9911796707
TMI Blog1988 (7) TMI 80X X X X Extracts X X X X X X X X Extracts X X X X ..... rs 1977-78 and 1978-79, while it was a partner in M/s. Bhojraj Surendrapal for the assessment year 1977-78 only. 4. On 7-4-1978, one Shri Narendraprasad Gurucharandas settled in trust Rs. 5,000 and created trust known as "L.B. Trust". The beneficiaries to this trust were the assessee and another trust having 50 per cent share each in the income. Through its trustee, L.B. Trust became a partner in the firm of M/s. Jain Traders. The assessee received its share of income in the said trust in the previous years relevant to the assessment years 1980-81 and 1981-82. 5. Apart from the aforesaid income the assessee also earned income by way of interest on the deposits made in certain concerns in which its trustees or the partners of M/s. Jain Traders were partners. Again, the assessee had also earned interest on deposits made with certain banks. 6. Vide clause 3 of the deed of trust dated 10-3-1974, the trustees were required to utilise net income in the following manner :--- " 3(a). The Trustees shall in their absolute discretion utilise the net income of the said Trust Fund for charitable purposes viz. relief of the poor, education, medical relief and the advancement of any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that u/s. 2(15), Charitable purpose is defined as to have included relief of the poor, education, medical relief and the advancement of any other objects of general public utility. The object clause of the Trust clearly denotes that it is meant for the advancement with other objects of general public utility also. 2. We also invite your Honour's kind attention that section 13(1)(bb) which was enacted from 1-4-1977 is applicable only to the Charitable Trusts having its objects for the relief of poor education or medical relief. It does not cover the Trusts which are having included in their object clause of the 4th object namely ; general public utility. In this reference, it should not be out of place to mention that the changes recommended by the Chokshi Committee vide (para 2.9) which inter alia proposed that the provisions of section 13(1)(bb) should also be made applicable to the Trust of the fourth category objects. The para runs as follows : ' The provisions of section 13(1)(bb) should also be made applicable to the trusts with the fourth category objects, i.e. trusts for the advancement of objects of general public utility other than relief of the poor, education a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the fag end of the year and it can be received only after a lapse of a considerable time. Hence the application should be filed after the receipt of such income and as such Form No. 10 filed by the assessee is well in time. In the above circumstances and in the light of the above, it is requested that the additions made by the Income-tax Officer are not in order and may kindly be deleted. " It may be mentioned that objections on the aforesaid lines were also filed before the IAC in respect of the assessment years 1980-81 and 1981-82 wherein, it had also highlighted the fact that it was not a partner in the firm of M/s. Jain Traders through one of its trustees but it had received its beneficiary interest from the income of L.B. Trust which was a partner in the firm through one of its trustees. 11. For the assessment year 1977-78, the IAC had overruled the objections filed by the assessee and directed the ITO to frame the assessments "in accordance with the reasonings and conclusions arrived at in the preceding paragraph". For the assessment year l980-81, the IAC accepted the assessee's contention that the provisions of section 13(1)(bb) of the Act, would not be applicable in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals) reiterating the contentions which were advanced before the ITO/IAC during the course of assessment proceedings. In his consolidated order dated 12-9-1985 for the three years under appeal, the Commissioner (Appeals) accepted the assessee's contentions in the following manner : " 4. Apart from the above submissions some Judicial decisions have been cited on behalf of the appellant which have been duly considered but they are not very much relevant to the points at issue. After having gone through the points taken up by the ITO and after duly considering the submissions made on behalf of the appellant, my observations are given below : (i) In terms of rule 17 of IT Rules the assessee is required to give notice to the ITO u/s. 11(2) in Form No. 10 before the expiry of the time allowed u/s. 139(1) or (2) of the Act for getting the benefit of accumulation of surplus income. Secondly, in terms of section 11(2)(b) surplus funds have to be invested in the approved securities/investments within 6 months of the closing of the previous year. Now I find that rule 17 is procedural and there is no doubt that there is a short delay in furnishing Form No. 10 to the Department, at least ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the trust is not taxable. 2. The learned CIT(A) has erred in law in condoning the delay in filing Form No. 10 as required under Rule 17 of the IT Rules neither he had power to condone the delay. 3. The learned CIT(A) has erred in law and on facts in holding that section 13(1)(bb) is not applicable in this case. 4. On facts and circumstances of the case, the learned CIT(A)'s order may be set aside and that of the ITO be restored. " 16. The learned representative for the department submitted that the reported decisions regarding filing of Form No. 10 relied on behalf of the assessee before the Commissioner (Appeals) would not be of any help to the assessee in view of substitution of Rule 17 in Income-tax Rules, 1962 with effect from 1-4-1971. In this connection, he invited the attention of the Tribunal to pages 591 and 592 of Chaturvedi and Pithisaria's commentary viz. Income-tax Law (Third Edition), more particularly the Board's Circular No. 273, dated 3-6-1980 giving guidelines regarding condonation of delay in filing Form No. 10. Since in the instant case, the assessee had not made such application before the concerned authority, the learned representative for the depar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee where Form No. 10B was not filed along with the return but was filed before the assessment was finalised. He, therefore, urged that the Tribunal should hold the action of the Commissioner (Appeals) on this point. 19. As regards applicability of the provisions of section 13(1)(bb) of the Act, the learned counsel for the assessee reiterated the submissions which were made before the lower authorities and urged that here also, the Tribunal should uphold the action of the Commissioner (Appeals). In this connection, he pointed out that the assessee's stand regarding the Chokshi Committee's report and submitted that since the fourth object viz. 'advancement of any other object of general, public utility', is not covered under that section, the ITO/IAC were not justified in denying the claim made by the assessee for exemption u/s 11 of the Act. According to the learned counsel for the assessee, since the income earned by way of share of profit/interest was not with a view to earn profit but to augment the trust fund, the ITO/IAC was not justified in taking adverse decision against the assessee. He also submitted that even though the assessee was a partner in the firm of M/s Jain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 10-3-1970 is already reproduced above in para 6. On the plain reading thereof, it is quite apparent that the assessee is a charitable trust. The expression 'charitable purpose' is defined in section 2(15) of the Act. In our view, as it is not possible to envisage any object of advancement of general public utility other than poor, education, medical relief, the Legislature has rightly thought it fit not to mention 'advancement of any other object of public utility' in section 13(1)(bb) of the Act. It is no doubt true that before the IT authorities as well as before the Tribunal it was the stand of the assessee that the income sought to be accumulated was for the purpose of constructing a Dharmasala/hospital at Bhatinda. However, we find from the copies of Form No. 10 filed with the department that the accumulation of income was sought to be made 'for the construction of hospital at Bhatinda'. Since the construction of a hospital is nothing but providing 'medical relief' as envisaged in section 2(15) of the Act, we are of the view that the assessee's case is clearly hit by the provisions of section 13(1)(bb) of the Act. According to us, it is of no consequence as to whether the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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