Income Tax Appellate Tribunal - Delhi
Vishwa Dharmayatan Trust vs Deputy Director Of Income-Tax on 13 October, 1995
Equivalent citations: [1996]56ITD37(DELHI)
ORDER
T.V. Rajagopala Rao, President
1. This is an appeal filed by the assessee-trust against the order of the CIT (Appeals), XVI, New Delhi dated 27-1-1992. The matter relates to assessment year 1988-89 for which the previous year ended by 30-6-1987.
2. For assessment year 1988-89, the assessee-trust filed its return on 12-6-1988 declaring its income at Rs. 2,170. The main question involved in this appeal is whether the assessee-trust had spent 75% of its income towards religious or charitable purposes. If so, whether it is entitled to exemption under Section 11(1)(a) of the Income-tax Act. The assessee Trust filed income and expenditure statement as well as balance sheet along with the return. The Assessing Officer completed the assessment on a total income of Rs. 2,12,516. In the process, he had considered the income by voluntary donations of Rs. 1,69,261 and income by way of interest derived by the assessee Trust, namely, Rs. 45,075, totalling to Rs. 2,14,336 as income earned by an Association of Persons. He gave a deduction of only Rs. 2,000 which according to him is the amount required to earn the said income by the AOP. The Assessing Officer held that the assessee Trust is not entitled to exemption under Section 11 of the Income-tax Act and so all receipts of the said Trust should be considered and taxed as income of an AOP.
3. The assessee Trust was operating from C.4/41, Safdarjung Development Area. A raid and a consequent search over the said premises under Section 132 took place on 23-2-1988 which falls in the assessment year 1989-90. In the course of the search proceedings, the statement was recorded from Shri Vallabh Vyas son of Shri Rattan Lal Vyas, employed as a Caretaker by the assessee Trust. A copy of the statement of Shri Vallabh Vyas was found at pages 7 to 10 of the Department's paper book. The statement was recorded in a question and answer form. Shri Vallabh Vyas deposed that Vishwa Dharmayatan which is the name of the assessee Trust is an Institution for propagating Dharma. Shri Chandraswami Maharaj was the founder of the Institution. The building bearing C.4/41, Safdarjung Development Area was a building belonging to Shri Dara Singh, Wrestler and Film Star. The building was being used as a resident of Shri Chandra Swamiji as well as a guest house for his disciples. The building appears to have consisted of several rooms and Shri Chandra Swami's room is room No. 8. In room No. 7 of the said building, there was a temple. Shri Vallabh Vyas deposed that the guest house is run and the food for the guests used to be provided from out of the contributions and offerings made to the temple situated in room No. 7. During the days of search 15 'to 20 people were present as guests. Electricity, water and ground rent for the building was being paid by the Trust. He also deposed that Shri Swamiji resides and his office also is situated in room No. 8 of the said building. When keys of the building were demanded, one Shri Abhey Kumar and another were sent and they brought the keys purportedly from Shri Chandra Swamy. When search took place, an amount of Rs. 20,000 in cash was found from the almirah situated in room No. 6. When asked Shri Vallabh Vyas deposed that this amount belongs to the Institute-Vishwa Dharmayatan Trust. When asked whether any work started in Vishwa Dharmayatan Ashram (Sewa building at the back of Qutab Hotel), he said that he does not know anything about it. The amount of Rs. 20,000 was seized. The amount was found in 100 rupee notes of 200 in number. Copy of the income and expenditure statement for the accounting year ending with 30-6-1986 was filed at page 180 of the assessee's paper book. On the income side of the statement, we find an amount of Rs. 1,60,527.50 received as voluntary donations and Rs. 45,075.20 was shown to have been received as interest on fixed deposits. On the expenditure side of the statement, the following expenses are found noted:
(i) Interest: Rs. 60,000 (The interest is said to be payable to a bank for offering continued security of Rs. 5 lacs which is insisted upon by the landlord as a precondition to his continued letting of the building in C.4/41, Safdarjung Development Area. Thus, the Bank security was offered in compliance to one of the terms of lease deed entered into with the landlord at C.4/41, Safdarjung Development Area.)
(ii) Rent of Rs. 1,08,000 is stated to have been given to Shri Dara Singh @ Rs. 9,000 p.m. for occupation of the building at C.4/41, Safdarjung Development Area, New Delhi.
(iii) An amount of Rs. 22,260.50 was spent towards salary and wages; and the other items of expenditure are the following :
(iv) Printing & Stationery Rs. 3,125.25 (v) Postage & Telegram 865.40 (vi) Travelling & Conveyance 3,274.70 (vii) General expenses 1,227.75 (viii) Bank charges 123.00 (ix) Audit fees 1,000.00 (x) Water filter 2,500.00 (xi) Telephone 784.00 (xii) Legal charges 500.00 The excess of income over expenditure shown as 1,941.30
4. Before proceeding further in the matter, we wish to point out that the whole of the seized material including diary and other documents do not pertain to the accounting year closing with 30-6-1987. The whole of the search period pertains to assessment year 1989-90. During the assessment enquiry, certain questionnaire was served against the assessee-Trust and its answers were sought to be elicited. In reply to question Nos. 1 to 4, 10 and 11, the assessee-trust stated that because the premises bearing C.4/41, S.D.A., New Delhi from where the assessee Trust functions was also being used as a place of pilgrimage for the attendants or followers and disciples when His Holiness Chandra Swamiji happened to be in town, it is impossible to ascertain to whom the said document/ papers belonged to and who was the particular person who had left the documents at the same premises. In answer to question No. 5, it was stated that Shri Chandra Swamiji was not the Trustee of the assessee-trust during the period under consideration. In answer to question No. 6, it is stated that no expenses were borne by the assessee-Trust on the journeys undertaken by His Holiness Shri Chandra Swamiji Maharaj during the year. In answer to question No. 7, it is stated that the Trust was not maintaining any locker in any bank. In answer to question No. 8, it was stated that the premises bearing No. E-9/5, Vasant Vihar was the registered office of the assessee-trust in the earlier years. In answer to question No. 9, it is stated that Chander Sharma, Inderjit and Pawan Sharma had no connection whatsoever with the Trust. In answer to question No. 12, it is stated that the financial transactions appearing in the seized material are in no way connected with the assessee-trust. In answer to question No. 13, it was stated that the names and addresses, telephone numbers, etc., appearing in the seized diary are personal in nature and not connected with the assessee-trust in any way and in answer to question No. 14, it is stated that 'income-tax raid was conducted on 23-2-1988 simultaneously at various residential and office premises of the executives and the trustees of the Trust. At the moment we are unable to give specific reply to your said query because we could not be able to inspect or to take copies of books of account and other documents seized from Income-tax Department in spite of requests and reminders. More so, a perusal of the Panchnama prepared and books of account and other documents seized clearly indicate from where we can give specific explanation. However, we are still trying to find out the same. The moment we get, we will produce the same in the Department'. Each of the questions 1 to 14 were extracted in the assessment order for the frame of the questions for which answers as given above were given.
