1983 (11) TMI 47 - HC - Income Tax

Summary

Issues Involved:
1. Whether the income of the trust is exempt from tax under section 4(3)(i) of the Indian Income-tax Act, 1922.
2. Whether the income of the trust is exempt from tax under sections 11 and 12 of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

Issue 1: Exemption under Section 4(3)(i) of the Indian Income-tax Act, 1922
The assessee, M/s. Yogiraj Charity Trust, claimed that its income was exempt from tax under section 4(3)(i) of the Indian Income-tax Act, 1922, for the assessment years 1959-60 to 1961-62. The Income Tax Officer (ITO) rejected this claim, observing that the trust's main activity was to act as a tool for concerns controlled by Seth Ram Krishna Dalmia, the founder of the trust. The funds were blocked in various concerns controlled by Seth Dalmia, and the trust was used as a conduit for transferring shares between companies at his instance. The ITO also noted that the trust's objects were both charitable and non-charitable, and the trustees had unfettered discretion to apply funds to any of the objects, thus disqualifying the trust from exemption under the said provisions. The Appellate Assistant Commissioner (AAC) reversed the ITO's decision, but the Tribunal, following the Delhi High Court's judgment in CIT v. Jaipur Charitable Trust [1971] 81 ITR 1, and the Supreme Court's affirmation in Yogiraj Charity Trust v. CIT [1976] 103 ITR 777 (SC), held that the income was not entitled to exemption.

Issue 2: Exemption under Sections 11 and 12 of the Income-tax Act, 1961
For the assessment years 1962-63 to 1965-66, the assessee claimed exemption under sections 11 and 12 of the Income-tax Act, 1961. The ITO rejected this claim for the same reasons as mentioned above. The AAC reversed the ITO's decision, but the Tribunal, following the same judicial precedents, held that the income was not entitled to exemption.

Subsequent Events and Rectification of Trust Deed
The assessee argued that subsequent to the Delhi High Court's judgment on May 26, 1970, the trust deed was rectified and amended by a civil court decree on March 24, 1972, and a deed of declaration was executed on June 2, 1972. These changes were intended to remove the objectionable clauses, making the trust a public charitable trust entitled to exemption. The assessee cited the case of Jagdamba Charity Trust v. CIT and Yogiraj Charity Trust v. CIT [1981] 128 ITR 377 (Delhi), where the court held that the trust was entitled to exemption after the rectification. The assessee requested the court to remand the cases to the Tribunal to allow for the introduction of this new evidence.

Court's Analysis and Conclusion
The court rejected the assessee's request to remand the cases to the Tribunal for considering the rectified trust deed, stating that the Tribunal had considered all material available at the time of its decision. The court emphasized that the rectification occurred after the Tribunal's decision and that there is no provision in the Income-tax Act or the Income-tax Appellate Tribunal Rules allowing for the introduction of evidence of events occurring after the Tribunal's decision. The court cited the Supreme Court's decision in Keshav Mills Co. Ltd. v. CIT [1965] 56 ITR 365 (SC), which held that additional evidence cannot be introduced at the High Court stage. The court also distinguished the cases cited by the assessee, noting that they involved specific circumstances or agreements between parties that warranted additional evidence, which was not applicable here.

Final Judgment
The court answered both questions in the negative, ruling against the assessee and in favor of the Revenue. The court held that the income of the trust was not entitled to exemption under the relevant provisions of the Indian Income-tax Act, 1922, and the Income-tax Act, 1961. The parties were directed to bear their own costs.