1992 (1) TMI 192 - AT - Income Tax

Agricultural Income, Assessing Officer, Attributable To, Charitable And Religious Purposes, Charitable Purpose, Income From Property, Previous Year, Religious Trust, Time Limit For Completion

Summary

Issues Involved:
1. Limitation of reassessment orders.
2. Entitlement to full exemption under section 11 of the Income Tax Act.

Detailed Analysis:

Limitation of Reassessment Orders:
The primary contention raised by the assessee was that the reassessment orders dated 30-11-1987 were barred by limitation. The assessee argued that under section 153(2A) of the Income Tax Act, the reassessments should have been completed on or before 31-3-1987, given that the first appellate authority remitted the matter to the Assessing Officer on 21-1-1985. The assessee relied on CBDT Circular No. 10-P(V-68) of 1968 to support this claim. However, it was countered by the Departmental Representative that section 153(2A) was not applicable to the assessment years 1969-70 and 1970-71, and the Circular was administrative in nature and not binding.

Upon examining the facts, the Tribunal concluded that the impugned assessments were not barred by limitation. It was noted that section 153(2A) was introduced with effect from 1-4-1971 and applied only to assessment years 1971-72 and onwards. Therefore, the reassessments for the years 1969-70 and 1970-71 were not subject to this limitation. The Tribunal also dismissed the applicability of the Circular, stating it was administrative and could not override the provisions of the Act. Consequently, the limitation issue was decided against the assessee.

Entitlement to Full Exemption Under Section 11:
The second issue was whether the assessee was entitled to full exemption under section 11 of the Income Tax Act. The assessee maintained separate books for agricultural and non-agricultural income and argued that the income applied to charitable purposes should be attributed exclusively to non-agricultural income, thus qualifying for full exemption under section 11. The Assessing Officer, however, contended that since the funds were mixed, the income applied to charitable purposes should be apportioned between agricultural and non-agricultural income on a proportionate basis.

The Tribunal examined the scheme of the Act, particularly sections 10(1) and 11, which fall under Chapter III. It was noted that agricultural income is exempt under section 10(1) due to constitutional provisions, while section 11 deals with income from property held for charitable or religious purposes. The Tribunal emphasized that agricultural income is inherently exempt and does not require further exemption under section 11.

The Tribunal applied the doctrine of attribution, as elucidated in the case of Paton v. IRC, which allows the taxpayer to attribute payments in a manner most favorable to themselves. Following this rationale, the Tribunal found it reasonable to consider the income applied to charitable purposes as coming from non-agricultural income. This view was supported by the Calcutta High Court's decision in CIT v. Ashoka Charity Trust.

As a result, the Tribunal set aside the orders of the lower authorities and directed the Assessing Officer to calculate the exemption under section 11 on the basis that the income applied to charitable purposes was wholly attributable to non-agricultural income. Thus, the assessee was entitled to full exemption under section 11.

Conclusion:
The Tribunal allowed both appeals, deciding the limitation issue against the assessee but granting full exemption under section 11 by attributing the income applied to charitable purposes to non-agricultural income.