RAJA BALDEODAS BIRLA SANTATI KOSH & ORS. v. COMMISSIONER OF INCOME TAX
[Citation -1985-LL-0808-1]

Citation 1985-LL-0808-1
Appellant Name RAJA BALDEODAS BIRLA SANTATI KOSH & ORS.
Respondent Name COMMISSIONER OF INCOME TAX
Court ITAT
Relevant Act Income-tax
Date of Order 08/08/1985
Assessment Year 1970-71
Judgment View Judgment
Keyword Tags principles of res judicata • rectification application • public charitable trust • transfer of property • registered trust • competent court • void ab initio • private trust • trust corpus • trust deed • trust fund
Bot Summary: On March 30, 1964, the trustees of the Santati Kosh transferred the shares in Jiyajeerao Cotton Mills Ltd. to the Jankalyan Trust in pursuance of their resolution dated March 23, 1964, after receiving the consent of the settlor and the Ujjain Company and a deed of confirmation was also executed by the trustees of the Santati Kosh affirming the transfer of the shares in Jiyajeerao Cotton Mills Ltd. held by the Santati Kosh to the Jankalyan Trust. The Income-tax Officer held that the assessee, Santati Kosh, had no power to make the gift in favour of Jankalyan Trust and he came to the conclusion that the assessee, Santati Kosh, continued to be the owner of the said shares of Jiyajeerao Cotton Mills Ltd. and dividends received in respect of the said shares and further that the income received from the said shares was taxable in the hands of the assessee, Santati Kosh. The Income-tax Officer also disallowed some of the expenses claimed by the assessee, Santati Kosh, on the ground that such expenses were not incurred in connection with the realisation of the income of the assessee, Santati Kosh, by his order of assessment dated of the income of the assessee, Santati Kosh, by his order of assessment dated March 29, 1973. The argument of learned counsel for the assessee, Santati Kosh, was that although admittedly there was no contemporaneous evidence of May, 1943, to show the basis or direction or the purpose for which the shares of M/s. Jiyajeerao Cotton Mills Ltd. were transferred by the Ujjain Company to the assessee, Santati Kosh, yet from the documents placed on record relating to the subsequent conduct of the Ujjain Company and the assessee, Santati Kosh, the Appellate Tribunal should have come to the conclusion that the said shares were transferred by the Ujjain Company to the assessee, Santati Kosh, for utilisation thereof for useful purposes and objects. Learned counsel contended that the resolution of the assessee, Santati Kosh, and the correspondence which passed between the Ujjain-Company and the assessee, Santati Kosh, in the year 1964 seeking the permission and giving the consent by the Ujjain Company to the donation of the said shares by the assessee, Santati Kosh, to the Jankalyan Trust was relevant material and ought to have been taken into consideration by the Appellate Tribunal for coming to the conclusion that the said shares were transferred by the Ujjain Company for the purpose that they shall be used for public and charitable purposes. Learned counsel appearing for the Revenue submitted that when it was admitted on behalf of the assessee, Santati Kosh, that there was no contemporaneous evidence of May, 1943, or soon thereafter regarding the directions or the purposes for which the shares in question were transferred by the Ujjain Company to the assessee, Santati Kosh, the Appellate Tribunal was justified in coming to the conclusion that there was no evidence on record to show that the transfer of the said shares was made by the Ujjain Company with the direction that they shall be used for public and charitable purposes. As regards the third question suggested by learned counsel for the assessee, Santati Kosh, it was argued by him that no question was ever raised before any of the Income-tax Authorities or even before the Appellate Tribunal that the consent of all the major beneficiaries of the assessee, Santati Kosh, was not obtained before making donation of the said shares y the trustees of the assessee, Santati Kosh, to the Jankalyan Trust.


