Income Tax Appellate Tribunal - Delhi
Alarippu vs Income-Tax Officer on 18 November, 1996
Equivalent citations: [1997]60ITD478(DELHI)
ORDER
Moksh Mahajan, A.M.
1. The assessee is in appeal against the order of learned CIT (Appeals) for the assessment year 1988-89. In the various grounds of appeal the assessee is aggrieved against the finding of the CIT (Appeals) whereby it has been held that there was infringement of the provisions of section 13(1)(d) read with section 11(5) of the Act on account of a loan of Rs. 50,000 given to Mahila Hatt and that the income applied was to the extent of Rs. 5,69,186 as against Rs. 7,94,200 as claimed by the assessee. In addition, the interest charged under section 139(8) and under section 217 of Act have also been contested.
2. Shri K.V.S.R. Krishna, who appeared on behalf of the assessee stated that the assessee is a society registered under section 12A(a) of the IT Act. Since inception, society has been assessed under section 143(1) of the Act at nil income. The society is a voluntary group which in association with other voluntary organisations stages plays to educate people on various social problems. During the assessment year 1988-89, the assessee submitted a return alongwith statement of income which was revised later on. The assessee had given an amount of Rs. 50,000 to Mahila Hatt (Ruler) through Mahila Vikas Sang, Patna as directed by the donor agency namely Oxfam America. The latter by a letter dated 9-4-1987 informed the assessee that a sum of Rs. 2,15,400 had been sent to the Society along with Rs. 2,24,000 sent to Mahila Hatt. As per this letter, the assessee was requested to give a temporary loan upto Rs. 50,000 to Mahila Hatt, Bihar in case there was delay in receipt of the money (page 21 of the paper book). The assessee complying with the request sent the amount to Mahila Hatt as certified by Mahila Vikas Sang. The amount was utilised for organising a seminar cum workshop for the Mahila Hatt, Bihar (page 22 of the paper book). Mahila Vikas Sang, Patna has been granted exemption under section 80G by the Commissioner of Income-tax Patna (page 23 of the paper book). The bye-laws of the Mahila Vikas Sang are similar to the ones provided in memorandum of association of the assessee's society (page 26 to 32 of the paper books). Since the amount was utilised for similar objects as available in the case of the assessee, this constituted application of income for which support has been derived from the decision of the ITAT Delhi Bench A in the case of Indian National Theatre Trust v. ITO [1985] 13 ITD 588. In regard to the expression application of income used in the section, support was derived from the cases of CIT v. Trustees of H.E.H. The Nizams Charitable Trust [1981] 131 ITR 497/7 Taxman 178 (AP) and CIT v. Sarladevi Sarabhai Trust (No. 2) [1988] 172 ITR 698/40 Taxman 388 (Guj.). Then the amount given to Mahila Haat did not constitute either an investment or deposit for which the assessee could have been charged for violating the provision of section 13(1)(d) of the Act. For the aforesaid proposition, reliance was placed on the decision of the Tribunal in the case of Indian National Theatre Trust (supra) and Notional Engg. Co-ordination Committee v. Asstt. CIT[1992] 43 ITD 612 (Pune). It is also contended that the learned CIT (Appeals) also erred in not considering the revised computation of income furnished before the Assessing Officer wherein the application of income was claimed at Rs. 7,94,200 and not Rs. 5,59,188. The learned DR on the other hand strongly relied on the order of the learned CIT(Appeals). It is argued that the provisions of section 13(1)(d) speak of the modes of investment available to the assessee. As the assessee has not invested the amounts in the specified modes there being an infringement of the provisions of section 13(1)(d) read with section 11(5) concerning the amount of Rs. 50,000 the order of the learned CIT(Appeals) need be upheld. As to the computation of income, it is submitted that the CIT(Appeals) can be asked to go into the issue in the light of the arguments as advanced.
3. We have carefully considered the rival submissions. The facts are admitted. Section 11 of the Act deals with the income from property held under trust, for charitable or religious purposes. As per sub-section (2) of section 11, the assessee is allowed to accumulate income and allowed to set it apart under certain circumstances. Clause (b) of sub-section (2) of section 11 lays down that the money so accumulated or set apart is to be invested or deposited in the firms or modes specified in sub-section (5) of section 11 of the Act. Sub-section (5) of section 11 in turn prescribes the modes of investment or deposits for the money. The amount given to Mahila Haat is undisputedly not covered under the modes as specified. As per section 13(1)(d), in case the trust or institution does not invest or deposit the money in any one of the modes as prescribed, the aforesaid amount is not to be excluded from the total income of the assessee. The expression used in these sections are "investment or deposits". The expression "investment" as per Websters New International Dictionary (second edition unabridged) means "to lay out (money or capital) in business with the view of obtaining an income or profit." Deposit on the other hand means, that which is placed any where, as in any ones hands for safe keeping, something entrusted to the case of another. These two expressions have been used in cognate sense and have to be understood as such. In this context, we find that the expressions "investment and deposit" have been considered by the Tribunal in the case of National Engg. Co-ordination Committee (supra). The Tribunal after considering the dictionary meaning of 'investment' as also the judicial decisions explaining the said word have held that, "the amount laid down for this purpose should be capable of and result in any income, return, profit to the investor and in every case of investment the intention and positive act on the part of the investor should be to earn such income, returns, profit. The word 'deposit' on the other hand having been used in conjunction with the word investments and in understanding its meaning, the principles of "Noscitur A Sociis" applied and the expression had to be understood in a cognate sense of the word investment." In section 11(5) the expressions refer to pattern of investment to be complied with by the Trust. In the case of the assessee the amount has been given to Mahila Haat neither for the purpose of investment nor for the deposit in the circumstances as explained by the assessee. The amount was given at the behest of Oxfam and that too in case the funds released did not reach them in time and for utilisation for organising a seminar cum workshop. The funds were recovered back in the succeeding assessment year as contended. Thus these neither acquired the form of investment or that of deposit. Coming to the application of income, the expression application has been interpretated by the various Courts. In case of Sarladevi Sarabhai Trust (supra) after considering the dictionary meaning of the term apply as "to put to use", it has been held by their Lordship of Gujarat High Court that when the charitable Trust donates its income to another charitable trust the provisions of section 11(1)(a) can be said to have been met by such donor trust and the donor trust can be said to have applied it income for the purposes. To similar effect a decision was taken in the case of Indian National Theatre Trust (supra). On the facts, it has been held that it case the objects of both the donor and the donee are the same, the loan advanced to the donee trust could not but be said to be application of income in furtherance of objects of the assessee. No contrary decisions has been cited by the learned DR on this proposition. It has also not been denied that the objects of both the donor and the donee are not similar. Applying the ratio in the case of Indian National Theatre Trust (supra) it could not be said that the amount given to Mahila Haat did not constitute the application of income. Thus on the facts of the case it is held that there is no violation of section 13(1)(d) of the Act and the amount as given to Mahila Haat would constitute applications of the income. Thus the assessee's appeal is allowed on both the grounds.
4. As regards computation of income as per revised statement filed, we find that the same has not been considered by the learned CIT(Appeals). Therefore, we would restore the matter back to the file of the CIT(Appeals) for reconsideration of the same. On the aforesaid issue, the matter stands restored to the file of the CIT (Appeals).
5. Coming to the chargeability of interest under section 139(8) and 217 of the Act, the same has also not been considered by the learned CIT(Appeals) though specifically raised by the assessee in its grounds of appeal. On this matter too, we would restore the matter back to the file of the CIT (Appeals) for adjudication of the issue. In the result, the appeal is allowed in part.