9911796707
TMI Blog2003 (12) TMI 276X X X X Extracts X X X X X X X X Extracts X X X X ..... 13,031 on which the assessee does not seem to have incurred any expenditure. Thus, interest income of Rs. 32,13,031 was net income and donation of Rs. 29 lakhs to SUKES has been given out of such income. The receipts from hospital activities and nursing home were to the tune of Rs. 24,72,443. Against the same, the assessee had incurred expenses including depreciation of Rs. 31,84,765. After adjusting loss of Rs. 2.49 lakhs against such expenses, remaining expenses of Rs. 29 lakhs or so against receipts from CMC etc. of Rs. 24,72,443, the net result from running CMC would be a loss of Rs. 4 lakhs or so. Thus, it could not be said that assessee was running a nursing home (CMC) purely for commercial consideration or with profit motive as the net result from running such activities was a loss. Page 33 of the paper book for the assessment year 1997-98 further shows that even in the past, net result from running of a nursing home was a loss. Thus profit motive does not seem to be the dominant objective of CMC. In any case, even if there is a little surplus and the objective is not to make profit and such income is reinvested and utilized for the objectives of the trust, the same would qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal course to recover the amount so donated. Therefore, this fact cannot be held against the assessee. As regards funds diverted by SUKES to business ventures of Brar family, there is no evidence on record that the founders and trustees of the assessee-trust were also the founders or the trustees of SUKES. It, therefore, cannot be said that the amounts diverted to Brar family were under the direction of the assessee-trust. Moreover, the persons to whom funds were diverted were not the persons falling in the prohibitive categories mentioned in section 13. Moreover, the Board's Circular No. 1582 dated 19-10-1984 only directs the field officers to examine this aspect at the time of completing the assessment. But it does not say that exemption in respect of donation given to another institution should invariably be denied. Thus, in the light of the detailed discussion and the legal position discussed above, we are of the considered opinion that CIT(A) was justified in holding that donation given to SUKES by the assessee-trust amounted to utilization of income for the objects of the assessee-trust and, therefore, such income qualified for exemption u/s 11 of the Income-tax Act. Acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has misled herself in coming to conclusion that the Trust was existing solely for charitable purposes when no income was utilised for achieving the objectives of the Trust. Further, the requirement for claiming exemption under section 11(1) of the Income-tax Act, is not fulfilled. 3.(i) The learned CIT(A) has misdirected herself in admitting the additional evidence without affording any opportunity to the Assessing Officer as provided under Rule 46A(3) of the Income-tax Rules, 1962. (ii) Although the learned CIT(A) mentioned in her order that detailed report was submitted by Mrs. Jyoti Rani, the then Assessing Officer on the written arguments of the appellant vide her letter No. 8389 dated 14-10-1999, but the impugned appellate order has been passed on 2-3-2001. Since, Mrs. Jyoti Rani was transferred and relieved on 12-4-2000, the learned CIT(A) was not justified in not allowing any opportunity to the present Assessing Officer before passing order. (iii) While allowing relief, the learned CIT(A) has relied upon the additional evidences without affording any opportunity, which are not relevant to the year in question and hence are immaterial. (iv) The ld. CIT(A) is also incorrect i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eneficiary) trust towards their industrial concern in which the trustees or their relatives had beneficial interest. Thus, the CIT(A) committed an error in accepting this fact that the donation was for achievement of objectives of the Trust when the facts state otherwise. 6. The learned CIT(A) has erred in allowing relief by referring to Instruction No. 1132 dated 5-1-1978. The recipient trust was not in fact carrying out any educational activity during the year in question and the donation received on 12-7-1995 by Sardarni Uttam Kaur Educational Society was transferred to industrial concerns of the trustees immediately after the receipt of donations. Thus, the whole exercise comes within the ambit of colourable device in view of decision of Hon'ble Supreme Court in the case of McDowell Co. Ltd. v. CTO [1985] 154 ITR 148. 7. The learned CIT(A) is not justified in deleting the addition of Rs. 2.49 lakhs by holding that income/loss derived from agricultural operation forms part of income of the appellant trust and is exempt being a charitable institution without appreciating the facts that the business of the agricultural operation was not incidental to the attainment of the objectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deed. However, he allowed deduction under section 80G in respect of donation given to SUKES. Thus, the Assessing Officer completed the assessment on a total income of Rs. 24.25 lakhs as against loss declared of Rs. 12,82,074. 