JUDGMENT JUDGMENT judgment of court was delivered by DWARKA PRASAD J.-This is application under section 256(2) of Income-tax Act, 1961 (hereinafter referred to as " Act "), by Raja Baldeodas Birla Santati Kosh, Pilani, through its trustees (hereinafter referred to as " Santati Kosh ") in matter of its assessment relating to assessment year 1970-71 relatable to previous year ending on March 31, 1970. Shri Jugal Kishore Birla, son of Raja Baldeodas Birla, created private trust known as Raja Baldeodas Birla Santati Kosh, Pilani, by registered trust deed dated May 20, 1943, and settled sum of Rs. 10,000 and some shares for making provision for upkeep and maintenance of properties belonging to and maintained by male descendants of Raja Baldeodas Birla at Pilani and for benefit of male descendants in male line of Raja Baldeodas Birla, their wives, widows and daughters. Shri Rameshwardas Birla, Shri Brajmohan Birla and Shri Laxmi Niwas Birla were made trustees of Santati Kosh. Some time in May, 1943, M/s. Ujjain General Trading Society Ltd. (hereinafter referred to as " Ujjain Company ") donated 25,000 shares of Jiyajeerao Cotton Mills Ltd. to Santati Kosh. said shares were subsequently divided into 3,75,000 shares and some shares of other companies were also received by way of dividends from Jiyajeerao Cotton Mills Ltd. by Santati Kosh. On March 13, 1964, Birla Jankalyan Trust was created and Santati Kosh Trust transferred all shares of Jiyajeerao Cotton Mills Ltd. to Jankalyan Trust for utilisation for objects and purposes of that trust. resolution was passed to this effect on March 23, 1964, by board of trustees of Santati Kosh. trustees also wrote letter to Ujjain Company seeking their confirmation in respect of decision of Santati Kosh Trust to make donation of shares of Jiyajeerao Cotton Mills Ltd. to Jankalyan Trust for utilisation thereof for objects and purposes of latter trust. letter was also addressed by trustees to settlor of Santati Kosh, Shri Jugal Kishore Birla, seeking his confirmation to proposal regarding transfer of aforesaid shares to Jankalyan Trust. Ujjain Company consented to transfer of shares in Jiyajeerao Cotton Mills Ltd. by Santati Kosh Trust to Jankalyan Trust and intimated its approval to trustees of Santati Kosh. Similarly, Shri Jugal Kishore Birla also addressed letter to trustees of Santati Kosh giving his consent to transfer of aforesaid shares by Santati Kosh Trust to Jankalyan Trust for utilisation thereof for public charitable purposes. On March 30, 1964, trustees of Santati Kosh transferred shares in Jiyajeerao Cotton Mills Ltd. to Jankalyan Trust in pursuance of their resolution dated March 23, 1964, after receiving consent of settlor and Ujjain Company and deed of confirmation was also executed by trustees of Santati Kosh affirming transfer of shares in Jiyajeerao Cotton Mills Ltd. held by Santati Kosh to Jankalyan Trust. During course of assessment proceedings for assessment year 1970-71, Income-tax Officer discovered that trustees of Santati Kosh had gifted aforesaid shares to Jankalyan Trust on March 30, 1964. He asked assessee, Santati Kosh, to show as to why transfer of shares effected on March 30, 1964, to Jankalyan Trust may not be held void ab initio, as he was of view that transfer of shares made by Santati Kosh Trust in favour of Jankalyan Trust was in contravention of provisions of section 11 of Indian Trusts Act, 1882, and that trustees did not have any power to gift or alienate any portion of property of trust in terms of settlement deed dated May 20, 1943. Income-tax Officer held that assessee, Santati Kosh, had no power to make gift in favour of Jankalyan Trust and he came to conclusion that assessee, Santati Kosh, continued to be owner of said shares of Jiyajeerao Cotton Mills Ltd. and dividends received in respect of said shares and further that income received from said shares was taxable in hands of assessee, Santati Kosh. Income-tax Officer also disallowed some of expenses claimed by assessee, Santati Kosh, on ground that such expenses were not incurred in connection with realisation of income of assessee, Santati Kosh, by his order of assessment dated of income of assessee, Santati Kosh, by his order of assessment dated March 29, 1973. appeal was preferred by assessee, Santati Kosh, before Appellate Assistant Commissioner of Income-tax, which was partly allowed and it was held that assessee, Santati Kosh, was