5. The Assessing Officer after going through the facts and circumstances of the case held the following :
On going through the facts and circumstances of the case, it is clear that the facts on paper are different from the facts in reality. The diary and seized material speak a lot of non-charitable and non-genuine activities which the assessee has not tried to answer and has avoided them. But this will not change the facts established amply from the statement recorded at the time of search and confront to the assessee during the assessment proceedings from the seized record. The assessee has himself accepted that during the year, there is no charitable activity as 80G is not granted vide order sheet dated 6-3-1991. This is clearly a reation of Shri Chander Swamiji and an attempt is made to give colour of charitable nature to this Institution. Even the accounts, etc., are not correct. It does not call the contributions received as well as expenses incurred on food, etc., as are reported from the statement of the caretaker/incharge Shri Vallabh Vyas. Under these circumstances, all receipts of this Trust will be taxed as receipts of a non-charitable Trust and exemption under Section 11 will not be available. This will be taxed as the income of AOP.
Thus an amount of Rs. 2,12,516 is considered to be the taxable income of the assessee-trust which was considered to be only an AOP and the exemption under Section 11 claimed was denied to it.
6. In appeal, against the said assessment, the learned CIT (Appeals) after going through the income and expenditure statement as well as the balance sheet filed along with the return of the assessee-trust for the accounting year in question observed, there was no expenditure on any charitable activity during the period which is evident from the income and expenditure statement - Regarding accumulation also there does not appear to be any notice given as required under Section 11(2). On 31-7-1989, in the reply tendered by the assessee, it was stated that the construction of the building required to be utilised for charitable activities was the only activity undertaken in the period and there was no violation of Section 13 of the Income-tax Act. The contention that the seized material was not shown or the copies thereof were never permitted to be taken was negatived. The learned CIT (Appeals) specifically recorded the following finding in para 8 of his orders :
It was conceded in the course of the assessment proceedings that the seized papers are not relevant to assessment year 1988-89, i.e., period under consideration. Moreover, it has not been denied that the appellant had not been granted Section 80G exemption for the period in review. Moreover, nothing has been brought on record to substantiate the claim that the trust was carrying on the activities for charitable purposes and that the benefit of Section 11 was admissible. As already stated above from the statement of accounts nothing is apparent regarding the activities of the appellant which would be covered under Section 2(15) of the Income-tax Act. In the circumstances I am not persuaded to grant the contention of the appellant that the instant assessment has been completed on unfounded grounds that the assessing authority misconceived in treating the voluntary donations and interest as income of the appellant.
With the above observations, the learned CIT (Appeals) had dismissed the appeal filed by the assessee-trust. Hence, the present appeal.
7. Some important questions which we should consider in this appeal are when was the assessee-trust formed, what is the Trust Deed under which it was formed, what are the aims and objects of the Trust, whether those aims and objects reveal the intendment that the income of the Trust should be spent for religious and charitable purposes, whether the assessee-trust was recognised and registered under Section 12A of the Income-tax Act and whether any exemption to the donors of the assessee-trust was given under Section 80G of the Income-tax Act in earlier years as well as in the year under consideration as well as in the subsequent years to the year of account.
8. The assessee Trust was formed under the Trust Deed dated 30-6-1980. The author of the Trust was one Shri Suraj Prasad Gupta s/o Late Lala Balbhadra Singh. He settled an amount of Rs. 10,000 towards the corpus of the Trust. Shri Chandra Swamy s/o Sri Dharam Chand Gandhi, Sri Suraj Prasad Gupta, Settlor and Shri Pawan Kumar Sharma s/o Shri Jagraj Chand Sharma were the appointed Trustees. The aims and objects of the Trust were all set out in para 1 of the Trust Deed. It is sub-divided into paras (a) and (b). There are (ten) clauses under para (fo). Since the aims and objects of the Trust are very important to consider in order to know whether the assessee Trust is established to carry out the religious and charitable purposes or not, we set out the aims and objects as given in para 1, as under :
(a) The basic aim and object of the Trust is to undertake, promote and assist in the relief to and welfare and uplift of the poor, needy, backward, under-privileged, sick and handicapped people in the territory of India irrespective of nationality, community, caste, creed, colour, religion and sex.
(b) Without prejudice to the generality of the foregoing basic aims and objects, it shall include the following:
(i) Promoting and propagating tenets of Indian Culture by establishing, aiding, and or promoting" institutions in India and abroad, organising lecture tours, seminars, symposias, conferences and deliberations to highlight the rich cultural heritage of India in this country and foreign lands.
(ii) Undertaking, scientific research in the field of Ayurvedic medicine, running Rasayan Shales preparation and development of Ayurvedic medicine and drugs.
(iii) Promoting, erecting, establishing, equipping, supporting, maintaining and granting aid to schools, colleges, boarding houses, including industrial homes, polytechnic institutions, laboratories, libraries, hostels, cultural centres and other social & educational institutions.
(iv) Establish, assist or make donations to cultural centres, museums, exhibition centres, auditoriums & Ashrams for imparting spiritual, cultural and moral knowledge or training.
(v) To grant aids, to promote, establish, support and maintain institutions for the growth of advancement and diffusion of knowledge on all subjects including Indian Philosophy and Mythology. To construct buildings and maintaining Dharamsalas, Sarais, Pios for public use of benefit and which shall not involve the carrying of any activity for profit.
(vi) To distribute food, rugs, blankets, and all kinds of cotton and woollen cloth to the poor.
(vii) To develop a healthy as well as critical attitude towards socio-economic problems of the country and moral upliftment of the people so as to make them good citizens of India.
(viii) To invest, dispose off, acquire, transfer and otherwise deal with the subject-matter of the Trust in such manner as the Trustees deem fit so as to enable the Trust to carry on the objects of the Trust effectively.
(ix) To accept donations, grants, dakshina, Gupt Daan presentations and any other offerings and to deal with the same for the purpose of the Trust.
(x) To organise havans, yagnas, kirtans, discourses, etc., for bringing peace and prosperity to the suffering humanity.
9. In para 3, the Settlor desired that the Trust should be designated as "Vishwa Dharmayatan" and the office of the Trust will be situated at E-9/5, Vasant Vihar, New Delhi-110 057. In para 4, the Settlor ordained in what way income of the Trust should be spent. It is as follows :
4. The Trustees shall apply the incomes and profits of the said Trust properties and Funds as the case may be or such portion or portions thereof as may be necessary to pay, meet and discharge all outgoings and expenses of and incidental to the administration of the Trust and subject thereto shall hold and apply the capital and income of the Trust properties and funds for the aims, intents and purposes herein before declared and expressed of and concerning the Trust and Funds.