4. Being aggrieved, the assessee carried the matter in appeal before the CIT(A). It was submitted before the CIT(A) that Dr. P.N. Chuttani was founder of the trust, who was an eminent doctor and had an outstanding record of service in the medical field. He served PGI for almost two decades. Dr. Chuttani was a bachelor and bequeathed his entire wealth to TTVC. Since Dr. Chuttani was associated with medical profession, his dream was also to set up a trust, which would afford medical relief and encourage medical research and for that purpose Chandigarh Medical Centre and Chuttani Medical Centre were set up. It was emphatically submitted that the Assessing Officer had failed to appreciate that the assessee-trust's activities were not merely to afford medical relief and encourage medical research but were charitable also which was obvious from its name as 'Trilok Tirath Vidyavati Chuttani Charitable Trust'. It was submitted that the Assessing Officer had mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... should be deleted. 5. On the written submissions filed by the assessee, the Assessing Officer submitted a detailed report dated 14-10-1999. We may briefly discuss the same as under: (i) The main objectives of the assessee-trust was to spend for medical research or for providing medical relief, but no such funds had been given to the PGIMER nor any medical relief nor any donation was given for encouraging medical research. It is not understood how Nursery schools, not connected with the field of medicine, fit into the scheme of things. When seen in totality, the main objects of the assessee-trust related to medical field only and not ordinary nursery school. (ii) SUKES was created in 1993 which had no specific record in the field of nursery education and even while giving the donation, no condition was imposed, which was contrary to the proviso to Article 4 of the trust deed. No worthwhile service had been rendered in the field of nursery education by the donee-trust, i.e., SUKES till the receipt of the donation. (iii) It was pointed out that the Managing Trustee of SUKES was the daughter of Mrs. G.K. Brar. Mrs. G.K Brar was one of the trustees with Dr. Chuttani, in another trust na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ief. It was accordingly urged that assessee should not be allowed any exemption in respect of income given by way of donation to SUKES. 6. The ld. CIT(A) considered these submissions. She referred to the trust deed and found that as per clause (ii) of Article 4, one of the objects of the assessee-trust was to maintain, establish, finance, subsidize, exclusively or partly, or give grants-in-aid, recurring or otherwise, for the maintenance of hospitals, clinics, dispensaries, nursery schools or other establishments of like nature. Thus, she found that providing financial assistance to nursery schools was also included in the objects of the trust. She observed that a donation of Rs. 29 lakhs given to Sardarni Uttam Kaur Educational Society for running a nursery school fell within the objects of the trust. She further observed that SUKES was also granted exemption under section 80G of the Income-tax Act and, therefore, there is no doubt that SUKES was a public charitable trust. Thus she held that giving of the donation of Rs. 29 lakhs was not inconsistent with the objects of the assessee-trust. By referring to the CBDT Circular No. 1132 dated 5-1-1978, the ld. CIT(A) further held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 lakhs to the PGI. She also took note of the fact that assessee had given donation of Rs. 1 lakh for Kargil War and Rs. 2 lakhs for Gujarat Relief Fund. These donations were given towards the fulfilment of social objectives. Taking note of these facts and definition of 'charitable purpose' given in section 2(15), the ld. CIT(A) held that the assessee was a charitable institution. 6.2 As regards the objection of the Revenue that the assessee was running Chuttani Medical Centre on commercial lines, the ld. CIT(A) observed that assessee had engaged eminent doctors as consultants, who had revenue sharing arrangement with the trust and were paying 25% of the fees to the Centre and the balance was reflected as income. The operations of the trust were running within the parameters of its objectives. No institution can run without finance, otherwise the trust would be eating its corpus, hence derivation of income was not incongruent to the objectives of the trust and it does not defeat the objectives of the trust provided the income was reinvested in the institution itself. Section 11(4a) allows the trust to run a business and exemption in respect of profits and gains would be available i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the time of hearing of the case, the Ld. CIT (D.R.), also filed written submissions on behalf of the Revenue on 28-11-2003. The submissions made before the learned lower authorities were reiterated. In this regard, he drew our attention to pages 1 to 8 of Departmental Paper Book (in short DPB), which is a copy of Assessing Officer's letter dated 14-10-1999 to CIT(A) giving her comment on the written submissions filed by the assessee. Adverting to the main issue regarding allowance of claim for exemption under sections 11 and 12, the ld. D.R. submitted that the assessee-trust had not utilized its income for achieving the objectives of the trust on account of the following facts : (i) The assessee was granted registration by the CIT in Feb., 1976 and had no liquid funds in its corpus. The assessee sold one of its properties at Panchsheel Park, New Delhi for Rs. 3,29,68,428. The sale proceeds were received during assessment year 1995-96 and interest income on such sale proceeds started accruing from assessment year 1995-96. Thus there is no application of funds for charitable purposes in the earlier year. The assessee was not able to establish in a credible manner that it had carrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the element of altruism is missing in this case. He further submitted that whether the activities of the assessee were charitable within the framework of definition of section 2(15), the onus was on the assessee. He relied on the judgment of Supreme Court in the case of Indian Chamber of Commerce v. CIT [1975] 101 ITR 796. (v) Since the very inception of the assessee-trust, there has been no direct application of income for charitable purpose except the alleged donation of Rs. 29 lakhs given to Sardarni Uttam Kaur Educational Society. Even the promised application of income for setting up PGIMER was not intended to be fulfilled, as seen from the application seeking accumulation, without specifying the purpose, quantum etc. It is inexplicable, as to why the assessee-trust was so prompt in making donation to Sardarni Uttam Kaur Educational Society for an incongruent objective but was lethargic and casual in doing so in case of the immediate and primary objective of setting up the proposed PGIMER. Apparently, the intention was to continue with the diversion of the commercially earned income to the interested persons. In this regard reliance was placed on the judgment of Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad sought permission in Form 10 for accumulation of Rs. 55 lakhs in assessment year 1997-98. The record shows that the application in Form 10 was not specific as it did not specify the above purpose nor gave specific period nor was backed by a resolution of the trustees. In this regard, he drew our attention to a copy of application dated 16-6-1997 submitted by the assessee in Form No. 10 for assessment year 1997-98. Reliance was placed on two judgments - One of Madras High Court in the case of M.CT. Muthiah Chettiar Family Trust and the other of Calcutta High Court in the case of Director of Income-tax (Exemption) v. Trustee of Singhania Charitable Trust [1993] 199 ITR 819. Besides, it was submitted that the assessee-trust had ostensibly donated funds to the recipient society for setting up 'nursery schools' for furtherance of the objectives of the recipient society, which was primarily in the field of education. However, it was found as under :- (a) The recipient society was set up on 21-7-1993 for promoting charities in the field of education. (b) The recipient society was confined to the pages of the trust deed and accounting records without any charitable activity having been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it has also been mentioned on page 5 that any contribution by the trustees to any other trust or society, institution etc. having as its sole objects on all or any of the objects of the assessee-trust shall mean furtherance of the objects of the trust. He further drew our attention to page 2 of the paper book, which is a copy of balance sheet, as on 31-3-1996 and the same shows corpus of Rs. 3.10 crores of the Trust. He drew our attention to page 33 of the paper book for the assessment year 1997-98, which is a copy of the receipts and expenditure for the financial years 1993-94, 1994-95, 1995-96 and 1996-97. He submitted that that right up to the assessment year 1995-96, net result of the trust was a loss. However, the assessee started earning interest income on sale proceeds of the property from the assessment year 1995-96 onwards. He submitted that for the assessment year 1996-97, interest income aggregated to Rs. 32,13,031. Thus, the question of application of income arose in the assessment year 1996-97. The assessee donated an amount of Rs. 29 lakhs to SUKES for the purpose of nursery schools, which was one of the objects of the assessee-trust. He submitted that SUKES was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ption was allowed. Relying on the judgment of Supreme Court in the case of Radhaswami Satsang v. CIT [1992] 193 ITR 321, the ld. Counsel submitted that when on the same facts the claim of the assessee has been accepted in the past, it is desirable that status quo should be maintained. He further submitted that donations given by one charitable institution to another charitable institution amounted to application of income for charitable purposes and hence the donor-trust was entitled to exemption of the amount donated. For this proposition, the ld. Counsel relied on the judgment of Bombay High Court in the case of Trustees of the Jadi Trust, and the judgment of Gujarat High Court in the case of CIT v. Sarladevi Sarabhai Trust No. 2[1988] 172 ITR 698. He further submitted that there was no bar on assessee to carry on business. The mere fact that assessee was running CMC for commercial consideration did not disentitle the assessee from exemption of its income so long as the income so generated had been utilized and reinvested for the objects of the trust. He relied on the decision of ITAT, Amritsar Bench in the case of Dy. CIT v. Ch. Aishi Ram Batra Charitable Trust [1999] 70 ITD 487 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any person referred to in sub-section (3). He submitted that none of the clauses of sub-section (3) applies to the facts of assessee's case. Therefore, such benefit cannot be denied to the assessee. Thus, the Ld. Counsel urged that the order of the CIT(A) in allowing exemption in respect of donation of Rs. 29 lakhs given to SUKES did not merit any interference. 