entitled to transfer portion of trust corpus and income by making gift of same to Jankalyan Trust and that transfer of shares of Jiyajeerao Cotton Mills Ltd. by assessee, Santati Kosh, to Jankalyan Trust was valid. appellate authority held that transfer of said shares was not void, but was perfectly valid and, as such, dividend income from shares was deleted from assessment of assessee, Santati Kosh. As regards expenses, Appellate Assistant Commissioner agreed with Income-tax Officer that entire expenditure was not incurred by assessee wholly and exclusively for purpose of earning income of assessee, Santati Kosh, and that part of expenditure had already been allowed by Income-tax Officer, which constitute reasonable allocation under provisions of section 57(iii) of Act. As such, assessee, Santati Kosh's claim for further allowance of some expenses was not accepted by his order dated October 31, 1973. Income-tax Officer, A-Ward, Jhunjhunu, who was assessing authority, filed appeal before Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, and cross-objections were also filed by assessee, Santati Kosh, before Tribunal. Tribunal allowed appeal and dismissed cross-objections by elaborate order dated September 23, 1976. Appellate Tribunal held that it was not established that assessee, Santati Kosh, was created for purpose of utilisation of its income for useful purposes and objects. It was also held that transfer of shares by assessee, Santati Kosh, to Jankalyan Trust was ab initio void for more than one reason. It was held that consent of all major beneficiaries of assessee, Santati Kosh, was not obtained before making transfer of said shares by Santati Kosh Trust to Jankalyan Trust and that consent of settlor was of no consequence. It was also held that consent of civil court should have been obtained on behalf of minor beneficiaries of assessee, Santati Kosh, in respect of transfer of said shares by trustees of assessee, Santati Kosh, to Jankalyan Trust. Tribunal thus came to conclusion that transfer of shares was contrary to law and was void ab initio and thus said shares continued to belong to assessee, Santati Kosh, and dividend income received from aforesaid shares was assessable in hands of assessee, Santati Kosh. On question of expenses, finding arrived at by Appellate Assistant Commissioner was approved. application was thereafter submitted by assessee, Santati Kosh, before Income-tax Appellate Tribunal for rectification of order of Tribunal. application was allowed by Tribunal by its order dated March 31, 1978. assessee, Santati Kosh, thereafter filed application under section 256(1) of Act before Appellate Tribunal praying that Appellate Tribunal may state case and refer questions of law arising out of its order dated September 23, 1976, to this court. Tribunal stated case and has referred following four questions arising out of its order dated September 23, 1976, to this court: " 1. Whether, on facts and in circumstances of case and on proper construction of deed of settlement dated May 20, 1943, trustees of Raja Baldeodas Birla Santati Kosh could make donation of 3,75,000 ordinary shares in Jiyajeerao Cotton Mills Ltd. and other shares on March 30, 1964, to Birla Jankalyan Trust, public charitable trust for its objects? 2. Whether, on facts and in circumstances of case and on proper interpretation of deed of settlement dated May 20, 1943, Tribunal was right in holding that consent of minor beneficiaries and/or competent civil court on their behalf was necessary for making donation of shares in Jiyajeerao Cotton Mills Ltd. and other shares to trustees of Birla Jankalyan Trust? 3. Whether, on facts and in circumstances of case and on proper construction of deed of settlement dated May 20, 1943, transfer of aforesaid shares by trustees of Raja Baldeodas Birla Santati Kosh is valid or void or voidable? 4. Whether, on facts and in circumstances of case, even assuming that transfer of said shares was void income from said shares, which was in fact not received by assessee but by Birla Jankalyan Trust, was assessable in its hands? " As regards other questions sought to be referred by assessee, Appellate Tribunal declined to make reference on ground that they raise questions of fact. In present application under section 256(2) of Act, assessee desires us to direct Appellate Tribunal to state case and refer following eight questions arising out of its order dated September 23, 1976, to this court: " 1. Whether, on facts and in circumstances of case, finding of Tribunal that basis and directions or purposes, namely, for useful objects for which 25,000 ordinary shares in Jiyajeerao Cotton Mills Ltd., subsequently sub-divided into 3,75,000 shares, were entrusted by Ujjain General Trading Society Ltd. to trustees of Raja Baldeodas Birla Santati Kosh in May, 1943, was not proved is perverse and/or was arrived at by ignoring relevant evidence and/or materials on record? 