10. Para 5 of the Trust Deed sets out the various powers given to the Trustees. In paras 5(a), (b), (e), (f), (h) and (i), the assessee-trust is expected to set up, establish and maintain the cultural centres, educational institutions, hospitals, clinics, relief & rehabilitation centres and other welfare units. Para No. 7 of the Trust deed casts a duty on the Trustees to maintain true and accurate accounts of all moneys received and spent and of all matters in respect thereof in the course of management of the Trust or in relation to the carrying out-of the objects and purposes of the Trust, as well as of all the assets, credits and effects of the Trust properties and funds. The accounts shall be audited by a Chartered Accountant at least once in a year. In para No. 9, it is said that the minimum number of Trustees shall be three and the maximum not more than 10. In para No. 8, while giving the status of the first appointed trustees, it is stated that Shri Chandra Swamiji is a trustee for life whereas the settlor Shri Suraj Prasad Gupta and Shri Pawan Kumar Sharma the other trustees were only trustees for the time being. Two trustees present at a Meeting shall form the quorum at any Meeting of the trustees. Death, resignation or vacancy caused otherwise in the office of the trustees shall be filled up by the remaining trustees by their majority vote. Similarly by a majority vote, the trustees can appoint any person as a trustee or additional trustee so that the total number of the trustees shall at no time exceed 10. In para No. 14, it is stated that the trustees may appoint one of the trustee as the Managing Trustee for such time as may be determined by the Trustees and such Managing Trustee shall continue to act as such until another Managing Trustee is appointed in his place, subject to the general control and supervision of the Trustees. Shri Chandra Swamiji Maharaj shall remain a trustee throughout his life and shall enjoy the privilege of the Chairman of any meeting of the trustees, their governing bodies and general body meeting at which he shall be present and it shall not be competent for the other trustees either by rules, or resolutions or otherwise to deprive him of this right to Shri Chandra Swami. In para No. 23 certain circumstances were listed on the happening of which a person ceases to be a trustee. The circumstances are :
(a) If he dies; or
(b) If he without leave of absence does not attend any meeting of the Trustee for one calendar year; or
(c) If he becomes bankrupt; or
(d) If he becomes insane or otherwise becomes incapable to act; or
(e) If he resigns his office.
The other stipulations contained in other paras and other portions are not very much important and, hence, not extracted.
11. If we go through the aims and objects of the Trust as set out in the document, one will certainly come to the conclusion that the Trust is wholly religious and charitable Trust. It is significant to note that one of the objects of the Trust is to distribute food, rugs, blankets and all kinds of woollen cloth to the poor. We have got evidence in the shape of the statement of Shri Vallabh Vyas recorded in question answer form that in the Ashram 15 to 20 people used to dine and the food, etc., was served to them by spending offerings made to the God situated in room No. 6 of the S.D.A., New Delhi which is a tenanted premises. Another object of the Trust appears to be construct buildings, maintain Dharamsalas, Sarais, Piaos for public use or benefit and which shall not involve the carrying on of any activity of profit. To grant aids, to promote, establish, support and maintain institutions for the growth of advancement and diffusion of knowledge on all subjects including Indian Philosophy and Mythology is also of the objects. Undertaking scientific research in the field of Ayurvedic medicine, running Rasayan Shales and preparation and development of Ayurvedic medicine and drugs was also one of the aims and objects. Promoting, erecting, establishing, equipping, supporting, maintaining and granting aid to schools, colleges, boarding houses, including industrial homes, polytechnic institutions, laboratories, libraries, hostels, cultural centres and other social and educational institutions are also some of the objects and aims of the Trust. So to feed 15 to 20 persons and to allow them to live in the Ashram along with the Swamiji, there is no misuse of the funds of the Institution. On the other hand, it is in fulfilment of the aims and objects of the Trust. No doubt how much was received towards offerings, etc., made at the temple in room No. 6 by the disciples and bhaktas of the Swamiji, should have been found in the accounts of the assessee-trust and it should have been reflected in the income and expenditure statement filed for the year also. However, in this case, both the value of the offerings made as well as the daily expenditure incurred to provide food to 15 to 20 persons per day visiting the Ashram are not recorded. That means both the income as well as expenditure was not noted. Though it was an irregularity on the mode of account maintenance, it does not militate against the quality of evidence about the user of the Trust moneys according to the aims and objects of the Trust. Surprisingly none of the lower authorities had examined the Trust Deed or had gone through its objects and aims sought to be achieved and none of them found, according to the constitution of the Trust itself, it cannot be held to be religious or a charitable institution entitled to exemption under Section 11.
12. The learned CIT (Appeals) at least is clear in her orders that the seized material does not pertain to the assessment year 1988-89 and the whole of it pertains to assessment year 1989-90. The seized diary and its contents were never noted and discussed. On the other hand when questioned Shri Vallabh Vyas specifically stated that the diary does not belong to Ashram but it is a personal diary. The contents of the diary, if any, unless clearly revealed in the orders, do not reflect the manner in which the income of the Trust was being spent.
13. The assessee Trust is registered under Section 12A of the Income-tax Act vide registration No. DLI(G) (1-1090). Similarly, the assessee-trust got continued registration under Section 80G of the Income-tax Act up to 30-6-1987 vide order CIT-6/TE/94/80 dated 19-8-1986. It is no doubt true that the application for renewal of exemption under Section 80G for the period from 1-7-1987 to 31-12-1991 is pending with the learned CIT. It is also intimated that further renewal of registration under Section 80G was prayed for a period of three years from 1-1-1992. This information is gathered from the application dated 13-3-1992 of the assessee Trust filed before the CIT (Exemption), Mayur Bhavan, New Delhi copy of which is enclosed at page 9 of the paper book of the assessee. It is made clear in the said application itself at page 10 that at present the assessee-trust was engaged in the activities of constructing the building at Qutub Institutional Area, New Delhi and other activities of human and social welfare. It is further clarified that provisions of Section 11 have been complied with.
14. Along with the income and expenditure statement and balance sheet, an auditor's report was also filed before the ITO. In the balance sheet, it is stated that a land was purchased at Rs. 4,96,338 and a building in the said land was under construction and for the year ending 30-6-1987, a sum of Rs. 1,36,065.80 was spent towards the construction.
15. Now let us see how the status of the assessee Trust was being treated over the years beginning from its very inception. The first year of assessment made against the assessee Trust was in assessment year 1982-83, previous year ending with 30-6-1981. Copy of the said assessment was given at pages 175 and 176 of the paper book filed by the assessee. In the assessment order for 1982-83, the then ITO had recorded the following in categorical and unmistakable terms :
The Trust is registered under Section 12A(a) of the Act with CIT at No. DLI(c) (1-1090) vide letter No. 205 dated 22-12-1980. The aims and objects of the Trust are charitable within the meaning of Section 2(15) of the Act. The Trust is recognised under Section 80G by the CIT which was valid up to 30-6-1981 vide his letter No. 207 dated 22-12-1980.
16. For assessment year 1983-84, apart from repeating the above para, the following is further stated :
During the year, the Trust purchased land amounting to Rs. 4,25,406 for which necessary details/copy of the sale deeds having been filed during the course of assessment proceedings. The Trust gave grant for education amounting to Rs. 35,000 for which necessary details have been filed.
In that year, it was claimed that an amount of Rs. 45,815 was applied for purpose of the Trust. But since only Rs. 19,901 was the total income determined to that extent only the claim was allowed. Consequently, exemption under Section 11 was granted to the assessee trust.
