income is partly spent for charitable purpose and part not so spent, the trust would be partly charitable and partly non-charitable. This cannot be. Under sec. 11, the two questions (1) whether a trust is a charitable trust or not and (2) whether it is entitled to exemption or not, are separate. The fact that the income has or has not been spent on a charitable purpose has relation only to the exemption which can be given in respect of the income so spent. It has nothing to do with the nature of the trust i.e., charitable or not.

11. Therefore, the only questions which we have now to consider are : whether the expenditure on various items can be said to have been incurred on the charitable objects set out above and, if so, whether the provisions of sections 13(1) (c) and 13(3) are applicable thereto. The IAC has disallowed the expenditure on medical relief, education and relief to the poor which the Commissioner (Appeals) has confirmed.

12. There are no specific grounds mentioning these items but ground Nos. 48 and 49 are of a general nature which cover these disallowances. An amount of Rs. 632 spent on medical relief has been disallowed although the IAC has stated that :

"It can at the most be said to be medical relief to the employees which may to covered under the establishment expenses of the trust......"

When that is so there is no ground for disallowance. Therefore, that disallowance is cancelled.

13. An amount of Rs. 1,689 spent on educational object has been disallowed. Out of this a sum of Rs. 1,000 has been given to one Ajit Bhagat Memorial Trust and the balance to four individuals. It has been disallowed on the ground that the assessee had failed to show that the said trust was a charitable trust and it had not been explained what for the amount was given to the poor individuals and how the selection of these four persons was made for giving that benefit. The assessees reply was that it had helped only those few needy people who actually approached it and the quantum was so small that it need not have been disallowed. Regarding the Bhagart Memorial Trust it has been stated that it was not necessary the charitable institutions to which the Foundation gave donations must necessarily to enjoying the tax exemption status.

14. Regarding the donations to the individuals the IAC has not doubt that they were needy persons. Therefore, the disallowance of Rs. 689 is cancelled. Regarding the donation to the Bhagat Memorial Trust it was necessary that it should be a charitable trust. Therefore, on this point the matter is restored to the IAC to ascertain this fact and allow the payment if the trust is proved to be a charitable trust.

15. Another disallowance of this kind is an amount of Rs. 6,041 out of which Rs. 3,850 is by way of financial help to four individuals. These four persons were in the employment of the Sarabhai family as their personal servants. In our view this disallowance has been rightly made. It almost amounts to making personal charity at the cost of the Foundation. If the members of the Sarabhai family wanted to make such a charity they could have done it from their own resources but to make it at the cost of the Foundation and claim it as a deduction is not permissible. The special qualification for this charity was not so much that they were in need but they were ex-employees of the Sarabhai family.

16. The balance expenditure of Rs. 2,175 is on the distribution of blankets to the poor. The IAC has disallowed it on the ground that this expenditure was not verifiable. He has stated that :

"It is true that the assessee purchased blankets amounting to Rs. 2175. But it is not certain to whom they were distributed. It is claimed by the assessee that in the night at about 2 AM some of the employees of the Sarabhai Foundation went round the city and placed blankets on the poor persons who were sleeping on the roadside. This story is not supported by any evidence."

In our view there is no reason to doubt that the blankets were distributed. What kind of proof does the IAC want ? Does he want receipts from the poor people ? In these circumstances, the assessees claim has to be allowed. Therefore, the disallowance of Rs. 2,175 is cancelled and the balance disallowance of Rs. 3,850 is confirmed.

17. In the result these grounds are partly allowed.

18. That leads us to consideration of the expenditure on objects of general public utility which are as follows.

19. The first of such expenditure is in respect of a Botanical garden amounting to Rs. 83,470. The garden land was received by the assessee in 1979. It comprises about 7 acres and is spread over both sides of the road leading to the private residences of the members of the Sarabhai family. The IAC has disallowed the expenditure on the grounds that the garden was not open to the public and that it was meant only for the personal amusement and entertainment of the members of the Sarabhai family. He has observed that it was further developed adding the hundred varieties of roses and cactus to give an ornamental look to the whole garden. Regarding his conclusion that it was not open to the public he has noted that till December 1984, when the visited it nobody from outside was allowed to visit it as admitted by the gardener in charge. The Managing Trustee, Smt. Giraben, he states, had admitted that till 20th January, 1985 there were hardly any persons from outside who had visited it. The assessee had tried to show that they had written to educational institutions to send their students to this garden but the IAC has dismissed this as an after-thought because enquiries had been made regarding the access of the public to this garden. Regarding the assessees claim that this garden was for the benefit of students, the IAC has observed that educational institutions were not consulted regarding their requirements in respect of the families of the plants according to the syllabus of the standards of teaching classes. He has noted that the persons who were consulted for this purpose were not "connected with the educational requirements of a Botanical student." Regarding the non-accessibility of this garden to the public, the IAC has noted the evidence of one Ramdas, the gardener, who, according to him, had stated that no outsider was allowed to go in the garden and that Shri Gautam Sarabhai, one of the trustees, came to the garden for morning and evening walk. He has also recorded that the employees of the Sarabhai Foundation working in the garden admitted that since two years of joining the services of the Foundation they had seen any outsider in the premises of the Foundation. The statement of the Durvan, Narayan Singh, in charge at the entry gate on 10th December, 1984, according to the IAC, confirmed that whenever anybody from outside came, the Durvan had to enquire inside on telephone and after getting permission from inside i.e., Sarabhai family, the outsider was allowed to enter the Foundation premises. In this connection he has referred to the "Register of Visitors" maintained by the gatekeeper which hardly showed any outsider who had visited the Foundation in the last three or four years.

20. The assessees counsel invited our attention to the actual statement of Ramdas, the gardener. It has been made on oath before the Income-tax Officer on 10th December, 1984. The witness has stated that he had been working there for 2 months. In reply to a question whether any outsiders were coming there for a stroll. He has replied that no outsiders were coming there for a stroll. In reply to a further question as to who came there for a stroll he has again replied that nobody came there. To another question whether anybody working there or one from the Sarabhai family came there for a stroll he has replied that during office time they go from outside and sometimes in the morning and the evening Shri Gautam Sarabhai came there for a stroll. In reply to a question as to the time at which Shri Gautam Sarabhai came to the garden he replied that he came there in the evening at about six oclock and after supervising the work of the gardeners he went away. The assessees counsel also drew our attention to the statement of one Maganbhai Sumabhai, who was also working there as a gardener, recorded on the same day. In reply to the question as to who came to the garden for a stroll he has replied that nobody came there for a stroll and added that Shri Gautam Sarabhai and Smt. Giraben came there in the evening at about six oclock to supervise their work and then went away and no outsider came there.

21. To our mind combined effect of the statements of these two persons is that Gautam Sarabhai and Giraben came there in the evening to oversee the work of the gardeners and not for a stroll in that garden. Although Ramdas has stated at one place that Shri Gautam Sarabhai came in the morning and evening for a stroll, immediately, in answer to the very next question, he has stated that he came there for overseeing the work of the gardeners. This statement is corroborated by the statement of Maganbhai Sumabhai who has stated the same thing. The IAC has relied upon the statement of Ramdas but he has not taken into account the statement of Maganbhai Sumabhai and has merely taken into account one answer of Ramdas without taking into account the next answer. Moreover these statements were recorded in December, 1984 and these two persons were working there only for the lost two months and could not make any statement regarding the period relevant to the assessment year 1981-82 which is before us.

22. The relevant Standing Counsel submitted that although the assessee had spent Rs. 83,470 on this Botanical garden during the relevant period all that we had was a bare submission by the assessee that they were marking it ready for being opened to the public. He submitted that there was nothing to show as to what in fact was being done. In this connected he invited our attention to the circular by the assessee to various educational institutions stating that those who wished to avail of the Bhotanical garden at Sarabhai Foundation on Saturdays between 10 and 12 AM should contact Shri A.M. Patel and Shri D. S. Mehta and giving their telephone numbers. He pointed out that this circular was on 8th December, 1984. He also pointed out that the letter from Bhavans College of Science to the assessee-trust seeking permission for their students to visit the Botanical garden was dated 1st February, 1985, implying thereby that the facilities of the garden were open to the public only from December 1984 onwards. He drew our attention to the report of Dr. D. N. Krishnarao dated 3rd October, 1979 and the report of Mr. S. C. Sharma dated 4th/8th January, 1982 wherein suggestions had been made regarding the garden and pointed out that there was no proof that these suggestions were accepted or implemented. He pointed out that for the assessment year under consideration the expenses on this garden amounted to Rs. 94,522 but in spite of that the garden was not yet open to the public and further pointed out that even in 1984 it was open only for two hours and that too only for one day in the week, namely, Saturday.

23. Now the problem before us is to decide whether the assessee did spend the above amount in the relevant period for development the botanical garden or not and if so whether it can be allowed as having been spent on an item of general public utility or educational value. The evidence is that this garden was in fact opened to the public in the end of 1984. For that the circular to the various educational institutions is on record. The IAC has stated that it has been issued after questions were put in that connection but the fact of the circular having been sent to the educational institutions cannot be denied. Therefore, irrespective of the motives this fact remains. It may be true that it was open only for two hours once a week but for however short a time it may be open, the fact of it being accessible to the public has to be recognised. Now this was in the end of 1984 and we are concerned with the year 1980. It goes without saying that a garden does take time to grow. A period of about 4 years is very reasonable. Moreover we have the reports of the aforesaid two expert - Dr. D. M. Krishnarao and Mr. S. C. Sharma. The assessee invited their suggestions and they made those suggestions during that period of about 4 years. Therefore, it can be said that the assessee was making efforts for this project. The Standing Counsel has argued that there is no proof that these suggestions were carried out. But it is impossible to ascertain that because, in that case, we have to know what the situation was before the suggestions were made. It is sufficient that the assessee invited the suggestions from these experts and ultimately there is in fact a Botanical garden. Therefore, the process of bringing it into existence during the aforesaid period of 4 years has to be inferred. The IACs observation that if students of botany were to be benefited, educational institutions and professors of botany would have been consulted has no substance. It is sufficient that ultimately a botanical garden is grown and the knowledge of botany is not necessarily confined to professors of botany. The IACs observation that for benefiting the students the families of plants would have to be grown according to the syllabus is a narrow, bookish and absurd approach. The knowledge of botany need not be divided according to the syllabus of students. A person intending to grow a botanical garden may grow it in is own way and then people interested in the study of botany is not necessarily a person who is attending some collage and reading books according to some syllabus meant for certain standards of education. Although the circular has been sent to the educational institutions that the circular has been sent to the educational institutions that does not mean that the botanical garden was intended only for students learning that subject according to some syllabus or a book of rules. The assessees counsel drew our attention to the Directory of Botanical Gardens in India, 1983 edition, wherein the following entry appears :