2. Whether, on facts and in circumstances of case, Tribunal was right in holding that shares in Jiyajeerao Cotton Mills Ltd. entrusted by said Ujjain General Trading Society Ltd. to Trustees of Raja Baldeodas Birla Santati Kosh in May, 1943, formed part of corpus of Raja Baldeodas Birla Santati Kosh and did not form or constitute separate trust fund to be used for useful objects? 3. Whether, on facts and in circumstances of case, finding of Tribunal that there was no consent of major beneficiaries of Raja Baldeodas Birla Santati Kosh to donation of said shares made by trustees thereof to trustees of Birla Jankalyan Trust was perverse and/or was arrived at by ignoring relevant evidence and/or materials on record? 4. Whether, on facts and in circumstances of case, Tribunal was right in holding that donation of shares in Jiyajeerao Cotton Mills Ltd. and other shares by trustees of Raja Baldeodas Birla Santati Kosh to trustees of Birla Jankalyan Trust on March 30, 1964, was for any unlawful objects or consideration forbidden by law? 5. Whether, on facts and in circumstances of case and on proper interpretation of deed of settlement dated May 20, 1943, and provisions of Indian Trusts Act, 1882, Tribunal was right in holding that donation of shares in question to trustees of Birla Jankalyan Trust was void notwithstanding that said donation was consented to and/or acquiesced in by concerned beneficiaries? 6. Whether, on facts and in circumstances of case, Tribunal applied correct principles while interpreting deed of settlement dated May 20, 1943, provision of Indian Trusts Act, 1882, Indian Contract Act, 1872 and Transfer of Property Act, 1882? 7. Whether, on facts and in circumstances of case, findings of Tribunal that there was nothing to establish that in earlier years all facts were brought to notice of Department and that no enquiry was made by Department regarding genuineness of transfers of said shares are perverse and/or were arrived at by ignoring materials and evidence on record? 8. Whether, on facts and in circumstances of case, finding of Tribunal that no material was brought on record to show that finding of Appellate Assistant Commissioner in not allowing entire claim of expenses was incorrect, perverse and/or arrived at by ignoring materials and/or evidences on record? " Questions Nos. 1 and 2 relate to same matter regarding basis and directions or purposes for which shares of Jiyajeerao Cotton Mills Ltd. were transferred by Ujjain Company to assessee, Santati Kosh. Appellate Tribunal observed as under in this respect: " Under which basis and directions those shares were transferred originally " Under which basis and directions those shares were transferred originally to assessee-trust has not been proved. At least no contemporaneous evidence of May, 1943, was brought on record by assessee either before authorities below or before us. So there is no evidence on record to show that in May, 1943, M/s. Ujjain General Trading Society Ltd. transferred shares with direction that they shall be used for public and charitable purposes. " argument of learned counsel for assessee, Santati Kosh, was that although admittedly there was no contemporaneous evidence of May, 1943, to show basis or direction or purpose for which shares of M/s. Jiyajeerao Cotton Mills Ltd. were transferred by Ujjain Company to assessee, Santati Kosh, yet from documents placed on record relating to subsequent conduct of Ujjain Company and assessee, Santati Kosh, Appellate Tribunal should have come to conclusion that said shares were transferred by Ujjain Company to assessee, Santati Kosh, for utilisation thereof for useful purposes and objects. Learned counsel contended that resolution of assessee, Santati Kosh, and correspondence which passed between Ujjain-Company and assessee, Santati Kosh, in year 1964 seeking permission and giving consent by Ujjain Company to donation of said shares by assessee, Santati