17. For assessment year 1984-85, for which the previous year ended by 30-6-1983 in the assessment order framed by the then ITO it is clearly stated that the facts of the case were the same as discussed in the assessment order for assessment year 1983-84. The aims and objects of the Trust are charitable within the meaning of Section 2(15) of the Act. In the year of account relating to that assessment year, the assessee Trust stated to have received Rs. 1,25,000 as donations towards building fund. Confirmation letters were filed and the assessee claimed to have spent an amount of Rs. 20,000 on the construction of the building which is allowed as expenditure incurred by the assessee for charitable and religious purposes. In that year accumulation of Rs. 11,001 was allowed under Section 11(1)(a). Thus it is obvious that the Trust was held entitled to exemption under Section 11(1). Photocopy of the assessment order for 1984-85 was provided at page 178 of the assessee paper book.
18. Now for assessment year 1986-87, photocopy of the assessment order was provided at page 179 of the assessee's paper book. During that year donation to an extent of Rs. 47,000 was received towards building fund. Out of the said amount of donation, the assessee claimed to have spent Rs. 42,955 on the addition made to the building. It is specifically stated by the ITO in the said assessment order that the facts of the case are the same as having been discussed in the earlier assessment order. There is no change in the aims and objects of the Trust which are considered charitable within the meaning of Section 2(15) of the Income-tax Act. A perusal of the said assessment order would reveal a continued consistent position adopted by the revenue are cognising the assessee-trust as public charitable trust and granted exemption to it under Section 11(1).
19. Now it is not the case of the Revenue that the Trust deed under which the Trust was formed was altered or its aims or objects were altered. The nature of the expenditure spent towards providing additional construction to the building situated in Qutab Institutional Area also remained the same. In assessment year 1988-89 with which we are concerned, the return was filed on 12-6-1988 disclosing an income of Rs. 2,170 and it was accompanied with Form No. 10B as per the requirements of Clause (b) of Section 12A read with Rule 17B. The contents of Form No. 10B disclosed that an amount of Rs. 2,12,168 as application of income for charitable or religious purposes vide page No. 16 of the assessee's paper book. Explaining the nature of the income received, it is stated that interest of Rs. 45,075 and voluntary contributions of Rs. 1,69,261 have been received. As against which a sum of Rs. 2,12,168 was claimed as expenditure spent for charitable and religious purposes in India during the previous year. It is very significant that the Assessing Officer or the First Appellate Authority did not concern themselves either to quote from the Trust Deed or discuss the aims and objects of the Trust. They have also not discussed anything about the expenditure incurred as disclosed in the income and expenditure statement. They did not hold any enquiry and come to a judicial finding that the expenditure claimed was all bogus.
20. Now the question is when the Trust is recognised as public religious and charitable trust in all the earlier years up to assessment year 1987-88, without stating the circumstance under which a different treatment of the status of the trust is warranted can the Assessing Officer hold it to be non-charitable? What is the tangible evidence before him or one fails to understand what are the tangible evidences kept in mind before recording that its income is not being spent for any charitable or religious purposes. Simply because a diary of personal nature whose contents also were never discussed was found at the time of search, simply because some clandestine and anti-national activities were purported to have been recorded in it and simply because possession of the diary is ascribed to Swamiji, does it warrant a finding that the assessee Trust is non-charitable in nature and hence not entitled to exemption under Section 11(1).
21. Now in this connection, the following is stated at page 1275 of Sampath lyengar's Law of Income-tax, 9th Edition :
48. Need for consistency in recognition of trusts : res judicata - Where a trust has been recognised to be one for charitable purposes for several years and there is no change in the nature of documents of trust or in the law applicable, the court will not allow a review of the question again and again. The principle of res judicata would apply to proceedings under the Income-tax Act regarding questions relating to assessment which do not vary with the income every year but depend on the nature of the property or questions on which the rights of parties to be taxed are based. The question whether a trust is entitled to exemption as regards the income derived by it for the purpose of carrying out the directions of the author of the trust and as set apart by him in the deed creating the trust is not a question the answer to which can vary from assessment year to assessment year.
The above statement of law is said to be the ratio of two following Delhi High Court decisions :
1. CIT v. Shree Ram Memorial Foundation [1986] 158 ITR 3;
2. Addl CIT v. Hamdard Dawakhana (Wakf) [1986] 157 ITR 639.
In Hamdard Dawakhana (Wakf) 's case (supra), the Delhi High Court held that as long as the user was for charitable purposes, the exemption had to be granted. From the facts of that case, it was found that the Trust had been accepted to be a charitable trust for a long period and the Act of 1961 had not made any changes which effected the validity of the charitable purposes.
In Shree Ram Memorial Foundation's case (supra), the following is the law found as per the Head Note :
If an institution has been set up for charitable purposes, the expenditure on one of its principal objects must also necessarily be of a charitable nature. When a particular charitable institution has been recognised as such for several years and is carrying on the same object without any protest, it is not for the court to reopen the same point from time to time.
The assessee was a charitable institution registered under Section 80G. Its objects were relief of the poor, education, research, medical relief, etc. One of its objects was to prepare and publish biographical and other research studies. Amounts spent on publication of biography of S had been exempted from tax in the assessment years 1970-71, 1971-72 and 1972-73. On an application for directing reference of the question, whether the Tribunal was justified in holding that the assessee was entitled to exemption with reference to the amount spent on publication of the biography for that year:
Held, dismissing the application, that the assessee was entitled to exemption and no question of law arose for reference.
22. We have already seen that the very first power recognised in the trust was that it shall have power in their absolute discretion to invest in moneys forming part of the Trust properties and funds requiring investment in any of the investments such as acquisition of land, buildings and other assets or any one or more of them as the Trustees deem fit. So also we have seen that over years whichever amount is spent towards purchase of land in Qutab Institutional Area and the expenditure incurred in constructing a building in that land purchased, was always considered to be spending the income of the assessee-trust for religious and charitable purposes and exemption also was granted. Now when similar amount of Rs. 2,12,168 was spent this year and when it is also claimed that it should be taken to be expenditure incurred for charitable and religious purposes, what is the reason for which such exemption being denied cannot satisfactorily be gathered from the orders of either of the authorities below.
23. It is not correct to state that 80G exemption was not extended covering the accounting period in question. In fact the exemption was extended up to 30-6-1987 by the order of the Commissioner dated 19-8-1986 which is in Hindi and which is found at page 15 of the assessee's paper book. The items of expenditure and the amounts of expenditure incurred over staff wages, salary, etc., were already provided in this order in the above paras. The list of donors and the amounts of the donation for the period from 1-7-1986 to 30-6-1987 totalling to Rs. 1,69,261 was provided at pages 4 and 5 of the departmental paper compilation. The amount of Rs. 24,100 was paid towards salary and wages and the names of the persons and the amounts paid towards their salary including the daily wages were provided at page 13 of the departmental paper book. In the course of the assessment, hearing on 16-1-1991, certain information was sought to be secured from the assessee Trust which includes information about the rent, if any, paid for the premises C.4/41, S.D.A., New Delhi. In that connection, the assessee filed the necessary information, a copy of which is provided at pages 14 and 15 of the departmental paper book, clarifying the position with regard to the rent paid at para No. 2, the following is what is stated :
That the premises No. C4/41, has been occupied by the assessee-trust on monthly rent of Rs. 9,000 for which the Lease Deed had already been executed, photo copy of the same is annexed hereto for your information and record.