THE RETREAT BOTANICAL GARDEN SHAHIBAGH, AHMEDABAD This Garden at Shahibag near Ahmedabad established in 1979 covers 2.6 ha. and in a developing stage and has not yet been made open to public. Inside the campus there are about 8,000 trees and shrubs and other interesting collections of roses, cactil and succulents, orchids etc. distributed in about 160 species. Two greenhouses contain good collections of foliage plants. The garden Herbarium has about 100 specimens and Library 200 books." This shows that the garden was in the process of making long before 1983 because the number of trees and species mentionad therein could not have been grown overnight only in 1983. It may be true that the garden, before the project was started, was a part of the property of the Sarabhi family and it is adjacent to their residential premises. But that does not mean that it is for the personal amusemnt of the Sarabhi family and it is adjacent to thier residential premises. But that does not mean that it is for thepersonal amusement of the Sarabhi family. The assessee has explaind that each residential building of the members of Sarabhi family in the rear portion has a garden of its own and it is unthinkable that the botanical garden would have been intended for their personal use. This is quite convincing and needs no persuastion. 24. In the light of all our above decisions on various points made by the IAC and by the learned counsel regarding this item, we hold that the expenditure in this connection is allowable under section 11.

25. The second item is the expenditure on literary and cultural activity which comprised of (a) music library of records, tapes and cassettes and (b) running a study and research centre for documentation and publication which has live recordings of recitals and literary readings of contemporary Gujarathi writers and poets. The IAC has stated that according to the assessee the aim was to cover fifty authors in a short time and make the recorded cassettes available to students for study and research work. According to the assessee, as stated by the IAC this was important from the national point of view for preserving the national cultural heritage. The IAC has disallowed this expenditure on the ground that the assessee had neither advertised nor given a public show of these materials in last eight years and that there were no membership and no rules for obtaining these records and that no educational institution had been informed regarding the availability of this material. He has noted that the person in charge of the library, who had joined the service from February 1984 had stated that nobody from outside had ever attended to avail of these facilities. He has also stated that the managing Trustee, Smt. Gitaben had admitted that the cassettes had not been played before the VIP guests and that they were specially good for Gujarati students of B. A. and M. A. (perhaps what he means is students of Gujarati). From this he has concluded that the recordings were not made with the intention to benefit the general public but for special classes of students of B. A. and M. A. and also that the cassettes and gramophone records were "acquired by the Foundation for the personal benefit, amusement, and entertainment of the trustees and their relatives." He has also elaborated that if the recordings were intended for the use of students of B. A. and M. A. degrees some experts from the university would have been associated with the work and since that was not done the assessee had no such intention. The assessees claim that Prof. Niranjan Bhagat, a poet, had been supervising this work to prove their claim has been rejected stating that it only shows that these collections were made for entertainment purpose like Kavi Sammelan and Mushaiyara. The IAC has tried to substantiate this allegation of use by the trustees and their relatives as follows. According to him the fact that the cassettes had not been used could be verified very easily. So he asked the Managing Trustee whether they had been used and the reply was, for keeping these records in a working condition the employees had been asked to play them quite often without anybody listening to them. He has dismissed this explanation stating that "it is a white lie that records and cassettes will be spoiled if they are not used. It is only to hide the fact that somebody was using these cassettes and records and that the disclosure of the names of those persons is not in the interest of the Foundation that this concocted story of using the records and cassettes to keep them in working condition was given." The assessee had made a claim that blind persons could make use of these recordings but the IAC has rejected it on the ground that this collections were only for reference purposes and it could not be expected of blind persons to go to the Foundation for availing of this facility. He has stated that the price of Rs. 60 per cassette was high and it showed that it was not meant for the general public and in fact in the last six years hardly anybody had purchased them. Lastly he has stated that there was no stock register to show how many records were available and on what topics and that the expenses had not been properly vouched. The assessee explained that circulars were sent to educational institutions, libraries etc. enclosing a leaflet contains details of 48 audio cassettes in which recordings of poems, plays, novels etc. are made. It was the assessees case that since considerable time and effort would be required for this activity and since the resources were at that time utilised for the enormous task of organising the Botanical garden and the museum, the activity regarding the recordings had not yet been systematically organised.

26. At the time of hearing before us a copy of the aforesaid leaflet accompanied by the form etc. was supplied to us. Therein we find the list of 48 authors and a blank form for placing an order. In the covering letter an introduction is given regarding the preparation of these cassettes and it also states that the cost of each cassette would be Rs. 60 and would be available within 6 months of the placing of the order.

27. The learned Standing Counsel submitted that the aforesaid facility was made available only from 1st February, 1985 and that the reference library of recorded music could be availed of only on Saturdays and that too only for two hours in the morning and three hours in the afternoon. He pointed out that the number of persons who had availed of the facility of the lending library as stated page 391 of paper book I was only twelve out of which one was the trustee Smt. Gitaben Mayor. He submitted that the extremely limited time for which the facilities were available and the very small number who had availed of this facility showed that it was not meant for the public. He further submitted that this kind of library would not take such a long time to set up and so it could fairly be assumed that in the period relevant to the assessment year the expenditure claimed to have been incurred would not justify the claim for exemption. Thus the departments case is that the recordings were not meant for the public because they were never made so available, they were meant only for students of Gujarati of the B. A. and M. A. standards and the price of each cassette was quite high.

28. As against this it has not been denied that the above leaflet mentioning the list of 48 authors was in fact circulated to educational institutions and that the M. J. Library of Ahmedabad had arranged a programme between the 21st and 24th February, 1985 using these audio cassettes. It may be true that this material was made available to the public long after the assessment year before us. But the fact that they were made so available shows the intention to make them available to the public when they were ready. The fact that they were intended to be useful for the B. A. and M. A. students does not make any difference because other people were not excluded from their use. Firstly there may be many people who may be interested in Gujarati literature of a high standard who may not be studying for the M. A. & B. A. courses. Secondly, the public does not necessarily mean the general public with a low standard of education. People having a high standard of education are also members of the public and if the facilities are made available to them without any restriction it can be said that they are meant for the public. It was not the assessees case that the cassettes were intended for B. A. & M. A. students. Their intention was to make these kinds of recordings which may also be useful to the students of B. A. & M. A. courses. It is not necessary that the experts from educational institutions should be associated with this kind of recordings. When this kind of work with high intellectual and educational content is being done it cannot be expected that it would be done according to some syllabus of a particular standard of course. It is not necessary that people directly involved in teaching should be associated with this kind of work. Prof. Niranjan Bhagat is not disqualified from guiding this kind of work merely because he is a poet. All that is necessary is that somebody who is knowledgeable in this field and having a sufficiently high standard of intellectual and educational attainments with an established reputation should be associated with it and that requirement has been fulfilled in this case. The IACs approach is narrow and bookish.

29. The disallowance is also on the ground that the expenses were not properly vouched but the assessee has replied that these vouchers were never asked for and that they could be supplied at any time. This reply has not been contested by the Revenue.

30. It may be true that blind people may find it difficult to go to the Foundation premises and use this facility. But it is not as if they do not move about. They could use these facilities although with difficulty. The emphasis by the trustees was on the fact that it was no longer necessary to read in order to use what was communicated. In any case even if blind people were excluded the other persons did constitute members of the public. Moreover as pointed out above it was not the assessees intention that these recordings should be meant only for B. A. & M. A. students.

31. It may also be true that the facility was available only for a limited time as pointed out by the learned Standing Counsel and also that it was in fact availed of by very few people. But the fact remains that it was so availed of.

32. Regarding the submission of the learned Standing Counsel that it has taken a long time to set up this library we would first of all like to point out that getting the live recordings of as many as to authors would take up quite some time. Their availability and willingness to give the recordings has to be ascertained and then their records are to be made. Therefore, a part of the time consumed can be surely explained. The assessees explanation that the resources were at that time utilised for the botanical garden and the museum is quite plausible. Further even if a longer time is taken than is required the remains that the facilities were made available to the public and so the expenditure incurred in that connection must be considered to have been incurred for the public benefit.

33. There is no justification for the conclusion that these records were meant for the members of the Sarabhai family. The IAC has observed that the "cassettes are regularly given on loan as per register to Shri Gautambhai, trustee and Smt. Giraben, Managing Trustee". This has been shown to our satisfaction to be totally false, because it is they who have given these cassettes to the Foundation. Again it is impossible to think that these elderly trustees having so much personal wealth of their own would utilise these facilities for their own benefits.

34. The assessees explanation that the cassettes were occasionally played to keep them in working condition is quite plausible. It is well known that machinery has to be used in order to keep it in working condition. The IACs rejection of this explanation is unjustified and his remark that "it is a white lie" is intemperate. For the above reasons we hold that this expenditure is allowable.

35. The next item is the expenditure relating to the books library.

The disallownace is based on the following grounds :

(a) that it is merely a reference library and not meant for public use;

(b) that the books are in English and published by foreign publishers and so "meant only for the elite class of people and who have leisure time and who know English only;"

(c) that even after receiving the books for the last 10 years no one from outside had gone and made a reference; and

(d) that no public notice of the availability of this facility had been given.

The IAC has observed that the books came in the possession of the Foundation long ago and if they were meant for public use then a library would have been established within a period of about one year. The learned Standing Counsel also put forward a similar argument that although the books were acquired long ago they were open to the public only on 16th April, 1985 and that organising the library should not have taken so long. He pointed out that the assessee had not engaged any qualified Librarian to finish the work of organising it and submitted that the reply of the Managing Trustee in that connection that the assessee had to decide the priorities showed that the trustees were treating the work as if it concerned their own property and not a public charitable trust. The assessee has replied that the IACs observation that the library could be organised in one years time is based on ignorance. They also submitted that the assessee was fully occupied in organising the botanical garden and the museum and, therefore, could not devote the necessary time or the resources for organising the library.

