1990 (8) TMI 210 - AT - Wealth-tax

Issues Involved:
1. Legality of the Commissioner's revisionary order dated 11-1-1989.
2. Eligibility of the assessee trust for exemption under section 5(1)(i) of the Wealth-tax Act.
3. Interpretation of "funds of the trust" and "investment" under section 13(1)(d) of the Income-tax Act.
4. Validity of fresh assessment orders for the assessment years 1984-85 to 1987-88.

Detailed Analysis:

1. Legality of the Commissioner's Revisionary Order:
The Commissioner of Tamil Nadu-III, Madras, passed a revisionary order on 11-1-1989, setting aside the original assessments of the Wealth-tax Officer. The Commissioner directed the Wealth-tax Officer to redo the assessments considering the investments of the trust funds in non-approved and non-specified modes of investments. The Commissioner held that the grant of exemption under section 5(1)(i) of the Wealth-tax Act to the assessee was erroneous and prejudicial to the Revenue. The Commissioner's order was based on the finding that the assessee trust was holding silver articles in contravention of section 13(1)(d) of the Income-tax Act.

2. Eligibility of the Assessee Trust for Exemption:
The assessee trust claimed full exemption under section 5(1)(i) of the Wealth-tax Act for the assessment years 1984-85 to 1987-88. The original assessments granted this exemption. However, the Commissioner revised these assessments, arguing that the trust's holding of silver articles received as a gift was in contravention of section 13(1)(d) of the Income-tax Act. The assessee contended that the silver articles were received as a corpus donation and not as an investment. The Tribunal held that merely holding the donated silver articles did not amount to an investment or a violation of section 13(1)(d), thus entitling the trust to the exemption under section 5(1)(i).

3. Interpretation of "Funds of the Trust" and "Investment":
The Tribunal referred to several High Court decisions to interpret the terms "funds of the trust" and "investment." In CIT v. Birla Charity Trust [1988] 170 ITR 150 (Cal.), the Calcutta High Court held that "funds" should be understood as money in hand or cash, capable of being invested. Similarly, in CIT v. Insaniyat Trust [1988] 173 ITR 248, the Gujarat High Court held that "trust funds" refer to actual or available money or cash resources. The Madras High Court in Auditor Dasaradha Rami Reddy Charities v. CIT [1989] 177 ITR 249, ruled that holding promissory notes did not constitute an investment of trust funds. Applying these principles, the Tribunal concluded that the silver articles did not represent the trust funds as they were not converted into money and invested. Therefore, there was no contravention of section 13(1)(d).

4. Validity of Fresh Assessment Orders:
The fresh assessments for the years 1984-85 to 1987-88 were based on the Commissioner's revisionary order. The Wealth-tax Officer determined the net wealth of the assessee trust, denying the exemption under section 5(1)(i) due to the alleged contravention of section 13(1)(d). The Tribunal found that the fresh assessments were invalid as they were based on the erroneous revisionary order. Consequently, the original assessments granting the exemption were restored.

Conclusion:
The Tribunal set aside the Commissioner's revisionary order dated 11-1-1989 and restored the original assessments for the assessment years 1984-85 to 1987-88. The fresh assessments made in pursuance of the revisionary order were deemed invalid. The Tribunal held that the assessee trust was entitled to exemption under section 5(1)(i) of the Wealth-tax Act, as there was no violation of section 13(1)(d) of the Income-tax Act.

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