Similarly, it is stated that in annexure B, the details of payment of salary and wages during the year was provided. In para No. 4 of the said letter, the following is what is stated with regard to the details of expenses claimed in the profit and loss account:
With regard to the details of expenses claimed in the profit and loss account travelling expenses, conveyance expenses, general expenses, postage and telegram, it is submitted that we had already intimated to the department vide our letter dated 6-6-1989, that since respective books of account are not traceable at the moment, which might have been seized and carried away by the Income-tax officials at the time of search and seizure from residential/business premises of the executives of the assessee-trust in whose custody and possession were lying at that time in connection with the scrutinising and finalisation of accounts.
24. The Income-tax return was filed for assessment year 1988-89 on 12-6-1988 and along with the said return profit and loss account, balance sheet, auditor's report, etc., were all filed. Simply because the account books maintained in which the entries with regard to which the expenditure was incurred, were not produced on the ground that they were not immediately traceable and there is every likelihood that in the income-tax raid, they might have been seized and carried away by the Department itself, it is highly unlikely that without regular books of account, profit and loss account, balance sheet, will be possible to be prepared. Further unless the auditor's themselves go through the books of account, it is highly unlikely that they would provide the auditor's report which is filed along with the return. Under the facts and circumstances, we feel that non-production of account books need not create a serious doubt about the genuineness of the expenditure incurred. Neither of the lower authorities had examined and tried to falsify the claim of amounts spent towards expenditure either towards payment of salary or wages or rent or electricity, postage, telegram etc. etc. Therefore, we hold that except mere suspicion, there is no substantial evidence on record to falsify the claim of the expenditure claimed to have been incurred by the assessee-trust for the accounting year under consideration.
25. Now the question is how to compute the income of a public charitable Trust. It is the contention of the assessee's learned Advocate Shri C.S. Agarwal that the income should be computed by applying commercial principles and all the expenditure incurred should be excluded from out of the income and the excess only should be considered to be the income available with the Trust for application towards religious and charitable purposes. Now in this case, the excess amount is shown only at Rs. 2,170. It is also the contention of Shri C.S. Agarwal that the whole of the expenditure incurred by the assessee-trust in this year of account should be deemed to be the income applied for charitable or religious purposes. In support of this proposition, he relied upon several case laws. He relied upon CIT v. Janaki Ammal Ayya Nadar Trust [1985] 153 ITR 159 (Mad.). In that case, the assessee-trust claimed exemption from tax under Section 11 of the Income-tax Act on the ground that it had spent moneys during the year for purchase of land, payment of income-tax and investment in Tamil Nadu State Electricity Board loan and all the above three items should be taken as disbursal of income for charitable purposes. The Court held that the entire income of the Trust during the assessment year in question had been applied for payment of tax, it should be treated as having been applied for charitable purposes and the assessee would be entitled to exemption. In any event, there was no income in the relevant assessment year for being spent for charitable purposes as the amount of income-tax paid should be taken into account for the determination of the commercial profits and available surplus in the hands of the Trust for application for the trust purposes and the said payment should be taken to be the outgoing of the year in which it was paid and as such constituted the actual expenditure which will have to be deducted before the surplus income is arrived at for the purpose of Section 11(4). Consequently the income of the assessee-trust for assessment year 1964-65 was liable to be exempt from tax.
The next case relied upon by the assessee's counsel was CIT v. Estate of V.L. Ethiraj [1982] 136 ITR 12 (Mad.). The following two portions of the Head Note are important in the said decision :
The language of Section 11(1)(a) of the Income-tax Act, 1961, makes it clear that the income derived from property held under trust wholly for charitable and religious purposes to the extent to which such income is applied to such purposes in India is excluded and once the income from the property as such is excluded, there is no question of computing the income from the property applying the provisions of Section 14 of the Act. Income from properties held under trust would have to be arrived at in the normal commercial manner without reference to the provisions which are attracted by Section 14. Twenty-five per cent, thereof will have to be ascertained and if the assessee had accumulated more than twenty five per cent, then the consequences contemplated by Section 11 will follow.
In the said case ultimately while answering the reference, the Madras High Court held :
That the Tribunal was in error in holding that the officer as a first step had to determine the income under the different heads with reference to the statutory deductions provided for in the relevant sections and, thereafter, arrive at the total income. Consequently, the question of allowing any other outgoing by way of expenditure would not arise.
The Third decision on which reliance is placed is again a Madras High Court decision in CIT v. Rao Bahadur Calavala Cunnan Chetty Charities [1982] 135 ITR 485. The ratio of the decision correctly reflected in the Head Note of the decision which is as follows :
Whenever Parliament considered that the computation of income should be in accordance with the provisions of the Income-tax Act, 1961, it introduced the concept by using appropriate language. In the absence of any such language in Section 11(1) of the Act, the computation as envisaged by the other provisions of the Act cannot be imported into Section 11(1). Section 11 contemplates an application of the income for charitable purposes. The charity can accumulate 25% of the income. Taking into account the purpose for which the conditions of Section 11(1)(a) are imposed, it would be clear that the income to be considered will be that which is arrived at in the context of what is available in the hands of the assessee subject to an adjustment of any expenses extraneous to the trust. The application of income for charitable purposes will have to be excluded and it is only the balance that would require an examination for finding out whether the assessee has complied with the rule of accumulation. Accordingly, the income from the properties held under trust will have to be arrived at in the normal commercial manner without reference to the provisions which are attracted by Section 14 and 25% thereof will have to be ascertained, and if the assessee has accumulated more than 25% the consequences contemplated in Section 11 will have to follow.
In this case also the Madras High Court held that the income from the properties of the trust would have to be arrived at in the normal commercial manner without classification under various heads set out in Section 14.
26. The above cases as well as the ratio of the Andhra Pradesh High Court in CIT v. Trustees of H.E.H. the Nizam's Supplemental Religious Endowment Trust [1981] 127 ITR 378 were all considered and the ratio of the above decisions was summarised by the Hon'ble Gujarat High Court in a case of CIT v. Ganga Chanty Trust Fund [1986] 162 ITR 612. At page 617, the summary of the views taken both by Madras High Court as well as by the Andhra Pradesh High Court in the cases above cited were summed up as follows :
The view taken by the courts in the above referred cases is that before determining the income which could be actually applied or accumulated for the purposes of the trust under Section 11(1)(a) of the Act, all outgoings, including the outgoing in the nature of payment of income-tax, must be deducted. It is only from the surplus income that remains in the hands of the trustees that actual application or accumulation for the purposes of the trust can be expected. If there is no income which could be actually applied or accumulated by the trustees for the purposes of trust, the trustees would be capable of actually applying or accumulating the income for taking the benefit of Section 11(1)(a) of the Act. Therefore, even in the case of an assessee following the mercantile system of accounting, there can be no doubt that for the purposes of actual application or accumulation or setting apart of income from trust property for the purposes of the trust, the trustees must have on hand income which could be so utilised and what are outgoings towards payment of income-tax must be deducted for working out such surplus income. If a notional income calculated on the basis of accrual under the mercantile system of accounting is conceived as income for the purposes under Section 11(1)(a) of the Act, it must be conceded that such notional income can never be actually applied or accumulated or set apart for the purposes of the trust and the assessee trust, while being liable to pay income-tax on accrual basis will not be able to derive the benefit conferred by the said provision. We are, therefore, of the view that the Tribunal was right in coming to the conclusion that the income derived from trust property must be determined on commercial principles and in doing so, all outgoings including outgoing by way of income-tax paid by the assessee-trust must be deducted and it is only from the surplus income in the hands of the trustees that the question of application or accumulation or setting apart of income can arise.