36. We again find that this explanation of the assessee is quite reasonable. When a trust is concerned with various activities, it may devote some more time and resources to one activity than another. That does not mean that the trustees regard a certain assets as their own. Moreover to start with, there were some 6000 books, which had to be classified. Further 1850 books were purchased and 2700 books were received on loan. So the work involved was quite heavy. The IAC has alleged that the subsequent purchase of the books showed that they were meant for some one else and not a member of the public. This has no substance at all and it is all out of ignorance. Establishing a library does not mean merely having a collection of books and classifying them. A good library is expected to go on adding to the collection so as to bring it up-to-date and developing new avenues of knowledge in continuity with the existing collection. It is a live work involving continuous contact with developing knowledge. The fact that it has not been used upto the time of the investigation does not make any difference because ultimately it has been made available to the public and so the intention to make it so available even during the preparation is proved. The IACs observation that it is only a reference library and so not meant for public shows even worst ignorance. It is not as if lending libraries alone are meant for the public. Most of the public libraries have reference sections. The IACs conclusion that the library is not meant for public because the books are in English language also shows a narrow and pedestrian approach. Knowledge of English is not a disqualification. It may be that those who do not know that language may not be able to use it but those who know it can use the library and there are large sections of the public who know that language and can use the library. If the IACs line of thinking was to be accepted libraries cannot be said to be for public use because the vast majority of Indians are illiterate. Therefore, this expenditure is also allowable.

37. The fourth item is the expenditure amounting to Rs. 11,000 incurred by the assessee for payment for payment to one "Harrang Samaj", which consisted of a group of persons organising music concerts. The IAC has disallowed it on the ground that the "Samaj" was not registered as a charitable institution under the IT Act. He has observed :

"How a payment to a group of individuals claimed to be involved in promoting Indian classical music, both vocal and instrumental, can be said to be application of income for charitable purposes. The IT Act allows donation to any institution which is a charitable institution as per the IT Act and not to any other institution."

The assessee replied that :

"the claim of the assessee is under section 11 and not as a deduction under section 80G. It is submitted that a charitable institution may render assistance in the nature of a charity even to an individual who cannot have any registration or recognition under the IT Act and yet that would be an application of income under section 11."

The learned Standing Counsel submitted first of all that the activities of the "Samaj" were not open to the public and secondly that enen if that "Samaj" was doing charitable activities the donation to it would not confer the status of charitable trust on the donor because a donor does not acquire the status of a donee. The assessee had given a clarification stating that the assistance given to the "Samaj" was an application for the purpose of the trust which could not be considered to be for non-charitable purposes and enclosed material concerning the activities of the "Samaj". The material consists of a form of invitation card. The Standing Counsel pointed out from this card that the invitation for attending the concert was meant for members only. The assessee had supplied a list of dates on which the programmes were held mentioning the mode of advertisement for each concert. The learned Standing Counsel pointed out that out of the 26 days on which the programme was conducted, advertisements in the newspapers were given only for 2 days and for the rest of the 24 days the invitation was by cards to interested members and classical music institutions. He submitted that the programmes were mostly meant for members only and others had to buy tickets.

38. In our view the assessees reply is based on a misunderstanding of the IACs ground. No doubt the IAC has said that the "Samaj" is not registered as a charitable institution under the IT Act but that does not mean that he was considering section 80G. His subsequent observations quoted above clearly show that according to him promotion of music cannot be called a charitable activity under the IT Act. What he means is that it should come within the definition of charitable purpose under the IT Act. In our view, as the learned Standing Counsel has pointed out, the benefit of activities of the "Samaj" i.e. concerts, was not available to the general public. It was mostly available to members. Therefore, this disallowance is upheld.

39. The next disallowance is of a loss in respect of a farm at village Hansol. The IAC disallowed this loss on the ground that it was acquired to utilise the assets and produce thereof for the trustees and their relatives. Thereafter he has made an estimate of the income at Rs. 1,50,000 and added it on the ground that either the produce thereof had been used by the family members of the trustees and their relatives or the sale proceeds thereof were transferred to them. The CIT (A) has reduced the income to Rs. 95,000 and sustained the addition to that extent.

40. It was the assessees case that this farm was acquired in the year 1966 with a view to promote improved methods of agriculture and other ancillary activities and to develop it as a place for picnic for persons from educational and other institutions. The assessee had submitted that the late Dr. Vikram Sarabhai who was a trustee of the Foundation was to guide and direct the above scheme but unfortunately he expired in 1971 and Smt. Sarladevi Sarabhai, who was the Chairman and Managing Trustee of the Foundation was keeping indifferent health for a number of years and she also passed away in 1975. Further the well in the farm had dried up and there was an acute shortage of water and due to the growth of population around the farm there was considerable pilferage and trespass. For these reasons the development of the farm with the above objects could not be pursued. Further, making a new tube-well and providing a proper boundary wall fro preventing pilferage and trespass involved heavy expenditure in the assessment years 1982-83 and 1983-84. The assessee had submitted that the farm had been entered as porperty of the Foundation in the Public Register maintained under the Bombay Public Trust Act, 1950 and since the Foundation was a registered public chartable trust the property acquired was for the furtherance of the objects of the Foundation and formed part of the corpus of the trust and consequently contained in the trust deed so that the expenditure incurred on the imporovement or maintenance of the farm was an application of the income of the trust within the meaning of section 11. The IAC has observed that nobody other than members of the Sarabhai family was allowed to visit the farm, in fact no one from outside had come to the farm, no demonstration was condusted at any time during the last 18 years and that no agricultural operations were conducted during that period. He has noted that there had been no resolution of the Board of Trustees for developing the farm as a picnic spot. The Standing Counsel pointe out that there was no evidence to show that any agricultural experiments were carried out. In this connection he pointe out that Kariabhai, who was working on the farm, had stated that no outsider had come there and there and that only urea fertiliser had been utilised to show that no experiments were conducted there. He also pointed out that the suggestions made by Agricultural Assistant D. V. Patel on 18-5-1981 were for improving the yield but that was not an experiment. He also emphasised the date toshow that these suggestions were after the end of the accounting period with which we were concerned. Further he pointed out the assessees letter dated 8th February, 1985 to the IAC which mentions the list of persons who were consulted by the Foundation for its activities and submitted that the list does not mention any expert for developing the farm.

41. The assessee had claimed a total income of Rs. 12,197 and expenses of Rs. 17,773, leaving a loss of Rs. 5,580. The IAC has noted that although there were 900 lime trees and nearly 500 mango trees, the income from the former had been shown at Rs. 714 only and from the latter at Rs. 1574.87 only. He has mentioned the evidence of the said Kariabbai that the trees were full of mangoes and lemons during the seasons. He has also stated that the aassessee had not kept any register for aily plucking of fruits and proper details of sales and receiots were not maintained. According to him the managing trustee had admitted that they had always tried to fetch maximum proce for the produce of the farm. Thereafter he has estimated the income from various fruit trees i.e. lemon, mangoes, bananas, jamuns, jack fruits etc. by consulting the Talati and discussions with "various persons" from Hansol village including the sarpanch and his "personal kinowledge". He has concluded that since this would be the correct estimate of income and since that has bot been shown, either the produce had been used by the family members of the trustees and their relatives or after the sale thereof the income had been transferred to them through one J. K. Gandhi. This later part of the conclusion is based on the statement of this Mr. Gandhi to the effect that he looked after the activities of the farm and the statement of one Nankurarn who was selling the produce of the farm and who stated that the sale proceeds were handed over by him to Mr. Gandhi. The IAC has noted that Mr. Gandhi was not in the service of the Foundation but in the service of a sister concern and that he was working for the managing trustee who had asked him to do that work. This, according to him, showed that the members of the Sarabhai family wanted to retain their control over the income of the Foundation through their personal trusted employees who were not on the roll of the Foundation.

42. This part of the order falls into three parts and been acquired for the personal benefit of the trustees of the Foundation; (a) Whether it can be said that the farm had been acquired for the personal benefit of the trustees of the Foundation; (b) Whether the income and expenditure resulting in the loss should be accepted for the estimate by the IAC as reduced by the Commissioner (Appeals) should be considered reasonable and be accepted; and (c) Whether the produce or the sale proceeds had been taken by the trustees or their relatives as alleged ?

43. So far as the first question is concerned in our view the fact that the farm had been entered as the property of the Sarabhai Foundation in the public register maintained under the Bombay Public Trust Act is themost important factor. Once that is done it formed a part of the corpus of the trust. However, we will consider the IACs order in that treard and the submission of the leaned Standing Counsel. Accoording to them since there was no evidence regarding the devlopment fo the farm and of conducting agricultural experiments and demonstratios and since there was no evidence of it haveing been used as a picnic spot, the conclusion should be drawn that it was acqured for the benefit of the trustees and their relatives. However, we find the assessee; is explanation in that regard as quite plausible. A project might be started with some definite amis but due to circumstances beyond the control of the persons concerned it may not be possible to crry out that project. In the present case the most important person, Dr. Vikram Sarabhai, who was to guide this project and Smt. Sarladevi Sarabhai, the Chairman of the Foundation who was keeping indifferent health for a number of years died-the former in 1971 and the latter in 1975. Further the well dried up and so there was an acute shortage of water. There was considerable pilferage and trepass due to the development of the surrounding areas. Provision of a new tube-well and building a surrounding brick wall involved heavy expenditure in the A. Ys. 1982-83 and 1983-84. These are genuine dificulties in the implementation of this project. In order to implemnt a project of this kind som energetic person taking a live interest in it is necessary. Such a person cannot be merely of the position of an ordinary manager. Therefore, since these ttwo persons died one can very well under-stand that there was no one else avaiable for the prupose. Further, as the above heavy expenditure was incurred there would naturally be some shortage of funds which cannot be expected to be always availbale for this project becasue there were other projects also to be implemnted. Therefore, if for a number of years the project is not implemented that does not mean that its starting with the acquistion of the farm was for the benefit of the trustees or their relatives. It is the gathering of the circumstances which made it diffcult, of not impossible, to implement the project. It is a smiple case of-man proposes; God disposes.

