Madras High Court
Director Of Income-Tax (Exemptions) vs Thanthi Trust on 20 January, 1995
Equivalent citations: [1995]215ITR879(MAD)
Author: T. Jayarama Chouta
Bench: T. Jayarama Chouta
JUDGMENT
Thanikkachalam J.
1. In these tax case petitions, the Department requested to direct the Tribunal to refer the following common questions of law said to arise out of the common order of the Tribunal for the assessment years 1975-76 and 1976-77 for our opinion under section 256(2) of the Income-tax Act, 1961 :
"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the provisions of section 11(4) are not applicable to the facts of this case ?
2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in deleting the disallowance sustained by the Commissioner of Income-tax (Appeals) towards excessive wastage in newsprint ?
3. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in deleting the additions sustained by the Commissioner of Income-tax (Appeals) towards sale of waste ?
4. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in allowing the trade discount in toto as claimed by the assessee ?
5. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in deleting the additions made by the Income-tax Officer towards unexplained cash credits as income from 'other sources :
2. The assessee is a trust deriving income from the running of a newspaper called Dina Thanthi. As a result of the search in the premises of the assessee, the Income-tax Officer was of the view that the income chargeable to tax has escaped assessment. Accordingly, he issued notice under section 148 of the Act for the assessment years 1975-76 and 1976-77. The assessee filed a return for the assessment year 1975-76 showing loss and claimed that if any positive income is assessed it would be exempted under section 11 of the Act and for the assessment year 1976-77, the assessee claimed that the chargeable income was "nil". The Income-tax Officer denied the exemption under section 11 of the Act on the ground that the assessee had violated the provisions of section 13(1)(c) of the Act by allowing the trust to have the benefit of the funds of the assessee, since the assessee had allowed its godown to be used for keeping stocks of Rani Publications which was the proprietary concern of the trustee. The Income-tax Officer also invoked the provisions of section 11(4) of the Act and held that the excess income determined by him was deemed to be applied for purposes other than charitable or religious in nature. On appeal, in so far as the application of section 11(4) of the Act is concerned, the Commissioner of Income-tax (Appeals) agreed with the Income-tax Officer. But, in respect of certain quantum of additions, the Commissioner of Income-tax (Appeals) thought it fit to remit back the issue to the Income-tax Officer for verification. However, on further appeal, the Tribunal considered that the additions made in respect of the excessive waste, sale of waste, trade discount and cash credit are not sustainable. This conclusion was arrived at by the Tribunal on an appraisal of facts arising in respect of the abovesaid four items. Accordingly, the Tribunal held that section 11(4) of the Act is not applicable to the facts of the case and the additions made in respect of the abovesaid four items were deleted.
3. It remains to be seen that the provisions of section 11(4) of the Act would be applicable only if the assessed income is more than the returned income. In the present case such a difference was shown by the authorities below since the additions were made in respect of the abovesaid four items. If the income arising out of those four items were not included, then there would be no excessive income than what was returned by the assessee in the returns.
4. In so far as those four items are concerned, the assessee furnished the particulars in order to show as to why the income arising out of those four items should not be included in the total income of the assessee. Since the assessee furnished the particulars, with regard to the aforesaid four items, the Commissioner of Income-tax (Appeals) thought it fit to remit back the same for verification to the Income-tax Officer. On appeal, the Tribunal, considering the facts gathered by the Commissioner of Income-tax (Appeals) and the Income-tax Officer, thought it fit to delete the additions made in respect of the abovesaid four items. If the additions made in the abovesaid four items were deleted, then there would be no difference between the income returned by the assessee and the income assessed by the Income-tax Officer. In such a case, section 11(4) of the Act would not be applicable to the facts of this case. Learned standing counsel for the Department submitted that in respect of certain items of additions, the assessee furnished the particulars only before the Commissioner of Income-tax (Appeals) and hence, the Commissioner of Income-tax (Appeals) remitted back these matters for verification to the Income-tax Officer. According to learned standing counsel, the Tribunal, without verifying the facts furnished by the assessee before the Commissioner of Income-tax (Appeals), deleted the additions made in respect of the abovesaid four items. Therefore, according to learned standing counsel. the order of the Tribunal in deleting the additions on the merits is not sustainable. But the fact remains that the Tribunal is the highest fact-finding authority. The Tribunal, after considering the facts gathered by the Income-tax Officer and the Commissioner of Income-tax (Appeals), legitimately thought it fit that no further verification is necessary in the matter for deciding the issues arising on the abovesaid four items. Thus, considering the facts, the Tribunal held that the additions made under the abovesaid four items are unsustainable. Since this conclusion was arrived at by the Tribunal on an appraisal of facts arising in this case, we consider that no question of law arises out of the order of the Tribunal as framed and suggested by the Department, as questions Nos. 2 to 5. As already pointed out when there is no excessive assessed income over and above the income returned by the assessee, the provisions of section 11(4) of the Act cannot be applied.
5. Accordingly, we consider the question of law as framed and suggested by the Department as question No. 1 also does not arise out of the order of the trial.
6. In the result, the tax case petitions are dismissed. No costs.