27. Having regard to the ratio of all the above cases cited above, we have to hold that the income of the assessee-trust is to be ascertained by applying commercial principles and not by considering the heads of income under Section 14 of the Income-tax Act. The expenditure incurred towards rental payment amount of interest paid on the continued security of Rs. 5 lacs provided by the bank, the amount spent for making the addition to the building in the accounting year in question, salary, and wages paid to the employees, telephone expenses, general expenses, postage and telegram, printing & stationery expenses and travelling & conveyance expenses were all to be considered as application of income for charitable and religious purposes. The details of telephone expenses were provided at page 168, details of general expenses at page 169, the details of postage and telegram expenses at page 170, the details of salary and wages at 171, the details of printing & stationery expenses at page 172, the details of the rent paid at page 173 and the details of travelling and conveyance expenses at page 174 of the assessee's paper book. We have already held that the Department is unable to prove that none of the expenses stated above were either false or never incurred. We see no reason as to why they should not be considered as part of the application of money for charitable and religious purposes.
28. At the end of the arguments, the assessee as well as the Departmental Representative had filed memo of arguments advanced by them. It was argued by Shri C.S. Agarwal that the statement recorded from Shri Vallabh Vyas at the time of raid does not contain any adverse material which would militate against the case of the assessee. Assuming without admitting since the statement of Shri Vallabh Vyas was not put to the assessee and he was not permitted to be cross-examined the statement of Shri Vallabh Vyas cannot be used against the assessee. It is next argued that when once the Trust is registered under Section 12A it became conclusive and the same was held by the Delhi Bench of the ITAT in Income-tax Appeal No. 859/Del/91 by its order dated 17-8-1992. Further it was submitted that there was no material on the basis of which it could be held that the assessee was engaged in any non-charitable and non-genuine activity. In the assessment order, the finding with regard to the diary among the seized material 'that the said material speak a lot' is highly vague. He also argued based upon Madhya Pradesh High Court decision in Deo Radha Madhava Lalji Genda Trust v. Property Tax Officer [1980] 125 ITR 531 that the term 'religious purposes or charitable purposes' are not to be rigidly and narrowly constructed so as to exclude all other incidental expenses which are directly connected with the upkeep, maintenance and expenses of the Trust itself.
29. As against the above arguments of learned Advocate for the assessee Shri C.S. Agarwal, Shri Haldar learned Sr. D.R. argued firstly that the details of salary, wages, purported to have been paid to Shri Vallabh Vyas, Shri V.P. Singh, Shri Ram Bahadur, Shri Shen Singh and Shri Chhedilal as per the information furnished to the Revenue was disclosed at page 1 of the departmental paper book and it bore the signature of Shri Pradeep Kumar Nahata one of the trustees of the assessee-trust. However, when we compare the salary and wages particulars furnished at page 173 of the assessee's paper book, we come across salary being paid only to two persons, namely, Ashok Kumar and Ramu, the total payment during the relevant previous year being Rs. 24,160. These two names are never noted at page 13 of the departmental paper book. Therefore, it was argued that the assessee had furnished a wrong certificate in the paper book filed before the Tribunal with reference to page 171 of the assessee's paper book. It is contended that page No. 171 of the assessee's paper book is fabricated evidence. The D.R. contented that firstly, it was denied that Shri Vallabh Vyas was not an employee of the assessee. However, in the grounds of appeal filed before the CIT (Appeals) as per page No. 46 of the assessee's paper book itself it is contended as follows :
Because of the learned assessing authority had erred in law to place his reliance on uncorraborating statement of Shri Vallabh Vyas who was simply an employee and was not at all conversant with the affairs of the Trust.
From the above, it is clear that the assessee never disputed that Vallabh Vyas was an employee of the Trust. However, for the first time, it was argued before the Tribunal that Vallabh Vyas was not an employee of the Trust.
30. Having regard to the arguments about Shri Vallabh Vyas we hold that Shri Vallabh Vyas is an employee of the Trust. He received salary from the Trust and the argument that he is not an employee should be rejected.
31. Similarly, it is contended by the learned D.R. that it was sought to be argued that Shri Chandra Swami was not a trustee of the Trust during the relevant previous year as per the submission made before the Assessing Officer at pages 54,58 and 60 (Question No. 5) of the assessee's paper book. However, the assessee's counsel admitted categorically before the Tribunal that Chandra Swami was one of the Trustees. Having regard to the arguments advanced in this respect, we hold that as set out in the trust deed terms themselves, Shri Chandra Swami was a life time trustee of the assessee Trust and argument to the contrary that he is not the trustee of the relevant accounting year is not correct.
It is argued by the learned D.R. that at present the assessee filed at page No. 15 of his paper book a certificate granted under Section 80G dated 19-8-1986 which disclosed that the learned CIT had issued a certificate under the said provision for the period from 1-7-1983 to 30-6-1987 but both before the Assessing Officer as well as before the CIT(A) it was not denied that 80G certificate was not granted to the assessee Trust during the relevant period and the admission made by the assessee in this regard was recorded in order sheet entry dated 6-3-1991.
32. Assuming there was an admission on the part of the assessee it is trite law that an admission can be proved to be wrong. The very fact that a certificate dated 19-8-1986 issued by the CIT could disclose that 80G certificate was provided for the period from 1-7-1983 to 30-6-1987 would conclusively prove that perhaps it was mistakenly thought that the certificate did not cover the accounting year in question. However, the mistake cannot bind the assessee since mistaken admission is no admission at all.
33. Next, it was contended by the learned Sr. D.R. that the assessee never tried to argue before the Assessing Officer that the amount of Rs. 2,12,168 was an allowable expenditure and its claim was that this amount should be considered as application of income for charitable or religious purposes in India. Even the submissions before the learned CIT(A) also remain the same. See pages 30 to 48 of the assessee's paper book. Thus it is contended that the assessee cannot take an alternative plea which would lead to enlargement of controversy before the Hon'ble Tribunal and it would not be within the subject-matter of appeal. The learned Departmental Representative relied upon the following case laws for the proposition that the controversy cannot be enlarged before the Tribunal:
1. Ugar Sugar Works Ltd v. CIT [1983] 141 ITR 326, 333 (Bom.)
2. P.R. Mukherjee v. CIT [1979] 116 ITR 554 (Cal.)
3. CIT v. Steel Cast Corporation [1977] 107 ITR 683, 700-10 (Guj.)
4. CIT v. Anand Prasad [1981] 128 ITR 388 (Delhi)
5. CIT v. Princess Sarla Kumari[1988] 171 ITR 14 (MP) Countering this argument of the learned Departmental Representative Shri Agarwal, learned Advocate for the assessee submitted in his reply arguments that the D.R.'s submission is based on complete misconception. The assessee never took an alternative plea. Although the contention of the assessee was and has been that the income of the Trust should be declared only at Rs. 2,168160 which is after deducting the expenses incurred on the maintenance of the Trust. It is wholly incorrect to suggest that there is on the part of the appellant any attempt seeking enlargement of the controversy involved in the appeal.