44. Regarding the second question, the IACs order is based on his disbelief that the trees on the farm would give such a low yield. Normally speaking if a farm is well taken care of land some one is actively taking interest in it, it could have yielded a good return. However, the very reasons indicated above, for which tghe project could not be implemented, are suffcient reasons for the yeield being very low. How much that yield would be, in a given case is question of fact. We connot say that the IAC has investigated his question throughly. First of all he was carrying out the investigation in the end of 1984 when thequestion is regarding the yield in 1980-81. What happened in the period 1980-81, as to how many trees actually were fruit bearing, has not been considered. All that has been done is a guress from the conditions as seen by the IAC in 1984 as to the yield in 1980-81. According to the IAC, Kariabhai had stated that the trees were full of fruit in the season and relied upon answer to question No. 7. Now, question No. 7 was "how much was the quantity of mangoes produced in the year ?" The reply was : "Mango and lemon crop on the trees is good. If some year there are cloudy conditions the crop is less, otherwise the trees are full (withfruit)". Now, in answer to Question No. 6, Kariabhai has stated that "out of 50 new mango trees planted in the last 25 to 30 years had dried up and in their place lemon trees planted. Out of the 30 trees planted approximately 10 hve dried up". In reply to question No. 5, he has stated that "last year 400 to 500 new lemon trees were planted but before that nothing was done". The total picture that emerges from all this isthat a good part of the new plantation dries up, that only in the year 1983 some 400 to 500 lemon trees were planted which means that the position regarding the year 1980-81 is not known. Further due to cludy weather conditions etc., the crop on the trees is reduced. Although the IAC has made some allowance for many factors such as the above, on our view his onclusion is not, and connot be, more than a very wild guess. The assessees counsel has drawn our attention to the suggestions made by the Agricultural Assistant D. V. Patel on 18-5-1981 regarding the mango crop. These suggestions, in our vew, would not have been invited if the yield was very good. He has also drawn our attention to the crop report of the Government of Gujarat for the financial year 1979 which states, inter alia, that there was widespread and effective unseasonal rainfall during the period from 15th to 22nd November, 1979all over Gujarat State and due to this various crops harvested as well as collected in threshing yards and standing crops and rabi zone crops were affected. It also states that thus due to heavy and ocntinuous rain during the first fortnight of August Khariff crops were affected serverly. But during second fortnight of September rainfall remained normal. Hence condition of crops improved. But due touneven distribution of rainfall in Banaskanta district condition of sown khariff crop was reorted poor. It also shows that there was unseasonal rainfall during the month of October and states that due to uneven distribution of rainfall in the State the growth of crops in the agricultural year 1979 cannot be said to be satisfactory. The above indicates that for the relevant period it cannot be assumed that the crop position for the farm was good.

45. That brings us tothe actual estimate and the evidence in that regard. The first is the statement of the Talati of Hansol village dated 6-2-1985. He has stated, inter alia, as follows :

"We have no record for the actual producation of crops on the land. So we have no information on that point.

** ** ** According to the statement of Maganji Bapuji, aged about 62 years, the yield of one Kalami mango tree is about 10 to 12 maunds of mangoes and the yield from ordinary mongo tree is approximately 50 maunds of about Rs. 500 in 12 months of season."

In his cross examination on the same day he has, inter alia, answered various question as follows :-

Q. Are You an agriculturist ? A. No. Q. Do you have any agricultural land in your name ? A. No. Q. Do you know Maganji Bapuji ? A. Yes.

Q. Do you know what is the yield of mangoes from Kalami mango tree and ordinary mango tree ? A. In such matters we take the opinion of the village people and give the information. During the service such questions arise and, therefore, we gain this much experience.

Q. Do you know what is personal experience ? A. Yes. Whcih is experienced personally.

Q. Have you ever got mangoes plucked from Kalami mango tree ? A. No. Q. Have you ever got mangoes pluced from ordinary mango trees ? A. No. Q. Have you given the statement at the instance of Manganji Bapuji ? A. This statement is given after discussion with Manganji Bapuji.

Q Whether Maganji Bapuji is alive today ? A. Yes.

Q. Do you have personal information of the produce in these survey Nos. in 1981-82 ? A. I have no personal infromation. It is volunteered by Saheb that the information is taken from the records.

Q. Normally the agricultural produce depends on the climate i.e., if there is a hurricane/tempest the mango crop would be less due tothe falling of the flowers and the trees itself may fall ? A. Yes, if they fall there is no crops of mangoes.

Q. Can the hurricane in this way damage the flowers, plants and lemon trees ? A. Yes.

Q I say that the statement given by you regarding the produce from ordinary Kalami mango trees incorrect ? A. I have given it after discussion with persions.

Q. Have you given the details of production of lemon trees from discussion ? A. Yes.

Q. The statement which you have given is given personally ? A. Questions were being asked and then I was giving replies.

Q. Was Manganji Bapuji sitting there ? A. Yes.

Q. Whether the statement of Manganji Bapuji was recorded in your presence ? A. When this question arose I had discussed this matter with Maganji Bapuji and two or foru other persons, viz., Sarpanch and Deputy Sarpanch of Kotarpur. The information was given after iscussion with them.

46. The above evidence shows that the Talati had absolutely no personal knowledge and no reords about this matter. He had merely relied upon the opinion of others. Those other people asuch as Manganji Bapuji and the Sarpanch with whom the Talati discussed this matter have not been examined. We have, therefore, no first-hand infromation regarding this matter. Further the IAC has also relied upon his personal knowledge. What the basis of the IAC for that personal know ledge is has not been stated by him. The learned Standing Counsel, on the basis of the available figures, submitted that according to the assessee every mango tree gave a gross return of only Rs. 3.75 and every flmon tree have a return of only Rs. 2 and that since this was ubbelievable, the estimate made by the Commissioner (Appeals) should be accepted. In our view although this kind of yield appers tobe toolow, what is necessary for an estimate is areliable basis for estimate such as comparable instances or opin6ons of Person who have personal knowledge and who are independent outside witness subjected to cross examination. As indicated above there is no firm evidence regarding the nuber of fruit bearing trees in the period 1980-81. Therefore, it cannot be said that there is a reasonable basis for arriving at the estimate made by the IAC. It is true that he has given a reducation for losses due tocloudy weather and age of the trees and the Commissioner (Appeals) has also given a further reducation but that is no way of arriving at an estimate for the prupose of making an addition. It must be borne in mind that the IAC and the commissioner (Appelas) were making an estimate not for academic pruposes but for making an addition and for doing that a much more firm basis is necessary as indicated above.

47. Regarding the third question in this connection, the IACs conclusion is based on an inference. There is no evidence in that regard. According tohim if the correct income has not been shown, then the producre must have been consumed by the trustees and their relatives or the income thereof has been misappropriated by them. Before usthe assessees counsel submitted that the produce of the farm could not be taken out without issue of a gate pass. He described the procedure. As soon as the produce was collected it was weighed and a gate pass to take it out was issued. It is handed over to one person who went to the wholesale market in the city an dhanded it over to a broker for sale. The broker gave a sale not stating the weight of the produce sold and the amount realised after deducting the brokerage and give the sale proceeds to that person who hands over the sale proceeds along with the brokers note to the Accountant who in turn deposits it with the Cashier. Thereafter the Auditor verifies the cash with the accountant and the amount is credited to the bank account of the Foundation. We find from the evidence of one Nankuram that the above system did prevail. In reply to question No. 5, he has stated that a gate pass is prepared in which the weight of the commodity is written. In reply to question No. 7 he has further stated that he takes the flowers to Manek Chowk and hands them over to a broker and that the broker gives him a bill and the sale proceeds. He then hands over the sale proceeds with the bill in the office to Shri J. K. Gandhi. Although his evidence relates to flowers it does show that the above system exists generally regarding the farm produce. The learned counsel also submitted that the mago crop was generally sold by contract and there was, therfore, no question of any imsappropriated by the evidence of J. K. Gandhi who in reply to question No. 10 has stated that the mangoes are sold on contract to person who gives the highest offer. In reply to question No. 11 he has stated that this system of sale by contract has been going on for thelast five or six years. Regarding the above evidence of Nankuram he has denied that the sale proceeds are handed over to him. But he has stated that Nankuram hands over the sale proceeds to Anubhai who in turn hands them over to the cashier who gives a receipt for it. According to the IAC since Shri J. K. Gandhi was not an employee of the Foundation but was a trusted person of the managing trustee, the sale proceeds were taken away by the trustees. We are of the view that there is no justification for the conclusion reached by the IAC and confirmed by the Commissioner (Appeals). First of all regarding this allegation of misappropriation no question has been put to the managing trustee Smt. Giraben. Secondly, the fact that Shri J. K. Gandhi was not an employee of the Foundation will make no difference because if any misappropriation was to be done it could have been done also through an employee of the Foundation. Thirdly, if the trustees wanted to misappropriate the produce or the sale proceeds they would not have kept such a system of gate passes and accounting for the sale proceeds. That this kind of system was maintained has not been doubted by the IAC or the Commissioner (Appeals). The system is such that misappropriation would not be easy. The produce cannot be taken out without a gate pass mentioning the weight and when it is sold the sale proceeds are handed over to the cashier of the Foundation, who deposits the same in the bank account. The only way in which misappropriation could occur would be that either the produce is taken out without a gate pass or after having taken out it is not sold in the market. The learned Standing Counsel did make a submission that there was nothing on record to show that whatever was available on the farm was sent to the bazar for sale. However, no question has been put in that regard to anyone to find out whether at any time either the produce found its way to any place other than the bazar or the sale proceeds were not handed over to the cashier as stated above. Mr. Gandhi in answer to Q. No. 30 has stated that the sale proceeds were handed over only to Anubhai. Lastly it is too much to say that the trustees who are old and personally so wealthy would do this kind of misappropriation. We, therefore, cancel this addition entirely ad hold that the loss claimed by the assessee should be allowed.

48. The next item of disallowance is in respect of the loss for Asarva farm. This disallowance is based on the same kind of material and reasoning as in the cases of Hansol farm. We, therefore, hold that the estimate of Rs. 20,000 is unjustified and consequently allow the loss claimed by the assessee.

49. The next item is in respect of expenditure of Rs. 52,002 regarding the museum. The IAC has disallowed this expenditure on the ground that it was not open to the public. That conclusion is based on the following facts found by him :

(i) On 6th and 12th December when he visited the Foundation, the museum was not yet open;

(ii) According to the advertisements in the newspapers the museum or gallery was open only between 10.15 to 10.30 A.M. and 3.15 to 3.30 P. M. i.e. only for 15 minutes in the morning and 15 minutes in the afternoon;

(iii) The news item regarding the museum was published in the papers along with the news regarding the Calico museum at a time when the shareholders petition in the Gujarat High Court was pending. It was, therefore, intended to give an impression that the Calico museum was transferred to the Foundation for the public convenience and that some other items of general utility were also being shown to the public :

(iv) From the visitors book it was seen that hardly anybody from the public had visited the gallery in the last 2 or 3 years since it had been opened. Although foreign guests and VIPs had visited it that did not mean that it was open to the public.

