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TMI Blog1989 (3) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1146111(145) of 1985 dated December 30, 1985, the society was registered as No. 130/III of 1985 and by proceedings No. 1146-III (145) of 1985 dated December 30, 1985, the petitioner was granted exemption under section 80G of the Act by the first respondent for donations received by the society and such exemption initially granted was valid for the period up to September 30, 1987. In that proceeding, it was also provided that the society can apply to the Income-tax Officer having jurisdiction over the case for renewal of the exemption as and when necessary. On December 31, 1985, the society received donations in the shape of six promissory notes from a partnership firm, viz., Sree Shyam Sayee Corporation. The promissory notes had been executed by various parties in favour of the donor-firm and those promissory notes had been endorsed in favour of the society and delivered to it under cover of a letter of the donor dated December 31, 1985. Since the society is a charitable one holding a certificate under section 80G of the Act, under section 197 of the Act, a certificate was also issued by the second respondent to the effect that the interest payable on the promissory notes dona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the society applied to the first respondent for a renewal of the exemption and this was also followed up by another communication as well as a memoranda. The first respondent, by a communication dated November, 27, 1987, rejected the application of the society dated July 28, 1987, for the renewal of exemption and that order ran as follows : "In connection with your above application, I am directed by the Commissioner of Income-tax to inform you that your request for renewal of exemption under section 80G of the Income-tax Act is not entertainable, as there is contravention of the provisions of section 13(1)(d) of the Income-tax Act on the part of the trust. Your above application is, therefore, rejected." The society has prayed for the issue of a writ of certiorarified mandamus or other appropriate writ or direction to quash the aforesaid order and directing the first respondent to renew the certificate under section 80G of the Act granted to the petitioner in its communication dated December 30,1985. In the affidavit filed in support of the writ petition, the society maintained that the promissory notes received by it by way of donation did not constitute "funds" of the societ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about by the society and that the society also did not have any opportunity to change the investment of its funds resulting in the amounts being allowed to remain as loans for the purpose of earning higher interest. Reiterating the reasons set out in the affidavit filed in support of the writ petition for not recovering the money due under the promissory notes donated to the society, the petitioner society contended that there was no opportunity for changing the investment for the purpose of investing the amount in specified securities and that the allegation that the society had allowed the promissory notes to be outstandings with a view to earn more income, proceeded on surmises ignoring the factual position. In support of this writ petition, Mr. T. Raghavan, learned counsel for the society, referring to sections 11 to 13 of the Act, and, in particular, to section 13(1)(d)(i) of the Act, contended that the society had received the promissory notes qua promissory notes by way of donation and such promissory notes could not be regarded as "funds" utilised for making any investment by any positive act by the society and that, therefore, there was no question of violation of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f for any period during the previous year (i) any funds of the trust or institution are invested or deposited after the 28th day of February, 1983, otherwise than in any one or more of the forms or modes specified in sub-section (5) of section 11 ; or... " The construction to be put upon the expressions "funds" and "invested or deposited" occurring in section 13(1)(d)(i) of the Act has to be determined in the context of the section, which is designed to deny to trust, the benefit of exclusion from the total income of the previous year, of the income received by a trust for charitable or religious purposes or charitable or religious institution, on funds belonging to the trust or institution, invested or deposited after February 28, 1983, in a mode not specified under section I 1 (5) of the Act. In this case, the society received by way of donation several promissory notes and under section 4 of the Negotiable Instruments Act, a promissory note is an instrument in writing (not being a bank note or a currency note), containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable to accept the submission of learned counsel for the respondents that even the promissory notes received by donation would constitute funds in the hands of the society. Donations made out of a sense of philanthropy and generosity need not always take the shape of cash or money donations. Such donations could also comprise other properties, movable as well as immovable, and by no stretch of imagination could such donations be comprehended within the expression "funds" for purposes of section 13(1)(d)(i) of the Act, though such properties may generally form part of the assets of the trust constituting its corpus. Nor can it be accepted that even in cases of donation of property, movable or immovable, it is incumbent on the part of the recipient-trust, in order to claim the benefit of sections 11 and 12 of the Act, to dispose of them, convert the same into cash and invest the proceeds in the modes specified under section 11(5) of the Act. To recognise that would amount to destroying trusts holding properties, movable and immovable, as their corpus and to annihilate the philanthropy and generosity of donors as well. We may now refer to the decisions relied on by learned counsel f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the funds of the trust or committing the funds with reference to any particular property or business with the object of earning profit or financial advantage or return. It was also further pointed out that the assessee in that case merely received shares by way of donation and did not deal with or commit or lay out any part of its existing assets to acquire the said shares and there was no such decision or action on the part of the assessee and there was, therefore, no investment of the funds by the assessee within the meaning of section 13(2)(h) of the Act. We are of the view that the principle laid down in this decision, though with reference to section 13(2)(h) of the Act, would be applicable to this case as well. CIT v. Insaniyat Trust [1988] 173 ITR 248 (Guj), lays down that in the context of the setting in which the expression "trust funds" is employed in section 13(2)(h) of the Act, the meaning attributable to that expression is "the actual or available money or cash resources, such as money in hand and money in the bank" and no other and if the funds of the trust are not capable of being invested, such funds would not come within the purview of section 13(2)(h) of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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