34. In order to appreciate the merit involved in the rival contentions, we need not go any further than perusing the only ground of appeal filed before this Tribunal. It is contended in the said ground that both the lower authorities went wrong in treating the net sum of Rs. 2,12,516 as representing the income of the Trust and as not covered by the exemption for charitable income under Section 11 of the Income-tax Act and in further not granting deduction for infrastructural expenses incurred in the day to day running and maintenance of the trust, a sum of Rs. 1,99,160. At least the argument underlying this ground reveal that firstly it is wrong to assess the income of the trust at Rs. 2,12,516. It is wrong not to grant exemption to the trust under Section 11. It is wrong in not granting deduction of Rs. 1,99,160 towards infrastructural expenses incurred in the day to day running and maintenance of the trust. To our mind it is well within the precincts of claiming exemption under Section 11. The argument that there is an attempt to enlarge the scope of the appeal is not correct. The case law cited by the learned Sr. D.R. under the circumstances is not relevant. Further the amount of Rs. 1,99,160 should be considered to be the sum required for day to day running and maintenance of the trust and whether it should be allowed as a deduction while determining the income under Section 11 does arise from the orders of the lower authorities and there is no question of enlargement of the scope of the appeal. In CIT v. Mahalakshmi Textile Mills Ltd [1967] 66 ITR 710, the Supreme Court observed that there is nothing in the Income-tax Act which restricts the powers of the Tribunal to the determination of the questions raised before the departmental authorities. All questions, whether the law or of fact, which relate to the assessment of the assessee may be raised before the Tribunal. Therefore, the contention that there is enlargement of the scope of the appeal before this Tribunal inasmuch as some points which were never raised before the lower authorities were for the first time sought to be raised before the Tribunal, is not well founded. If the so-called new points are essential to be determined and they came within the scope of the assessment, then all of them are entitled to be raised. Ultimately what exactly is the income of the assessee-trust is to be determined. Whether it is entitled to exemption under Section 11 is also to be determined. All questions which come within the scope of enquiry of these two broad questions can all be gone into by the Tribunal and there is nothing which bars the way of the Tribunal to do so especially when the Hon'ble Supreme Court itself declared the law on the subject. Therefore, the contention of the learned D.R. on this point is rejected.
35. The principal argument of the Sr. D.R. appears to be that C.4/41, S.D.A., New Delhi was rented premises in which the assessee was running a guest house for maintaining of which salary was paid to the employees and before securing the building on rent, security deposit of Rs. 5 lacs was to be offered and the interest payment towards continued offering of security deposit is an application of income which cannot be taken to have been spent wholly for charitable and religious purposes. So the rent paid, as well as the interest on the security deposit cannot be considered to be application of income under Section 11(1)(a) and in support of this contention, reliance is placed upon the Tribunal decision in Probodhan Prakashan v. Asstt. CIT [1994] 50 ITD 135 (Bom.). It was not the contention of the assessee that the voluntary contribution and interest earned by the assessee was by using the premises of C.4/41, S.D.A., New Delhi or for earning the above income, interest had to be paid and salaried employees were to be employed. As the premises was only a rental premises, the same cannot fall under the category of 'property held under trust'. The expenditure on the maintenance of the premises, therefore, cannot be for the purposes of the Trust. The difference between expenditure and the application of income is well known. The expenditure is relatable to earning of income, and, therefore, an anterior event of accrual/receipt of income whereas application is after income accrues or is received. Thus the assessee cannot claim the amount spent towards rent and interest paid to Bank by it as expenditure for arriving at commercial income. What is meant by commercial by the Courts with reference to Trust income is that there is no application of Section 14 of the Act and artificial expenditure/deductions as provided in the Act is not admissible to a Trust for computing its income. Thus the proposition expounded by the learned counsel for the assessee that income is required to be computed on commercial basis does not advance assessee's case.
36. The whole of the learned Sr. D.R.'s argument on this pivotal question is misconceived. For instance the argument ignores certain specific recitals in the trust deed itself. The question is whether the assessee-trust should have an office or not. In the trust deed we have already found that the office will be situated in E. 9/5, Vasant Vihar, New Delhi. The office is now shifted to C.4/41, S.D.A., New Delhi. Before letting out the said premises on rent, certain deposit is required. Therefore, it is a compelling necessity to offer deposit especially when it is an institution and for that purpose, a bank guarantee was given for Rs. 5 lacs and on which the payment of interest accrued which became a necessary disbursement. In order to arrive at the true income of the trust, to construct buildings and maintain Dharamshalas, Sarais, Piaos for public use or benefit is stated to be categorically one of the aims and objects of the trust. The basic aim and object of the trust stated to be to undertake, promote and assist in the relief of welfare and uplift of the poor, needy backward, under privileged, sick and handicapped people in the territory of India, irrespective of nationality, community, caste, creed, colour, religion and sex. A conjoint reading of the aims and objects would leave no one in doubt that for the purpose of achieving the objects and aims, the assessee-trust is entitled to secure its own building. In fact the assessee purchased a site by spending an amount of Rs. 4,25,406 in the Qutab Institutional Area. It is known to the Revenue since the amount at which the site was purchased, also was allowed as-a deduction or expenditure incurred for charitable and religious purposes. Since then whatever amounts were incurred for putting up a building there were being allowed every year as expenditure incurred for religious and charitable purposes. There is nothing wrong either in taking C.4/41, S.D.A., New Delhi on rent and incur expenditure towards payment of interest on Rs. 5 lacs security deposit. Poor feeding conducted to 15-20 people a day in the said premises is also within the aims and objects of the Trust since maintaining Dharamshala, Sarai, Piaos for public use or benefit is one of the aims and objects of the Trust. In the fact of such a clear evidence on record, the argument of the learned Sr. D.R. appears to be strange and ill conceived.