9. We have heard both the parties at length and given our thoughtful consideration to the rival submissions. We have carefully gone through the orders of the authorities below, examined the facts, evidence and material placed on record. We have also referred to the respective pages of the paper book to which our attention has been drawn and the various judgments cited at the bar. 9.1 At the outset, it must be mentioned that appeals for both the assessment years 1996-97 and 1997-98 were heard together. It was announced in the court that the Bench would decide whether to dispose of both the appeals together or only one appeal. We find that the facts for the assessment year 1997-98 are slightly different and relate to accumulation of income on which we feel that both the parties need to be further heard. Therefore, the Bench ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on the judgment of Gujarat High Court in the case of CIT v. Ahmedabad Crucible Co. [1994] 206 ITR 574. However, the only restriction on the powers of the first appellate authority is that such powers should be restricted to the sources of income, which have been considered expressly or by clear implications. The CIT(A) cannot discover new sources of income which have not been dealt with in the assessment order. Reliance in this regard is placed on the two judgments of Supreme Court in the cases of CIT v. ShapoorjiPallonjiMistry[1962] 44 ITR 891, and CIT v. Rai Bahadur Hardutroy Motilal Chamaria [1967] 66 ITR 443. 11. Now, in the present case, we find that the assessee had claimed exemption in respect of income of the trust under section 11 of the Income-tax Act. The Assessing Officer had denied such exemption. The assessee carried the matter in appeal before the CIT(A). Thus the issue whether the assessee was entitled to exemption in respect of its income or not was the subject-matter of dispute before the CIT(A) and it was not something which related to new source of income. The report of the Assessing Officer on the written submissions filed by the assessee also related to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... collect donations from other parties to be utilized for achieving the objects of the trust. It is sort of incentive granted to the donors to make contributions to the public charitable trust which they can claim deduction in their returns. For this purpose, the institution is required to submit application in the prescribed proforma before the Commissioner of Income Tax. The CIT examines such application with reference to the objects of the trust and grants registration only if it is found that the objects of the trust are charitable. Procedure in this regard has been spelt out under section 12 AA of the Income-tax Act and the requisite conditions for registration have been spelt out in section 12A of the Act. Once registration is granted to the trust, it enables the trust to claim exemption in respect of its income subject to fulfilment of other conditions relating to application and accumulation of income spelt out in sections 11 to 13 of the Income-tax Act. But grant of registration is a testimony of the fact that trust is a charitable institution. It is also important to note that registration is not granted by the Commissioner for indefinite period. It is only for a limited p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used in section is of wide amplitude. Their Lordships of Hon'ble Supreme Court considered this issue in the case of Andkra Chamber of Commerce. In that case, the assessee was to promote and protect trade, commerce and industries, to aid, stimulate and promote the development of trade, commerce and industries, and to watch over and protect general commercial interests of India or any part thereof. The memorandum of understanding provided that the income and property of the assessee shall be applied solely towards the promotion of its objects for which it had been set up. The assessee purchased property and rented out the same. The question was, whether the property held under a trust was for charitable purposes and the income therefrom was exempt from tax. On these facts, the Hon'ble Apex Court held that advancement or promotion of trade, commerce and industry, leading to economic prosperity enured for the benefit of the community. That prosperity would be shared also by those who were engaged in trade, commerce and industry, but on that account the institution retains its character of general public utility. It was held that the Legislature has used language of great amplitude in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or advancement of medical sciences (research) in all its branches. First proviso to Article 4 provides that funds made available to the said Post Graduate Institute or any other society may be subject to such conditions as the trustees may impose. The second proviso authorizes that such contributions can be made by the trustees to any other trust, society, institution etc. having as its sole objects, all or any of the objects of the assessee trust. The third proviso further provides that no part of income or corpus of the trust shall be applied directly or indirectly for the benefit of founders or their relatives or other persons specified in section 13 of the Income-tax Act. Thus, these objects enshrined in the trust deed do not cast any doubt in anybody's mind that objects of the trust are for general public utility and not for the benefit of any particular class or community or group. Besides, it restricts that the income or the corpus of the trust shall not be applied directly or indirectly for the benefit of founders, their relatives and other persons as specified in section 13 of the Act. 12.3 One of the objections raised by the ld. D.R. is that the assessee is running Chutta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents. All