Kosh, to Jankalyan Trust was relevant material and ought to have been taken into consideration by Appellate Tribunal for coming to conclusion that said shares were transferred by Ujjain Company for purpose that they shall be used for public and charitable purposes. Learned counsel appearing for Revenue submitted that when it was admitted on behalf of assessee, Santati Kosh, that there was no contemporaneous evidence of May, 1943, or soon thereafter regarding directions or purposes for which shares in question were transferred by Ujjain Company to assessee, Santati Kosh, Appellate Tribunal was justified in coming to conclusion that there was no evidence on record to show that transfer of said shares was made by Ujjain Company with direction that they shall be used for public and charitable purposes. However, it is not denied that resolution of assessee, Santati Kosh, dated March 23, 1964, and correspondence between Ujjain Company and assessee, Santati Kosh, thereafter, was placed on record of assessee and same has not been considered by Appellate Tribunal before arriving at aforesaid conclusion regarding absence of purpose or direction for which said shares were transferred by Ujjain Company to assessee, Santati Kosh. We are, therefore, of opinion that Appellate Tribunal should be directed to submit additional statement of case referring question in this regard, which we shall indicate later on, to this court for its opinion. As regards third question suggested by learned counsel for assessee, Santati Kosh, it was argued by him that no question was ever raised before any of Income-tax Authorities or even before Appellate Tribunal that consent of all major beneficiaries of assessee, Santati Kosh, was not obtained before making donation of said shares y trustees of assessee, Santati Kosh, to Jankalyan Trust. Reference was made in this connection to relevant portion of order of Income-tax Officer, Appellate Assistant Commissioner and Income-tax Appellate Tribunal and it was argued that only contention which was raised on behalf of Department was that trustees of assessee, Santati Kosh, lacked power of transferring said shares to Jankalyan Trust without obtaining consent of all beneficiaries, as no attempt was made to obtain permission from competent court on behalf of minor beneficiaries before making gift of said shares of assessee, Santati Kosh, to Jankalyan Trust. We do not intend to go into detailed discussion on this question, but we are of view that question of law does arise as to whether finding of Tribunal that consent of all major beneficiaries or other members of Birla family was not obtained before transfer of shares of assessee, Santati Kosh, to Jankalyan Trust, has been arrived at after proper consideration of relevant evidence or material on record. So far as question No. 4, mentioned above is concerned, it refers to validity of transfer of shares in Jiyajeerao Cotton Mills Ltd. by assessee, Santati Kosh, to Jankalyan Trust and is based on observation made by Tribunal that said transfer was made for unlawful considerations and on considerations forbidden by law. It was pointed out by us that question of validity of transfer of said shares by assessee, Santati Kosh, to Jankalyan Trust is already covered by question No. 3 which has been referred by Tribunal to this court by its order dated June 22, 1979. Whether such transfer of shares was valid or void or voidable shall fall within ambit of question No. 3 and reasons or grounds on which transfer is decided to be invalid or void may be more than one, but they would all be considered while dealing with question No. 3 already referred to this court by Tribunal. Thus, in our view, question No. 4, which is sought to be referred, is covered by question No. 3 which has already been referred and, as such, Tribunal cannot be directed to refer new question in this respect. Questions Nos. 5 and 6 have not been pressed by learned counsel for assessee and, as such, we need not consider those questions. As regards question No. 7, it may be observed that principles of res judicata are not relevant to assessment during subsequent years and, as such, finding of Tribunal in respect of earlier years or subsequent years regarding validity or genuineness of transfer of said shares will be of no avail to either party in respect of assessment during relevant assessment year. As such, whether all facts were brought to notice