On the same grounds the expenditure on Archives has also been disallowed.

50. The assessee has replied that the Court gallery was open to the public on 24 - 10 - 1983 by posters at public places, such as hotels, Gujarat Tourism office and IIM vide letter of that date, notice boards and letters to people interested and the Vallabh Sampradaya Pustimarg gallery was open on 31 - 1 - 1984 by announcements in the Gujarat Samachar. Our attention was also drawn to the entries in the visitors book bearing the dates prior to visit by the IAC. Now, the IAC has not doubted that the public announcements regarding the opening of these galleries were in fact made. Therefore, the first conclusion to be drawn is that the galleries were in fact open to the public and the IAC is wrong in stating that they were not open to the public. However, his emphasis is on the small interval of time for which, according to him, they were opened i.e., 15 minutes in the morning and 15 minutes in the afternoon. Now this is quite incorrect. Free English translation of the announcements which appeared in the Gujarat Samachar is as follows :

"The Darbar GAllery of Calico Museum of Textiles, Opp. Underbridge, Shahibag, A bad will remain open from 10 AM to 12.30 PM and 2.30 PM to 5 PM for the general public except Monday. At present the Vallabha Sampradaya Collection is being displayed. " - Gujarat Samachar dated 31-1-1984 (Page 1017 of Paper Book IV).

"Calico museum of Textiles, Shahibag, Ahmedabad. Timings : Darbar Gallery 10 AM to 12.30 PM to 12.30 PM and 2 PM to 5 PM. Entry Timings : Vallabh Sampradaya Wednesday and Bank Holidays) " - Gujarat Samachar 24 - 12 - 1984 (Page 1018 of Paper Book IV).

The announcement of 24 - 12 - 1984 although after the IACs visit is obviously a repetition of and in continuation of the earlier announcement of 31 - 1 - 1984. This shows that the IAC has completely ignored the announcements that the Darbar gallery was open altogether for 5 1/2 hours and he has merely taken into accounts the short intervals mentioned regarding the Vallabh Sampradaya Pustimarg section. Therefore, first of all part of the museum i.e. Darbar gallery was definitely open for a sufficiently long time. Regarding the short intervals for the Vallabh Sampradaya Collection, the assessee has explained that these were the timings only for entry and that once a person entered he could spend sufficient time to see the exhibits. The idea is to let certain number of people collect by centering in a limited interval so that they would form a group and could be shown and explained the various exhibits by a guide. We also and from the various entries in the visitors book all foreigners or VIPs or people who cannot be called members of the public as alleged by the IAC. For instance there are entries by the following :

Nalini and Haridas Shah, Bombay Parul Dave of Baroda Dr. A. V. Jayachandra of Madras Mridula Mulkraj of Bombay (16 - 12 - 1983) Narendra Trikamlal, Ahmedabad P. L. Dave, Secretary, State Board of Teachers Education Raikhad, Ahmedabad and many others.

They all appear to be ordinary people and not all of them have put dates but many of the entries which are subsequent thereto bear the dates which are prior to the IACs visit. The following two entries would show that :

N. H. Trivedi - 18 - 4 - 1984 Mridula Bihari Kanaiyalal - 16 - 4 - 1984 Therefore, we must say that the conclusion of the IAC that the galleries were not open to the public is wrong and against the evidence.

51. Regarding the allegation that the news items was published in order to show that the Calico museum was open to the public when the Gujarat High Court was seized with the matter, the assessee has replied that actually the announcement in the papers was made when the Gujarat High Court was not seized with the matter. The assessees reply shows that it was the City Civil Court which was concerned with the matter and has granted the temporary stay. It is unnecessary to consider this reply because the fact that the aid galleries were open to the public has been established by the assessee and an imputation of motives, even if correct, is totally irrelevant.

52. It is true that the galleries were open in 1983 and 1984 but preparations have naturally to be made for them and that involves quite a long time. A museum is not just a collection of interesting objects. They have to be kept in their proper places and for their protection, preservation and display proper arrangement have to be made. A good deal of planning has to be done and people knowledgeable in the field have to be consulted and their advice followed. In this connection our attention was invited to the evidence of the Managing Trustees, who had stated in reply to question Nos. 14 and 15 that the work of the museum was started from July 1979 and she started consulations regarding drawings, programmes, designs etc. This evidence has not been challenged. The items of expenditure also bear this out :

"DETAILS OF MUSEUM EXPENSES - A.Y. 1981 - 82 Cost of preparation of panels for preservation and display of ancient Manuscripts and other objects of Jain Gallery :

Materials 13,599.59   Labour 8,169.70   Travelling 2,922.91 24,692.20 Amount paid to Shri Hari Prasad Shastri, a Scholar Malvania 5,479.10 Amount paid to Shri Hari Prasad Shstri, a Scholar 600.00 Amount paid to Shri O.P. Sharma, Art Historian and Curator of Painting, National Museum, Delhi 3,000.00 Photoprints of manuscripts etc. 18,230.44   52,001.74"

Therefore, the expenditure must be said to be for setting up the museum. The learned Standing Counsel argued that the Calico museum was not shifted to the Foundation premises till 1983 and so there was no question of making preparations in 1980 - 81 for setting up the museum. The assessees counsel replied that the entire museum did not consist only of the items received from Calico museum and that the assessee had exhibits of its own. However, that is not the IACs ground for rejecting the assessees claim. His rejection is based on the allegation that the museum was not open to the public which, as we have stated above, is completely wrong. Therefore, the expenditure claimed in this connection and similarly for the archives is allowed.

53. The next disallowance is of Rs. 50,000 which, according to the IAC was transferred from the Reserve Fund to the income and expenditure account. The disallowance is on the ground that the assessee failed to show the finding of the ITO regarding the purpose for which it was set apart so that it could he ascertained whether it had been spent for that purpose. The Commissioner (Appeals) has confirmed the disallowance on the ground that there was no evidence to show the purpose for which the amount had been received and for which it was set apart for future expenditure. The assessee has explained that the amount had first been received from Darshan Charity Trust on the condition that it would form part of the corpus. A copy of the letter dated 25th December, 1979 from that trust to the Foundation and a copy of the resolution of that trust in that connection are in the paper book before us. In that letter the Foundation has been informed that donation of Rs. 50,00 is given as per the copy of the resolution, the material part of which is as follows :

"It is proposed to donate a sum of Rs. 50,000 to Sarabhai Foundation, a Public Trust registered under the Bombay Public Trusts Act, 1950 with a condition that the amount so donated shall form part of the corps of the Foundation and be held by the Trustees of the said Foundation upon the same trusts and subject to the powers, provisions and stipulation contained in the Deed of Trust creating the said Sarabhai Foundation."

The assessee explained that it was decided that the amount should be utilised promptly for the objects of the trust and, therefore, it was credited to the income and expenditure account for the A. Y. 1981 - 82. In grounds 66 and 67 it has been stated that this evidence was before the Commissioner (Appeals) and this has not been denied. Thus it was not as if the assessee had earmarked it earlier for some other purpose for which the approval of the ITO had to error and, therefore, this disallowance is not justified.

54. The next item of disallowance is in respect of an amount of capital gains which was invested by the assessee as deposits in Government companies, namely, Bharat Heavy Electricals, Indian Oil Corporation, Hindustan Petroleum Corporation. The assessees claim was based on the fact that it was an investment in capital asset as mentioned in section 11(1A). The assessee has relied on an instruction of the Board. The IAC has rejected the assessees contention on the following grounds :

(a) that he was unable to find any such instruction of the Board;

(b) by the word "capital asset" was meant an asset which was marketable and whose price was subject to fluctuation;

(c) fixed deposit was a loan and not a capital asset and the assessee had got only the right to receive the fixed amount back after a period of time with a particular rate of interest;

(d) section 11(1A) envisaged reinvestment in an asset of a similar nature.

55. Before us the assessees counsel relied upon the Gujarat High Court decision in the case of CIT v. Ambalal Sarabhai Trust (No. 3) [1988] 173 ITR 683 where it has been held that the fixed deposit was a capital asset and that by making that fixed deposit the conditions of section 11(1A) were fully satisfied which entitle the assessee to exemption from tax on capital gains arising on the share of shares. Therefore, applying that decision as we hold that the assessee is entitled to the exemption on the full amount of capital gains.

56. The next item of disallowance is of an amount of Rs. 1,02,000 in respect of what the IAC has called "purchase of dead stock. " Actually the items are "Jhummars", Cushions and Books. The disallowance is on the ground that they were no for furthering any object of public utility. An amount of Rs. 13,047 for the purchase of air conditioners has also been disallowed on the ground that they were purchased from the sister concern and so could not be said to be in furtherance of the object of public utility. The managing trustees was questioned on this aspect and she explained that the Jhummars had been purchased for creating a certain atmospheres had been purchased for creating as certain atmosphere and enviorment in the museum particularly in relation to the display of articles regarding Vaishnav religion. Regarding the cushions the assessee has explained that they were used in the Foundation premises for different purposes including sitting arrangement on the verandah at the entry to facilitate the visitors to remove their shoes. In our view, if the museum expenses are allowed then this kind of ancillary expenditure has also to allowed. It has to be appreciated that this is a museum of valuable (or rather invaluable) articles from the hostorical and aesthetic point of view. Its equipment, furnishing etc. have to the looked at from a different point of view. What may generally be regarded as articles of luxury may not be such in a place like this. Therefore, in our view, this expenditure has to be allowed.

57. Regarding the expenditure on books we have dealt with it earlier and we hold that this expenditure is allowable. There is also no justification for disallowing the expenditure on the purchase of air conditioners on the ground that they were bought from the sister concern. The question is whether they were necessary or not and the decision for that should be left to those who manage the museum.

58. The ground regarding disallowance of depreciation is not pressed and is, therefore, rejected.

59. The IAC has disallowed another item of expenditure on the construction of compound wall at the Hansol farm and the premises of the Foundation on the ground that it could not be held as spent for furtherance of an object of public utility. According to him the decision of the Gujarat High Court in the case of Satya Vijay Patel Hindu Dharamshala Trust v. CIT [1972] 86 ITR 683 is not applicable. In that case we have already held that the Hansol farm formed part of the corpus of the trust. Therefore, any expenditure in connection with it an expenditure for the purpose of the trust and consequently allowable. The same applies to the expenditure on the compound wall at the Foundation premises.

