Delhi High Court
Cwt vs Sir Shoba Singh Public Charitable Trust on 4 November, 2004
Equivalent citations: [2005]142TAXMAN478(DELHI)
JUDGMENT B.C. Patel, CJ.
These references are for the assessment years 1973-74 to 1983-84, at the instance of the revenue, by the Tribunal under section 27(1) of the Wealth Tax Act, 1957 (hereinafter referred as "the Act"). Though the questions are worded differently in different matters, but, essentially questions are as under:
"1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the net wealth of the assessed trust was exempt under section 5(1)(i) of the Wealth Tax Act, 1957?
2. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in holding that the assessed trust was not hit by the provisions of section 21A of the Wealth Tax Act, 1957 read with section 13 of the Income Tax Act, 196l?"
2. We have taken the facts from the paperbook of WTR Nos. 41 to 43 of 1988. Initially, in the income-tax case of the assessed it had been held that the trust violated the provisions of section 13(1)(c) read with section 13(3) of the Income Tax Act, 1961. However, the Tribunal had given the finding in favor of the assessed as regards the income-tax cases. The department had not accepted the same and was in reference before the High Court. As the department did not accept the claim of the assessed, the Wealth Tax Officer felt that the assessed trust had violated the provisions of section 13(1)(c) of the Act, and, therefore, it would be liable to wealth-tax and section 21A of the Act would apply. With these remarks, net wealth was computed below:-
Baikunth as per report 41,56,000 Ajmeri Gate as per report 6,69,100 Mashobra 2,00,000 Movable property:
Shares 1200 equity shares of Shobha Singh & Sons 7,20,000 600 Cumulative Preference Shares 6,00,000 2000 equity shares of Nerbudda Valley Refregrated Co.
20,000 13,40,000 Loans 34,577 Sundry Debtors 98,841 Advance to staff 365 Suspense a/c (as per b/s) 230 1,34,772 Total 64,99,872 Less: Liabilities 3,56,336 Net Wealth 61,41,336
3. Before the Tribunal the department submitted that dispite earlier decisions in the income tax cases and wealth tax cases of the assessed, it wanted to keep the issues alive, as otherwise, the cases which were already filed may be adversely affected. The Tribunal allowed the assessed's appeal in view of the order made by the Tribunal for the assessment year 1973-74 and hence these references.
4. It appears that the assessing officer under the Wealth Tax Act relied solely on the decision rendered by the Income Tax Officer wherein the Income Tax Officer held that the trust violated the provisions of section 13(1)(c) read with section 13(3) of the Income Tax Act, 1961. The decision on which reliance was placed ultimately was considered by this court in case of the same assessed titled CIT v. Sir Sobha Singh Public Charitable Trust (2001) 250 ITR 475 (Del) wherein one of the questions was as under:-
"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was right in law in holding that the provisions of section 13(2)(h) of the Income Tax Act were not applicable to the assessed's case and thereby exempting the assessed from tax under section 11 of the Income Tax Act in respect of the income arising to it from the shares and property donated by Sir Sobha Singh?"
The matter was considered at length and at page 480 the Division Bench pointed out as under:-
"A similar issue had come up before various High Courts and there is unanimity in the view, as that taken by the Tribunal. In construing the provisions of section 13(2)(h), the expression 'funds" has to be understood in the context of the provision and not only with reference to the dictionaries or to commercial parlance or to the principles of accountancy. It is to be noted that the expression used is "funds" and not "fund". "Funds" means money in hand or cash according to some dictionaries. This, according to us, would be the proper meaning to be attributed to the expression "funds" as appearing in the provision. The fundamental requirement of section 13(2)(h) is that there must be investment of funds of a trust. If any expanded meaning is given to include assets other than money in hand or cash or credit balance in a bank account, it is evident that they are not capable of being invested as such. Other assets of the trust apart from money in hand or cash or balance in bank will have to be converted into money or cash before the same can be invested, as was observed by the Calcutta High Court in CIT v. Birla Charity Trust (1988) 170 ITR 150 (Cal.). The expression "invest" connotes a positive act on the part of the trust whereby the funds of the trust are laid out or committed in any particular property or business or transaction with the object of earning a profit or financial advantage or return. What is contemplated is that the trust having assets in the form of money or cash or balance in a bank or any other form capable of being invested or by a positive act and pursuant to a decision of the trust was laid out or committed in a concern of a nature specified before it can be held that such an investment comes within the mischief of section 13(2)(h)." (P. 480)
5. In the instant cases it is clear that in view of the aforesaid decision and clear language of section 13(1)(c) the very basis of the revenue cannot be accepted and, therefore, the answer in all these references are required to be given in favor of the assessed and against the revenue. Ordered accordingly.