of Department and that no enquiry was made by Department regarding genuineness of transfer of said shares are not relevant to enquiry so far as it relates to assessment of assessee, Santati Kosh. Lastly, it was argued by learned counsel for assessee that finding arrived at by Tribunal on question of not allowing entire claim of expenses was without considering evidence on record. Learned counsel for assessee referred to us fact that in original order passed by Tribunal on September 23, 1976, it was observed that learned counsel for assessee has not advanced any argument before Tribunal on question of non-allowance of entire claim of expenses. It was pointed out by learned counsel that subsequently when rectification application was made, Tribunal by its order dated March 31, 1978, deleted following sentence from its order dated September 23, 1976: "The learned counsel for assessee advanced no arguments before us in this behalf." In place of this, following sentence was substituted: " learned counsel for assessee contended that matter may be remanded to learned Appellate Assistant Commissioner for deciding point regarding allowance of expenses. In our opinion, it is not necessary to remand case to authorities below. " It was argued by learned counsel for assessee that Tribunal did riot give any finding on question of not allowing expenses as claimed by assessee. We have looked into order passed by Appellate Tribunal and it appears that Tribunal not only held that there was no case for remand on point regarding allowing of expenses to lower authorities, but had affirmed view taken by Appellate Assistant Commissioner of Income-tax on question of expenses. Tribunal has recorded following finding in para. 68 of its order dated September 23, 1976: " Before us no further material was brought on record to show that finding of learned Appellate Assistant Commissioner was incorrect. In view of aforesaid facts and circumstances of case, in our opinion, there is nothing on record which may go to show that claim of expenses in question was in interest of business and it was wholly and, exclusively incurred for purposes of business. Thus, in our opinion, finding of learned Appellate Assistant Commissioner on this point is quite correct. " Thus, there is positive finding on question relating to claim of assessee for allowing expenses and Tribunal came to conclusion that it was not proved by assessee that entire expenditure was incurred wholly and exclusively for purpose of realising income of assessee, Santati Kosh. In our view, aforesaid finding of Tribunal on this question of expenses constitutes finding of fact and no question of law arises. It cannot be said that said finding had been arrived at by Tribunal ignoring evidence on record or is otherwise perverse or incorrect in law. We, therefore, decline to refer question No. 8 mentioned above. In result, we allow application under section 256(2) of Income- tax Act, 1961, in part and direct Income-tax Appellate Tribunal to state case and refer following two questions of law arising out of its order dated September 23, 1976, for our opinion: " 1. Whether, on facts and in circumstances of case, Income-tax Appellate Tribunal was not justified in holding that basis and directions and purposes for which 25,000 ordinary shares in Jiyajeerao Cotton Mills Ltd. were transferred by Ujjain General Trading Society Ltd. to trustees of Raja Baldeodas Birla Santati Kosh in May, 1943, has not been proved and that said finding was arrived at by Appellate Tribunal ignoring relevant evidence and/or material on record? 2. Whether, on facts and in circumstances of case, finding of Tribunal that consent of all major beneficiaries of Raja Baldeodas Birla Santati Kosh was not obtained in respect of donation of aforesaid shares by trustees of Santati Kosh to Birla Jankalyan Trust, was arrived at by ignoring relevant evidence and/ or material on record? " As Income-tax Appellate Tribunal has already stated case and has referred four questions arising out of its order dated September 23, 1976, to this court by its order dated June 22, 1979, it would suffice if Appellate Tribunal makes supplementary statement of case, as may be necessary, and refers aforesaid two questions also to this court. parties are left to bear their own costs. *** RAJA BALDEODAS BIRLA SANTATI KOSH & ORS. v. COMMISSIONER OF INCOME TAX
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