1994 (2) TMI 46 - HC - Income Tax

Appeal To Supreme Court, Assessment Year, Charitable Trust, Full Bench, High Court, Income Tax, Question Of Law, Res Judicata

Summary

Issues Involved:
1. Entitlement to full exemption of income under Section 11 of the Income-tax Act, 1961.
2. Applicability of the principle of res judicata.
3. Examination of statutory conditions under Section 11(1) and 11(2) of the Income-tax Act.
4. Validity of Tribunal's order and subsequent rectification applications.

Detailed Analysis:

1. Entitlement to Full Exemption of Income Under Section 11 of the Income-tax Act, 1961:
The core issue revolves around whether the assessee is entitled to full exemption of its income as earmarked or spent for Aryavaidyasala, Aryavaidya Hospital, and Aryavaidya Padasala for the assessment years 1971-72 to 1975-76. The Tribunal had applied the decision in P. Krishna Warrier v. CIT [1981] 127 ITR 192 (Ker) [FB], which held that the entire income of the trust derived from properties held in trust, including Aryavaidyasala, would be exempt if other requirements of Section 11 of the Act are satisfied. The assessee argued that the Full Bench decision should govern subsequent years, and no further examination under Section 11 was necessary. The court confirmed that the Full Bench decision was clear and specific, indicating that the assessee is entitled to full exemption without further inquiry under Section 11.

2. Applicability of the Principle of Res Judicata:
The principle of res judicata was asserted by the assessee, suggesting that the Full Bench decision for the assessment years 1965-66 to 1970-71 should apply to subsequent years. The court agreed, noting that the question of entitlement to exemption based on the nature of the property or the rights of parties does not vary annually. The court cited precedents indicating that res judicata applies to income tax proceedings concerning consistent issues across different years.

3. Examination of Statutory Conditions Under Section 11(1) and 11(2) of the Income-tax Act:
The Revenue contended that even if the Full Bench decision recognized the charitable purpose under Section 2(15), the assessee must still satisfy the conditions of Section 11(1) and 11(2) regarding the application and accumulation of income. The court, however, found that the Full Bench had considered Section 11 while rendering its decision. The court emphasized that the Full Bench's answer to question H was unambiguous, granting full exemption without necessitating further compliance with Section 11's conditions.

4. Validity of Tribunal's Order and Subsequent Rectification Applications:
The Tribunal's order under Section 260 of the Act, following the Full Bench decision, declared that no portion of the income was taxable. The Revenue's applications for rectification, arguing for a reassessment under Section 11, were rejected by the Tribunal. The court upheld the Tribunal's decision, stating that the Revenue's attempt to modify the Tribunal's order was essentially an effort to re-litigate the Full Bench's clear and binding decision. The court found no grounds for rectification and dismissed the Revenue's applications under Section 256(2).

Conclusion:
The court affirmed the Tribunal's application of the Full Bench decision, confirming the assessee's entitlement to full exemption of income for the specified years. The principle of res judicata was upheld, preventing the Revenue from re-examining settled issues. The court dismissed the Revenue's rectification applications, reinforcing the binding nature of the Full Bench's clear and unambiguous decision.