60. Thereafter the IAC has made some general observations regarding the question whether the activities of the Foundation are of charitable nature or not. He has come to the conclusion that they are not of charitable nature on two grounds : (a) non - accessibility to the premises and non - availability of the facilities to the public, and (b) the purpose for which the money was spent are non -charitable.

61. Regarding non - accessibility and non - availability of facilities he has stated that it was necessary that the entry of the public should be free and without hindrance which, according to him, was not so in this case. He has observed that :

(a) Although there were three gates for entering the Foundation, two were closed down and only one was open and at that gate there was guards whose permission had to be taken for the entry :

(b) The entry was through the property of a sister concern - Mutual Amenities Pvt. Ltd. (MAPL) and the guards were the employees of that concern :

(c) There was no sign board or public notice informing the public about this Foundation and the availability of its facilities to the public :

(d) The whole look of the campus gave an impression that this was a private property and no members of public could enter it. He relied upon the decision of the Supreme Court in the case of Addl. CIT v. Surat Art Silk Cloth Mfrs. Association [1980] 121 ITR 1 :

(e) Even if the said facilities are open to the public they are only for a small section of the public and that too once in a week or for 15 to 20 minutes in a day.

In this connection we will also mention that in the earlier part of the order the learned IAC has also recorded that Ramdas, the gardener had stated that no outsider was allowed to come to the garden.

62. Now, first of all the entry, both to the Foundation premises and to the private residences of the Sarabhai family, is through one common gate and in order to go to the Foundation one has to enter the common road. It has been classified to us that the guards at the gate merely tried to ascertain whether a visitor wants to go to the Foundation or to the residence of the Sarabhai family. It the visitor wants to go to the Foundation the guards indicate to him the direction and if he wants to go to the residence the guards telephones to the residence and ascertain whether the visitor should be permitted to go in. In that connection we have the evidence of Narayan Singh, the guard at the gate. He has stated that he stands at the gate near the telephone and the telephone is used to make enquiries inside. He has further stated that if an outsider wishes to enter he tries to find out why he has come and that information is conveyed inside and if permission is conveyed to him he lets that person go inside. He has also stated that he stands at the gate near the telephone and the telephone is used to make enquiries inside. He has further stated that if an outsider wishes to enter he tries to find out why he has come and that information is conveyed inside and if permission is conveyed to him he lets that person go inside. He has also stated that the outsiders come to see the Foundation and stated that if they come during the time when it is open he lets them go inside. The English translation of some of the question put to Narayan Singh and his answers thereto are as under :

Q. No. 13 : Before letting a person inside do you make enquiries ? To whom ?

Do you take the signatures in the registers ?

Ans. If outsiders come and say that they want to go to the museum or to the Foundation then we show him the way and let him go and do not take his signatures in the registers.

Q. No. 14 : When do you prevent him from entering the museum ?

Ans. When the museum is closed.

Q. No. 15 : When does the museum remain open and when does it remain closed ?

Ans. The museum is open from 10 to 12.30 AM and 2.30 to 5.30 PM.

Q. No. 16 : Apart from the museum does any one come to visit the Library ?

Ans. On some days they come and some days they do not come.

Q. No. 17 : Who comes ?

Ans. I do not remember. If any one says that he wants to go to the library of the Foundation then we let him go.

Q. No. 18 : Do you remember the name of any visitor ?

Ans. No, I do not remember any name. If any one wants to go to the library we do not ask his name.

This evidence clearly bears out what we have stated above. It clearly shows that what the guard does is to enquire from a person where he wants to go and if the visitor wants to go to the Foundation he shows him the way and if the visitor wants to go to the Sarabhai residence, he enquires on the telephone whether the visitor may be permitted to go in. Not only that but this evidence also shows that the Foundation and the library are open to the public at stated intervals and people do in fact go in and there is no restriction on any one. The enquiries at the gate are very normal and natural to separate the visitors to the residence from the visitors to the Foundation. The fact that the road of the MAPL is to be used is hardly of any consequence. Under an agreement executed by Ambalal Sarabhai in 1959 the Foundation has the right of easement over the common roads of the campus including the main road and it is this right which enables the Foundation to let in the visitors by using this road. So the observations of the IAC that the visitor has to trespass the property of the MAPL and that there is any hindrance has no basis.

63. Regarding the sign board the assessee had filed in the paper book before the Commissioner (Appeals) photographs of the sing board indicating the activities of the Sarabhai Foundation (Pratishtan) at the counter of the Gujarat Tourism Corporation at the Air Port and other places. Before us a copy of a similar photograph has been filed. It is a hoarding mentioning the name Sarabhai Pratishtan and it has been stated that it was here since 1979. This assertion had not been denied by the Commissioner (Appeals) or by the Standing Counsel. Photographs of the subsequent boards which replaced the old one were also filed before the Commissioner (Appeals) and before us. They mention the timing regarding the botanical garden, the audio cassette library etc. Moreover there is sufficient evidence as indicated above that the Foundation premises were open to the public.

64. The IAC has relied upon the decision of the Supreme Court in the case of Surat Art Silk Cloth Mfrs. Association (supra) and quoted : "it would be a question of fact in each case whether so much personal benefit, intellectual, professional to the members of the society or body of persons has to be incapable of being disregarded". He has not indicated the page number of the report and so it is not possible to find out the context in which these observations were made. But even if these observations are applicable here we would like to say that the benefit of the public was and is considerable looking to the exhibits and other benefits available. His allegation that it is open only once a week for 15 to 20 minutes is not correct as pointed out above. It is also not correct that the benefits are available only to a small section of the public. But even if it is true the claim to serve public charitable purpose cannot be denied on that account. The Gujarat High Court in the case of CIT v. Ahmedabad Rana Caste Association [1973] 88 ITR 354 has observed as follows :-

"Therefore, the advancement of any object of benefit to the public or a section of the public as distinguished from an individual or group of individuals would be a charitable purpose. " (p. 364) This decision has been approved by the Supreme Court in CIT v. Ahmedabad Rana Caste Association [1983] 140 ITR 1. Further, the benefits of the Foundation are available to any member of the public and not to particular individuals. The fact that the members of the public may be comparatively small in number makes no difference. In order that an institution may be charitable it is not necessary that its facilities should be meant for the vast crowds.

65. Regarding part (b) of the IACs observations that the purpose for which the money was spent was non - charitable objects, the IAC has relied upon certain English decisions. However, those decisions are not applicable here because the governing statutes are different as has been observed by the Supreme Court in the aforesaid case of Surat Art Silk Cloth Mfrs. Association and by the Gujarat High Court in the case of Ahmedabad Rana Caste Association (supra). Moreover museums are built and maintained by the State also which shows that they are for public benefit. This particular museum is for preserving the cultural heritage of India and is of national importance. As for libraries, it is hardly necessary to point out that they are regarded as for public benefit. The fact that instand of books there may be cassettes should not make a difference because one is to be read and the other is to be heard but ultimately both are means for communication.

66. As stated above the IAC has made a number of disallowances, inter alia, on the basis applicability of section 13(c) such as the expenditure on the farm and on other activities on the ground that they are for the personal amusement and entertainment of the trustees and their relatives. He has, however, made a disallowance in respect of a payment to a concern, MAPL (supra), section 13(3). The assessee had made this payment for use of the road, drinking water and services of watchmen which were provided by the MAPL. Now, as stated above the road to the Sarabhai Residences and to the Foundation is common. The departments case is that although there are two other gates available at the retreat campus for entering the Foundation premises, only this one gate which provides a common entry has been kept open. The road and other services are actually meant for the Sarabhai residence but the assessee is paying for them while the owners of those residential premises are not required to pay anything at all. According to him the visitors book at the gate is for the visitors to the residence and showed that this kind of arrangement of a watchmen at the gate with a telephone was intended for providing security etc. for the residential premises inside. He has also referred to a store room in the premises of the Foundation in the occupation of the staff of MAPl where the records regarding the visitors to the Sarabhai family are kept. This according to him, showed that this arrangement was for the residential premises inside. He has also observed that :

"This clearly shows that this store comprising of two rooms along with bathrooms is being used by Gautam Sarabhai and Giraben through their personal guards who are maintaining the register of visitors who are coming to meet the family members of Sarabhai family."

According to him there was no necessity for the guard and if at all they were necessary they would not be required for more than five hours of the day during which time the Foundation premises were open to the public. He has stated that the assessee was having four watchmen and four other persons, namely, Puji Ram, Bhikaji, Raiji etc. to look after the Foundation property and so the payment to MAPL was unjustified and, therefore, section 13(2) (c) read with section 13(3) (c) were applicable.

67. The assessees reply is that if separate arrangements were made for the Foundation it would have cost much more and the owners of the residential premises inside had their own arrangements for security purposes. Further they have also denied that the other persons who derived benefit from these common services did not pay for them.

68. In our view although the assessee could have kept a separate gate for entry to the Foundation premises, it would certainly be cheaper to share in common services. Secondly, it is not denied that they were getting these common services. The use of the store room by the guards is necessary for rendering the service. Therefore, the payment would be justified. Thirdly, guard and security arrangements are certainly necessary for the Foundation in view of the priceless materials which they had. We cannot agree that they are necessary only for five hours in the day particularly in view of the valuable materials kept in Foundation. The IAC has mentioned the same names - Puji Ram, Bhikaji, Raiji etc. as having been kept separately for the Foundation as those with the MAPL. Therefore, it cannot be said that the Foundation is keeping separate watchmen and so there was no necessity for paying the MAPL for their services. In our view it cannot be said that these services are meant only for the purpose of the residences inside just because the entry or the road are common. Therefore, this disallowance is unjustified and is cancelled.