37. The decision of Probodhan Prakashan's case (supra) has no application to the facts and circumstances of the case. The further argument that there is difference between expenditure and application of income which is well-known that expenditure is relatable to earning of income and, therefore, an anterior event of accrual/receipt of income whereas application is after income accrues or is received, that the assessee cannot claim the amount spent as expenditure for arriving at commercial income, what is meant by 'commercial' by the Courts with reference to the trust income is that there is no application of Section 14 of the Act and artificial expenditure/deductions as provided in the Act is not admissible to a trust for computing its income and thus the proposition expounded by the learned counsel for the assessee that income is required to be computed on commercial basis does not advance assessee's case is not a tenable argument in view of a host of decisions of both Madras, Andhra Pradesh and Gujarat relied upon by the assessee. In those cases, the Income-tax paid not for the current year but for the accumulated income-tax over years was allowed as a deduction while arriving at the income available with the trust, for charitable and religious purposes. In view of categorical finding in those decisions, the argument of the learned D.R. is untenable. The learned D.R. also relied upon a Calcutta High Court decision in Director of Income-tax v. Girdharilal Shewnarain Tantia Trust [1993] 199 ITR 215. The ratio of the decision is neither here nor there for our purposes. The point for consideration before the Calcutta High Court was whether the charitable trust is entitled to deduction under Section 80G in respect of its long-term capital gains. The Calcutta High Court held that it is not entitled. It is not known how the ratio will be of any help to the Department. The Calcutta High Court had clearly followed the Madras High Court decision in Rao Bahadur Calavala Cunnan Chetty Charities' case (supra) and also the Andhra Pradesh High Court in Trustee of H.E.H. the Nizam's Supplemental Religious Endowment Trust's case (supra). In both the cases, it is categorically held that the income of the Trust should be determined on commercial principles but not by application of Section 14 of the Income-tax Act. Thus there is no conflict between the Calcutta decision cited by the learned D.R. and the Madras, A.P. and Gujarat High Court decisions cited on behalf of the assessee. The main point discussed in the Calcutta High Court decision missed the attention of the learned Sr. D.R. and thus making his argument misconceived.
38. Last but not the least, it was contended by the learned Sr. D.R. that in view of Cangabai Chanties v. CIT[1992] 197 ITR 416 (SC), all the objects of the Trust as per the Trust Deed cannot be said to be of wholly religious and charitable nature. For instance, according to him, one of the aims and objects was to promote and propagate, the tenets of Indian culture, inter alia, by promoting institutions in India and abroad. Therefore, there was scope to spend the income derived by the assessee-trust abroad also and not exclusively within India. And in view of Gangabai Charities' case (supra), when there is a scope to spend the whole of the income for non-charitable purposes like undertaking tours to foreign countries, the Trust itself cannot be held to be wholly for charitable and religious purpose. This aspect, according to the learned D.R. skipped the attention of the authorities for earlier years.
39. The head note of the decision of the Hon'ble Supreme Court would clearly bring out the facts of the case as well as the ratio of the decision rendered by the Hon'ble Supreme Court in order to have a proper appreciation, the whole of the head note is extracted - Gangabai Charities' case (supra) -
G. executed a deed, described as a deed of trust, whereby she gave effect to her desire to construct and provide a building for the benefit of the public to be used for religious, charitable, cultural and social purposes. She contributed an amount towards the trust fund with which the land was purchased. The funds were augmented by her son from his own contribution and from donations. The deed specified that after completion of the building, the trustee might let or allow the building or portion or portion thereof for the use of the public for social, cultural, religious, educational, etc., purposes, for holding and conducting religious discourses and for running schools for the development of Sanskrit learning, free or on such rent as the trustee considered reasonable. The building was let out as a marriage mandapam to be used by members of the public as such. The trust also ran a printing press. The question was whether the income earned by the trust was exempt from tax under Section 11 of the Income-tax Act, 1961. The Appellate Tribunal held that the income was exempt under Section 11, but on a reference, the High Court reversed the decision of the Tribunal holding that the income was not exempt but was taxable. On appeal to the Supreme Court:
Held, affirming the decision of the High Court, that it was not possible to cull out in clear terms any specific charitable or religious object from the trust deed to conclude that the trust was set up wholly for religious or charitable purposes. The "religious, charitable, cultural and social" purposes referred to in the deed were not avowed as the objects of the trust: they were only the objects of those who wished to put the trust property to use. There was no mention in the deed as to how the income derived from the trust property was to be utilised. There was no mandate that the income was to be spent on religious or charitable purposes. Therefore, the trust deed did not meet the requirements of Section 11 (1)(a), and the income of the trust was not exempt from tax.
The Supreme Court also rejected the plea for a remand on the basis that one of the judges of the High Court who decided the reference had earlier given his opinion, as special counsel for the Income-tax Department, that the trust was ineligible for exemption, for the reasons that (f) owing to a long lapse of time the judge could not have remembered that he had given a 'routine' opinion : (ii) the judgment of the High Court was rendered after hearing detailed arguments on both sides; and (iii) in any case, senior counsel on behalf of the appellant had been heard by the Supreme Court and the Supreme Court had examined the trust deed minutely and carefully and was satisfied that the view of the High Court was the only view which could be taken. Decision of the Madras High Court in Addl. CIT v. Gangabai Charities [1983] 142 ITR 718 affirmed.
The Hon'ble Supreme Court from the facts and circumstances involved in that case held that it was not possible to cull out in clear terms any specific charitable or religious object from the trust deed to conclude that the trust was set up wholly for religious or charitable purposes. The "religious, charitable, cultural and social" purposes referred to in the deed were not avowed as the objects of the trust; they were only the objects of those who wished to put the trust properties to use. There was no mention in the deed as to how the income derived from the trust property was to be utilised. There was no mandate that the income was to be spent on religious or charitable purposes and, therefore, the trust deed did not meet the requirements of Section 11(1)(a) and the income of the trust was not exempt from tax. The Madras High Court decision in Gangabai Charities' case (supra) was affirmed.
40. Therefore, it is immediately to be seen that the whole of the decision rendered by the Hon'ble Supreme Court is dependent upon true construction of the trust deed which arose for consideration before their Lordships and the law is not laid down in general terms. Therefore, the ratio of the said decision should be applied if the same set of facts and circumstances and recitals in that particular trust deed also exist in the facts before us. The Hon'ble Supreme Court decision is confined only to the facts and circumstances of the case. We have threadbare discussed the trust deed, its provisions, the aims and objects, etc., etc. in the prior paras to this order and we have no hesitation to hold that the ratio of the Supreme Court decision in Gangabai Charities' case (supra) cannot be applied to the facts of this case since the terms of the trust deed are quite different and distinct from the terms of the trust deed which came up for consideration before the Hon'ble Supreme Court in that case. Suffice it to say that the ratio of the said case cannot be made use of successfully by the Revenue in this case.
41. Having regard to all the discussion made above, we fail to see any substance in the main arguments advanced by the learned Sr. D.R. that our findings on two minor points held against the assessee do not cut across the case of the assessee in any substantial manner and we hold that the assessee-trust is entitled to exemption under Section 11(1)(a) that its income should be determined at Rs. 2,170 for assessment year 1988-89, that both the lower authorities went wrong in considering the status of the assessee as AOP and also in determining its income at Rs. 2,12,516. We hold the assessee-trust is a public religious charitable trust. It had applied its income in the accounting year in question for religious and charitable purposes and the whole of the expenditure showed in the income and expenditure statement should be allowed and should be treated as application of income for charitable and religious purposes. The orders of the learned CIT (Appeals) is set aside. The appeal of the assessee is allowed.