such facilities involve huge investments, which are beyond the reach of such professionally competent and world fame doctors. It is here that the role of a charitable institution assumes importance. Such charitable institution engages the services of such doctors and provides all infrastructure facilities mentioned without which they cannot function. One such instance is that of Dr. Trehan, a prominent heart specialist/surgeon working in ESCORT Hospital, New Delhi, which is again a charitable institution. It is because of such facilities provided by the trust that such doctors can make use of their professional competence and skill in treating the patients. This is exactly what the assessee-trust has done. The assessee has brought prominent professionals under one roof and provided all necessary infrastructure and facilities required for the treatment of patients. Thus, these activities are for the attainment of the main object of the trust, i.e. providing medical relief to the public and, therefore, the running of CMC is for the attainment of the main object of the assessee-trust. In the case of Sivakasi Hindu Nadars Uravinmurai, relied upon by the ld. D.R., the Madras H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the trust. 13. The issue whether the assessee was carrying on business activity purely for business consideration also came to be considered by the Hon'ble Supreme Court in the case of Indian Chamber of Commerce. The objects of Indian Chamber of Commerce were primarily promotional and protection of Indian trade, interest and other allied service operations etc. By referring to the definition of 'charitable purposes' given in section 2(15), the Hon'ble Apex Court held that the benefit of exclusion from total income is taken away when in accomplishing a charitable purpose, the institution engages itself in activities for profit. However, the Supreme Court observed that a little surplus left over at the end of the year does not mean that the assessee was carrying on such activity for purpose of profit. As would be seen from the subsequent paragraphs, in the present case, the net result from running CMC is a loss. Therefore, it could not be said that the assessee was running CMC only for profit motive. This issue was also considered by the IT AT, Amritsar Bench in the case of Ch. Aishi Ram Batra Charitable Trust. In the said case, the Tribunal held that if a property, including runn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit and such income is reinvested and utilized for the objectives of the trust, the same would qualify for exemption. It is only such business income which has not been utilized for the objects of the trust or where the income assessed by the Assessing Officer is found to be higher than shown in the accounts of the assessee that such income would alone be not entitled to exemption as per section 11(4A). This is not the case here. Thus, we do not find any merit in such submission of the ld. D.R. 15. The next objection of the ld. D.R. is that for the purpose of claiming exemption in respect of income from business, the assessee was duty bound to maintain separate books of account as per provisions of section 11(4A) of the Act. No doubt sub-section (4A) provides that running of business activities should be subject to the conditions mentioned in subsections (1) to (3A) of section 11 and further requires that trust should maintain separate books of account in respect of such business. It is no doubt true that assessee has not maintained separate books of account in respect of running of nursing home and other allied activities. But as mentioned earlier, the assessee derived income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per provisions of section 11 of the Income-tax Act, the assessee is entitled to exemption in respect of income from property held for charitable or religious proposes. But such exemption is available only if the income held under the trust is utilized for charitable or religious purposes. As per the trust deed, the trust owned two immovable properties at Panchsheel Park, New Delhi and agricultural land situated at Village Barkatabad, Tehsil Jhajjar, District Rohtak. One of the two properties at Delhi was sold and the assessee realized the sale proceeds amounting to Rs. 3.29 crores in the accounting year relevant to assessment year 1995-96. Page 2 of the paper book, which is a copy of the balance sheet as on 31-3-1996, shows that sale proceeds were held in the corpus of the trust, as all the immovable properties owned by the trust also constituted the corpus of the trust. The assessee invested such sale proceeds in the fixed deposits and investments and earned interest aggregating to Rs. 32,13,031. As already discussed, net result from running of nursing home, i.e., CMC and other related activities was a loss. Likewise, the net result from agricultural farm was also a loss. The only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jects of the assessee-trust because both, inter alia, include establishment and assistance for running of nursery schools. We have also noted that since SUKES was registered and allowed exemption under section 80G, the assessee was under a bona fide impression that SUKES shall carry out the objects for which donation has been given. Moreover, as per provisions of section 11 of the Income-tax Act, even SUKES was required to utilize the funds for the objects for which it was created. Any misutilization of funds or utilization of funds other than the objects of the society would disentitle the recipient-society to exemption under section 11 of the Income-tax Act. It has rightly been held by the ld. CIT(A) that once donation is given by the assessee and the money has parted company, the assessee loses control or power to resort to legal course to recover the amount so donated. Therefore, this fact cannot be held against the assessee. 