69. The next disallowance is in respect of repairs and maintenance of buildings amounting to Rs. 1,31.351. The disallowance has been made on the ground that the examination of the values who submitted the valuation report for the repairs showed that the expenditure was highly exaggerated and not supported by proper vouchers. The assessee has replied that the IAC had not called for the vouchers and the valuer was examined by the IAC (not cross examined) on the same day on which the assessment order running into 64 long sheets was passed. The assessee has further stated that the said examination was completed at 6 p.m. on that day and the offer to the assessees representative to re - examine the valuer thereafter was not genuine. The assessees reply shows that the expenditure was duly supported by audited books of account and vouchers of the Foundation and the valuer was offered for examination only in order to meet the possibility of the assessing officer later on complaining that his requirements had not been met. Those requirements were regarding (a) the nature of repairs like rebuildings of walls, replastering etc. including the particulars place or part of the building which were repaired, and (b) the actual additions, or alternations made during the last three years along with specific place of construction. The assessees contention is that these requirements by their very nature were impossible to meet. The above statements of the assessee are not controverted by the revenue.

70. In our view the contentions of the assessee are correct. Since the IAC did not ask for the vouchers and the assessees books were duly audited there is no justification for making the disallowance. The observation by the IAC that the expenditure is exaggerated is extremely shallow and not duly supported by proper assessment of evidence etc. The assessee is justified in its grievance that no genuine offer for examination of the valuer was made since it was done at 6 p.m. on the day on which the long order by the IAC was passed.

71. The next disallowance is in respect of establishment expenses amounting to Rs. 1,76,493. The IAC has allowed an expenditure of Rs. 25,000 from that. This disallowance is based on the ground that the expenditure is exaggerated and related to activities which are for the personal amusement and entertainment of the Sarabhai family members and the VIP guests and friends. In our view the assessee is fully justified in the complaint that the disallowance is made without any detailed consideration of the expenses involved and without giving sufficient reasons therefor. We, therefore, cancel this disallowance also.

72. In the preliminary paragraphs of this order it has been stated that the IAC visited the Foundation premises, examined some persons working there and reached certain conclusions, which led to his detailed investigation. The conclusions are that :

(a) the accounts have been manipulated or not properly maintained;

(b) the facilities are not accessible to the public and are being used by the trustees.

The second conclusion has been considered in relation to various disallowances and so there remains the first one. Nothing very much turns on it because the disallowances are mainly based on the second one but it has occasioned the detailed investigation;. We are dealing with it because it is of a serious nature and the assessee has made an acute grievance of it. In this connection, the evidence of one Rohitbhai, a mechanic has been relied upon by the IAC. According to him :

(a) Rohit got Rs. 20 per day whereas the assessee debited Rs. 30 per day;

(b) Rohit got Rs. 112 for 10 - 12 - 12 days while the wage sheet shows Rs. 212;

(c) Rohit was not signing any vouchers and two vouchers produced before the IAC were signed by Rohit just then.

Now the evidence recorded is as follows :- (Questions and answers translated by us from Hindi) Q. At what rate of daily wages are you working here ?

A. I am working on daily wages at the rate of Rs. 30 per day.

Q. Who pays you your wages ?

A. I get the wages from Sarabhai Foundation.

Q. Do you give your signature for the wages that you get ?

A. No. I get wages on daily basis and I do not give my signature.

Sri Vinay Kumar has interfered when Shri Rohitbhai gave the reply that me labour charges are Rs. 30 per day. Shri Vinay Kumar told that your labour charges are Rs. 20 and not Rs. 30 and on this Shri Rohitbhai after reading this statement says that :

I got 20 rupees per day.

Q. 16 Why do you say Rs. 20 per day when earlier you had said Rs. 30 per day ?

A. I had said Rs. 20 and not Rs. 30.

IAC, AR - IX and myself are aware that Shri Rohitbhai had said Rs. 30 and not Rs. 20.

Read over and admitted to be correct.

Sd/- Rohit /6 - 12 1984 Sd/ - ITO Opportunity is given to Shri P.M. Mehta for re -examination of the witness, if he finds any ambiguity in the statements of Shri Rohitbhai. He has submitted that on my behalf Shri Anil R. Shah of R. G. Shah & Co. shall ask.

Sd/- P.M. Mehta 6 - 12 - 1984 Shri Anil R. Shah is given opportunity for re -examination.

Shri Anil R. Shah wants to ask specific question with regard to payments given to Shri Rohitbhai and receipt on separate paper or voucher is passed by him. I disallow this question as this has already been replied by the witness and there is no ambiguity.

Sd/ -

Anil R. Shah 6 - 12 - 1884 This statement has been recorded by myself and IAC, AR -IX, together.

Sd/ - ITO 6 - 12 - 1984 Shri H. M. Patel, Incharge and Secretary of SF was asked to show various vouchers relating to Shri Rohitbhai Motilal and these were seen. Shri Rohitbhai was asked to sign below in English (i8legible), he replies that I am signing only in Hindi. If I am asked to sing in English, and I do not know but still I can make some impressions which he does as under :

Sd/-

Sd/ - ITO Q. I am showing you one signature at A to A. Whose signature is this ? If it is yours when was it given ?

A. This signature is mine and has been given recently. I do not remember when I got the money.

Q. Have you taken any money in the last 8 to 10 days ? If you have taken how much did you take ?

A. About two or three days back I might have taken Rs. 112. I might have taken more.

Q. At what rate have you taken it and for how many days ?

A. It must have been for 10 days. I got it at the rate of Rs. 20 per day. The employers say they will give more but I do not know. I got Rs. 112 and I do not know anything.

Q. Apart from this did you get any other money in the last 15 days ?

A. No. Shri Anil R. Shah was given opportunity to re - examine Shri Rohitbhai on any ambiguity or other part on which he wants to make clarification which he declined.

Sd/- ITO, 6 - 12 - 1984"

73. Now, immediately after answer to Q. 16 both the IAC and the ITO have recorded that this witness said Rs. 30 and not Rs. 20. Moreover in the wage sheets which have been produced before us Rs. 30 has been recorded. Regarding the signature on the go sheets were have found that he has signed not in two places but in six. These signatures are the same as that on the statement. Therefore, even if two signatures might have been made on the day of the statement, the other four were not. These documents were impounded. Therefore, the signatures could not have been put afterwards. Further, referring to the signature on the 1st December, he has stated that it has been given recently and not now. The word recently fits because the statement is on the 6th and the signature on the 1st i.e., recent past. Moreover, Mr. Anil Shah was not permitted to pure a specific question regarding payments and receipts. Towards the end the dont says that he must have received not what he in fact received and the total would be Rs. 200 for ten days (a) Rs. 20 per day. Again the evidence of Jaswantbhai - the guest house cook, Laxmanbhai Vaghela, the attendant at the gate. Jagatsingh, the Jamadar, that they were signing receipts for payments have been ignored. Therefore, the IACs allegation on the basis of this evidence must be said to be false or at least totally baseless.

74. We shall now deal with the allegation that the accounts were no properly maintained. The first such instance cited by the IAC is that for the assessment year no income has been shown from the sale of Juwar and mangoes. The assessee was asked this question. By its letter dated 8th February, 1985 it has been explained that the receipt of Rs. 9,378 for the sale of flowers and lime included receipts of Rs. 1474.87 on account of the sale of mangoes. The assessee explained that "this mistake occurred as a of a normal practice to sell mangoes on the trees per lump sum amount by giving contract to contractor. This year due to very low crop of mangoes no contractor came forward to bid and hence we ourselves had to sell the mango crops along with the other farm products. This fact was overlooked and as no lump sum receipt was found in the mango account it was presumed that there was no receipt on account of mangoes this year. " This explanation has been reproduced in the assessment order itself. We find it to be perfectly reasonable and so there was no reason for the IAC to use this for reaching his conclusion and for making an estimate.

75. The IAC has also alleged that by his letter dated 4 -1 - 1985 the assessee was requested to furnished various details regarding the stock of various articles like gramophone records, audio cassettes, air conditioners, furnitures and fixtures, articles of national importance which the assessee was displaying in the museum and was owned by the assessee for public or official use and even up to the date of the assessment i.e., 8 - 2 - 1985 no such details were furnished even after the assessee was repeatedly reminded. The assessee has supplied a copy of the reply dated 12 - 1 - 1985 which was sent to this letter. It is, therefore, surprising that the IAC has stated that no such details were supplied. We find from the IACs letter dated 4 - 1 - 1985 that considerable number of details etc. were required to be sent and the assessees reply dated 12 - 1 - 1985 is also in considerable detail. We have not tolled every detail but if replies to some quires were not given that is not surprising considering the short time within which this reply was sent, the amount of details which were in fact supplied. The IAC has stated that even after repeated reminders stock register of articles meant for public use or office use was not supplied but the assessees counsel has denied this. We find from the letter dated 4 - 1 -1985 that all that has been asked for the were details regarding dead stock. Even in the IACs letter dated 19th January, 1985 the assessee was required only to give those details mentioned in the letter dated 4 - 1 - 1985. The assessee has supplied those details regarding dead stock. We, therefore, see no reason for this allegation also.

76. There are further allegations regarding discrepancies in the accounts. The basis for them, we find, is so untenable and the assessees explanation so reasonable that we see no reason for making those allegations. In any case we have deleted all the disallowances made in respect of these items and, therefore, it is unnecessary to consider each and every one of them in details. However, we have sustained the disallowance in respect of payment of Rs. 11,000 to Harangue Samaj. In that regard the distant. Earlier the assessee had stated that the Samaj was a branch of the Foundation but later on it was stated that the Samaj was not connected with the Foundation. Therefore, according to the IAC it was surprising how the income and expenditures account of the Samaj was included in the assessees books. The assessee has explained this in form of notes before the IAC and the Commissioner (Appeals). The assessee was giving certain financial help to this Samaj and keeping an account thereof in its books. For some time that Samaj was having its own bank account in the name of Mr. H. M. Patel and another but in the accounting year 1980 - 81 the account of the Samaj was maintained in the books of the Foundation. Ultimately the excess of payment over receipt was borne by the Foundation. What all this means is that the assessee gave financial help to the Samaj and maintaining a record which if looked at properly would not show any discrepancy or irregularity.

77. The IAC has disallowed an amount of Rs. 24,868 claimed as miscellaneous expenses. He has stated :

"In my earlier paragraphs I have discussed that the various losses claimed and expenses shown under this head is not allowable and accordingly this expenditure is also not allowed in computing the taxable income u/s 11."

Thus his ground for disallowing are the same as for the other expenses. The break - up is as follows :

"MISCELLANEOUS EXPENSES : STATEMENT `C Misc. expenses   7,652.60 Hansol Farm No. 4 (S. No. 45 & 57)     Total Expenses 18,122.07   Less : Total Income 12,546.82 5,575.25 Asarwa Farm No. 188 & 189     Total expenses 945.50   Less : Income 824.20 121.30 Motor Cycle Expenses 2,981.21   Cycle Expenses 148.10   Subscription Exp.