18. The next important part, which requires to be examined by us is that the Revenue has emphatically argued that SUKES was used as a conduit by the assessee-trust with a view to divert funds to the business adventures of Brar family. At the time of hearin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the above category, we are of the opinion that it is not correct to allege that SUKES was utilized as a conduit for diverting the funds. It is no doubt true that members of Brar family were very close or personally known to the founders of the assessee-trust. But this fact by itself is not enough for denying the exemption to the income given by way of donation to SUKES. The revenue was required to establish that the donation had been diverted to any of the persons mentioned in sub-section (3) of section 13 of the Income-tax Act. The revenue has relied on the judgment of Supreme Court in the case Bharat Diamond Bourse. But in that case, the assessee had advanced a sum of Rs.70 lakhs without interest and security and also without any written agreement to one 'B' who was one of the persons subscribing to its memorandum of association and also its honorary secretary. The assessee was also not able to establish that amount advanced to 'B' was actually given for acquisition of a suitable premises. The person to whom amount was given was found to be falling in the prohibitive category mentioned in section 13(3A) r/w section 13(1)(c)(ii) of the Income-tax Act and, therefore, it was hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 13. 18.3 Even in the case of SarladeviSarabhai Trust No.2, the Hon'ble Gujarat High Court has held that donation given by one charitable trust to another charitable trust created by the same group of persons would amount to application of income for charitable purposes. Thus, the mere fact that assessee had given donation to another institution would not disentitle the assessee for exemption under section 11. 18.4 As regards reliance of the ld. D.R. on subsequent Instruction No. 1582 dated 19-10-1984 issued by the CBDT modifying earlier Instruction No. 1132 dated 5-1-1978, the field authorities have only been asked not to give unqualified benefit to the donor trust under section 11 where the application of income for charitable purposes is made through the medium of the donee-trust. The field officers have been asked to satisfy themselves whether the funds donated to the donee-trust have been utilized for charitable purposes. But we find from the assessment order that at the time of completing the assessment, the Assessing Officer had merely held that donation given to SUKES did not qualify for exemption because the same was not in accordance with the objects of the assessee-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of revenue's appeal relates to deletion of an addition of Rs. 2.49 lakhs on the ground that income/loss derived from agricultural operation forms part of income of the assessee and exempt being a charitable institution without appreciating the fact that business of agricultural operation was not incidental to attainment of the objectives of the assessee-trust. Briefly stated, the facts of the case are that the Assessing Officer observed that assessee had debited and credited certain amounts on account of agricultural operations at its Naraingarh farm. According to the Assessing Officer, such income or loss did not relate to the objects of the trust and, therefore, such income/loss was not entitled to exemption under section 11 of the Income-tax Act. 20. Being aggrieved, the assessee carried the matter in appeal before the CIT(A). It was submitted before the CIT(A) that assessee-trust held certain agricultural land, which formed corpus of the trust. It was thus contended that income derived by way of agricultural operation represented income of the trust. The ld. CIT(A) considered these submissions and found that agricultural lands were bequeathed to the trust by Dr. P.M. Chuttan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and non-agricultural income in an appropriate ratio. Section 11 would apply only in respect of such income from property held under trust for charitable or religious purposes to the extent such income has been applied for such purposes. Once the income is considered as exempt under section 10, there is no question of including the same for the purpose of allowing exemption under section 11 of the Income-tax Act. Reliance is also placed on the decision of Madhya Pradesh High Court in the case of Nabhinandan Digamber Jain. Thus, income/loss from agricultural properties held under a trust is to be separately computed and cannot be given set off against income from non-agricultural properties held under the trust eligible for exemption under section 11. The assessee has not disputed the agricultural income computed by the Assessing Officer at loss of Rs.2.49 lakhs. In the light of these facts and circumstances of the case, we are of the considered opinion that ld. CIT(A) was not justified in allowing set off of loss against other income for the purpose of allowing exemption under section 11 of the Income-tax Act. We, therefore, set aside the order of the CIT(A) and restore that of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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