1,033.71   Scooter Exp.

67.06   Furniture & Fixture written of 71.09   Licence fee (Radio & Alkohal) 46.00   Conveyance Exp.

4,374.00   Insurance Premium Exp.

2,789.00 24,868.32 The break - up shows that these are expenses relating to the general expenditure of the Foundation and relate to the items in respect of which we have allowed the expenditure. Since we have held the Foundation to be a public charitable trust we cancel this disallowance also.

78. Towards the end of the IACs order an addition of Rs. 5 lakhs has been made in respect of the Annual Letting Value of the property of the Sarabhai Foundation. Since we have held that the Foundation is a charitable trust there is no question of any A. L. V. in respect of this property. This addition is, therefore, cancelled.

79. We may now consider the general aspects of this case. As stated above the Commissioner (Appeals) has not discussed the evidence independently. Rather his order proceeds on many irrelevant considerations, mis-statements of fact, misunderstanding the legal position and shows lack of language which, to say the least, is intemperate. All this reflects on his impartiality and affects the general validity of his order. Thus in para 3(vi) of his order he has stated that :

"For considering whether a charity is being done for an object of general public utility it is also essential to examine certain aspects like the image of the sponsorers,..... the reputation of the institution..."

This view has been reiterated in para 48 of the order. These factors are totally irrelevant because it is a question of act whether the income is being utilised for the object of the trust or not and it has nothing to do with the image or reputation of the settlors. The following observations in paragraphs 16 to 18 are totally irrelevant and in places the meaning thereof is far from clear :

"16. The question of charity is a much a larger precept. The provisions of Income - tax Act are not treatise on charity. The feeling to do charity emanates from the heart; from noble and high moral values and from sincere intentions to do good to someone. Infortunately the entire steps taken from 1981 - 82 by the Sarabhai Foundation had been geared to and meant, for fitting into the technical aspects of the provisions of the Income - tax Act only. Each step had been taken only for the purpose of claiming exemption under section 11. But at the same time it is a matter of regret that the basic precession for the creation of the Sarabhai Foundation - namely essentially doing charity, had been totally ignored.........."

It was unnecessary for the Commissioners (Appeals) to make any of these observations. All that he was to do was to decide whether the Foundation is a public charitable trust or not and if so whether it was spending its income on the objects specified as charitable under the IT Act. There are further observations as follows in para 18 :

"18. The learned DR pointed out that the Sarabhai Group, and specially the family members now looking after the industries, have evolved a negative reputation of having utilised 90 per cent of their time, resources, man - hours of work for tax planning purposes and only 10 per cent for running of the business of the group. In any normal industrial house (and more so in a period of industrial growth in a socio - economic sector like India) the priorities should have been just the reverse i.e. 90 per cent afforts should be for purposes of adding to the gross national product by doing production activities (whether in manufacturing or services or management) and 10 per cent for other purposes like planning of financial or tax matters. Since this has not been so in the case of the Sarabhai Group, during the last decade the conspicuous fall in its industrial ratings was only natural. And predictably on top of it he Sarabhai Group, due to the reforms and modifications in law in the last few years, had been caught in the vicious tailspin of smarter - than - thou - tax - avoidance - syndrome. But then the litigation and mixing up of its priorities have both been its own creation."

This is a classic in irrelevance and shows the way in which the Commissioner (Appeals)s mind has been working. The following are examples of the inserperate language and also of irrelevance :-

"20. ......... In this regard the question would, therefore, arise whether a well - heeled tax - prayer (like the appellant) can masquerade as a charitable entry merely on its ipse dicit without even attempting to do good to someone in any walk of life."

"21. ........... Here the appellant Sarabhai Foundation is apparently the beneficiary of the expert legal advice given by a coterie of professional tax advisers who are paid by the Sarabhai family annual retainership and fees in amounts running in six figures individually.

Such has been moral fiber of the trustees; and such was the ethos of the advice of their six - figures paid Counsels or to use the term mentioned by Honble Supreme Court in 148 ITR 153 the lawyer tuned - magicians."

In para 13, the Commissioner (Appeals) has stated that :

"I find from the side of the appellant the basic facts, the relevant and ancillary evidence (specifically brought on record in the assessment order) had remained unrebutted."

In para 23 he has stated :

"While no basic facts have been rebutted or denied it was only contended that the conclusion drawn by the assessing officer was biased and irrelevant."

All this is quite wrong. The assessee has been continuously rebutting these facts alleged by the IAC. Para 15(i) contains many observations which betray a lack of appreciation of the decision in the case of CIT v. Ahmedabad Rana Caste Association [1983] 14-ITR 1 (SC). All that the assessee was trying to say was that in order that exemption u/s 11 may be given it is not necessary that the entire public at page is being benefited and that it was sufficient if a part of the section of the public is benefited. It was trying to meet the case of the department that the facilities of the Foundation were available to a small class of persons only. but the Commissioner (Appeals) has stated as follows :

"I would not place any credence to the view that the implication of the learned Counsels submission has been that the entire charity is being done do the members of the Sarabhai caste or family."

This shows that the Commissioner has clearly misunderstood the submission of the assessees advocate. There was no attempt of making out a similarity between the CIT v. Ahmedabad Rana Caste Association [1982] 140 ITE 1 (SC) case and this case on the basis of caste. He has stated in this paragraph that in the case of the assessee these are mere pretensions too do charity and that the facilities have been used for the family. Instead of pointing out clear evidence to substantiate this conclusion he has merely stated that there is a plethora of evidence in that regard. The Commissioner (Appeals) has not followed the judgment of this Tribunal regarding the exemption from capital gains u/s 11(1A) on the ground that :

"An interpretation of the specific wording of the status and their scope could be done only by a a court of law i.e. High Court or Supreme Court. It is also settled that if any liberal interpretation is to be made then it can be done by issue of a specific circular only by the CBDT. In the present case the view held by the ITAT in its decision dated 28 - 7 - 1980 does not refer to any of these authorities."

All this is again wrong. The Tribunal is well within its powers to interpret the status and for that purpose it need not rely upon any decision of a court. It is a part of the judicial power which the Tribunal exercises. It is again wrong to say that liberal interpretation can be done only by the Board. The Board is not a judicial body and it has no powers to make interpretations of statutes. The legal position is that the lowest court has the power of interpretation of a statute and the Board has no such power. It is surprising that the Commissioner (Appeals) should not have followed the Tribunals order without distinguishing it and that too on the above reason.

80. The Commissioner has confirmed the IACs order with hardly any discussions but the IACs order is highly defective in more ways than one.

81. First of all his general approach is illogical. He has alleged that the donation of lands and buildings to the Foundation were a part of the tax planning but he has overlooked that in doing so the donor losses the property itself. Further the assessee started receiving the lands and buildings in 1979 and so made plans for utilising them and consequently its spending on other objects like education, relief of property etc. was considerably reduced and the spending for implementing the plans for utilising these buildings increased. These new plans were for objects of general public utility. They were more ambitious and bigger plans and naturally they took time implementation. As and when those plans fructified i.e. botanical garden, museum, library, the assessee opened them to the public. It is not surprising that they were open to the public only after they were ready and not before. to as, the conduct of the assessee appears to the quite normal and natural which the IAC has failed to appreciate.

82. The investigation, as stated above, started in the end of December 1984. During the course of the investigation, the IAC examined in detail 18 witnesses and called for information on 21 points covering about six foolscap typed pages. The assessee replied by a letter covering about 20 typed pages. The assessment order was passed on 8-2-1985 i.e. in a little over a months time and runs into about 64 foolscap pages. The last of the information was supplied by the assessee vide its letter dated 23 - 1 - 1985 so that for writing that order there were only about 5 days. The examination of one of the witnesses, Shri R. G. Desai, went on till the evening of the day on which the order has been passed. This shows that proper and due consideration could not have been given to the evidence and the reply of the assessee. It may even show that the assessment order was a ready when the last witness was examined. The assessee had filed a revised return but nowhere is there any mention of it in the assessment order. As stated above Shri Anil R. Shah was not allowed to put specific questions to Rohitbhai, the mechanic, on a serious matter where manipulation of accounts had been alleged. Again as stated above, the evidence in favour of the assessee of 3 witnesses who deposed that they were giving signatures on receipts for payments have been totally ignored. Similarly regarding the allegation that the trustees were using the garden for morning and evening walks, the evidence of Maganbhai had been ignored and the answer of Ramdas that Gautam Sarabhai came at about 6 p.m. and left after supervising has been ignored. Further although the same announcement in the Gujarat Samachar mentions that the Darbar Gallery was open altogether for 5 1/2 hours that part of it has been ignored but where that announcement mentions short intervals regarding the Vallabh Sampradaya Pustimarg section that has been taken into account. How could the IAC shut his eyes to this glaring announcement ? Further it is no small consideration that the assessee had applied for registration before the Charity Commissioner. By doing so the assessee was subjecting the administration of the property of the Foundation to the supervision of that Charity Commissioner which will show the bona fides of the assessee. This aspect of 6the matter has been paid little attention to by the IAC. Further as pointed out above the assessee vide his letter dated 12 - 1 - 1985 tried to supply the information called for the by the IAC by his latter dated 4 - 1 - 1985. In spite of that the IAC has stated that no such details were furnished. The IAC has made allegations of such trifling nature as that case of the trustees was going for stroll in the garden of the Foundation which also we have found to be false. He has rejected the books and made an estimate, ignoring that they were audited books and basing that decision on such minor discrepancies that no one would take them seriously and which we found are satisfactorily explained by the assessee. He has started his order by an allegal tax planning that can be exposed and the actual tax may be levied but that is precisely what is to be proved through an investigation and proper appreciation of evidence, the replies of the assessees and an impartial legal approach. On the contrary, all the above points reflect on the impartiality of the IAC.

83. As stated above we hold that the assessee is a public charitable trust and eligible for exemption under section 11. There is no justification for applying section 13. As indicated above, most of the expenses have been allowed. However, since we are confirming the disallowances regarding the payment to Harrang Samaj, partly allowing expenditure of Rs. 6,041 on relief to the poor and rejecting the ground regarding depreciation, this appeal is partly allowed.