COMMISSIONER OF INCOME TAX v. ANGOORI DEVI SHER SINGH GIRLS' COLLEGE SOCIETY
[Citation -1987-LL-0526-3]

Citation 1987-LL-0526-3
Appellant Name COMMISSIONER OF INCOME TAX
Respondent Name ANGOORI DEVI SHER SINGH GIRLS' COLLEGE SOCIETY
Court ITAT
Relevant Act Income-tax
Date of Order 26/05/1987
Assessment Year 1976-77
Judgment View Judgment
Keyword Tags reference application • benefit of exemption • discretionary power • educational society • specific direction • purchase of land • interest income • audit report • draft order
Bot Summary: Whether, on the facts and in the circumstances of the case the Tribunal was justified in restoring the matter back to the ITO to examine the allowability of accumulation under s. 11(2) of the Act when the Tribunal itself held the income of the assessee to be exempt under s. 10( 22 ) 2. 23rd Sept., 1979 and that exemption under s. 80G was also granted for the period 1st April, 1979 to 31st March, 1980 under the CIT's order dt. Since the report had been filed before the completion of assessment under s. 143(3), the benefit of exemption under s. 11 could not be denied. Though the Tribunal has used the expression educational institution in para 6 of its order of 19th March, 1986, its finding was that the assessee was entitled to exemption under s. 11. As we have noted above, the Tribunal did not hold that the income of the assessee was exempt under s. 10( 22 ). As regards restoration of the enquiry to the ITO recorded in paragraph 14 of the Tribunal's order of 19th March, 1986, that was in the exercise of the discretionary power of the Tribunal. Whether on the facts and in the circumstances of the case the Tribunal was justified in restoring the matter back to the ITO to examine the allowability of accumulation under s.11(2) of the Act when the Tribunal itself held the income of the assessee to be exempt under s. 10( 22 ). 5. In case the Tribunbal had held that the assessee was entitled to exemption under s. 10( 22 ) there could have been no question of directing the ITO to ascertain the extent of the chargeable income under s. 11(2) of the IT Act.


NARAYANAN, A.M. November, 1986 CIT, Delhi-VI, New Delhi requires Tribunal to state case and refer following questions of law as arising out of Tribunal's order dt. 12th March, 1986: 1. "Whether, on facts and in circumstances of case, Tribunal was justified in exempting income of assessee Society under s. 10( 22 ) of Act when no educational institution for educational purposes was in existence?" 2. "Whether, on facts and in circumstances of case Tribunal was justified in restoring matter back to ITO to examine allowability of accumulation under s. 11(2) of Act when Tribunal itself held income of assessee to be exempt under s. 10( 22 )?" 2 . objection taken by Department before Tribunal for this assessment year was as under: "On facts and in circumstances of case as well as in law AAC erred in directing ITO to compute income of assessee-trust in accordance with order dt. 20th Nov., 1979 of Tribunal for asst. yr. 1971- 72 in ITA No. 15(Del)/76-77; and to treat income as exempt in spite of delay in filing audit report under s. 12A(b)". 3 . In spite of having taken such objection Department was not in position to file copy of order of Tribunal for asst. yr. 1971-72. assessee also was unable to do so. records of Tribunal were, therefore, looked into by Registry. appeal folder for asst. yr. 1971-72 was then located. order for that year was seen to have been passed by Tribunal on 30th Nov., 1979 (and not on 20th Nov., 1979) as stated in Department's ground of appeal (supra) and appeal was numbered as ITA No. 15 (Del)/76- 77. This order disclosed following position: 4 . assessee is Society registered under Societies Registration Act, 1860 vide certificate issued on 9th June, 1970. Assessment for year 1971-72 was made on total income of Rs. 79,600. assessee apparently claimed before ITO for year that it was educational institution and hence its income was exempt under s. 10( 22 ) of Act. ITO did not accept this claim. He noted following in this regard: (i) There was no evidence to show that assessee was genuine educational institution. (ii) There was no notice given for accumulation of income of assessee. (iii) income of assessee was taxable under s. 12(2) of Act. 5. assessee appealed against assessment. AAC held that sum of Rs.79,600 which assessee had received was shown to be towards t h e corpus of its funds, funds having been received from Shri Bhagwan Charitable Trust. In that view he held that no income was taxable. Department then filed appeal. 6 . Before Tribunal it was once again stressed for assessee that even ITO had accepted fact that amount received by assessee trust was towards corpus of its funds. Tribunal dismissed Revenue's appeal. It confirmed findings of AAC. 7 . In light of above position taken note of from order of Tribunal for asst. yr. 1971-72, objection raised for Department this year (1976-77) was considered by Tribunal. First of all it looked at reasoning and findings recorded by AAC for asst. yr. 1971-72. This was because Tribunal in its order of 30th Nov., 1979 (supa) was pleased to observe that AAC "had given very logical and detailed reasoning on subject-matter". AAC's order for asst. yr. 1971-72 is dt. 8th Jan., 1976. following is recorded in his order: (i) assessee Society was founded on 9th June, 1970 with sole object of establishing, developing and maintaining educational institution in name of Angoori Devi Sher Singh Girls College, to manage, supervise and administer its affairs. For this purpose (towards establishment of college and purchase of land and construction of building thereon) another charitable trust, viz., Shri Bhagwan Charitable Trust gave donation to assessee towards its corpus. This donation was for sum of Rs. 3,20,000. (ii) actual process of establishing Girls College was got underway. There were negotiations going on with University of Delhi and University Grants Commission and hence, donation of Rs. 3,20,000 had not been spent upto end of relevant accounting year, i.e., upto 31st March, 1971. (iii) accounts of assessee was audited for period ending on 31st March, 1973. On 18th Aug., 1973 assessee gave to ITO notice under s. 11(2) for accumulation of its income for six years. ITO, however, while completing assessment for year 1971-72 rejected assessee's claim to be educational institution and taxed sum of Rs. 79,600 as noticed above. See para 4 above. Details of donations received were as under: . Rs. (a) Cash 1,000 (b) Cheque dt. 9-3-1971: 2,93,000 (c) Amount received from Shri Bhagwan Charitable 26,000 Trust on 31-3-1979: .. 3,20,000 sum of Rs. 26,000 was received after 31st March, 1971. Till 31st March, 1971 what was received was only Rs. 2,94,000 i.e., this was entirely from Shri Bhagwan Charitable Trust. total receipt consisted of (i) Rs. 2,40,000 and (ii) Rs. 79,600. (iv) ITO had taxed amount of Rs. 79,600 on basis of reference about assessee in assessment order of Shri Bhagwan Charitable Trust for assessment year 1971-72. ITO assessing Shri Bhagwan Charitable Trust had observed that assessee-society here could not be accepted as educational society and that it had been formed with specific and limited purpose of receiving donations from Shri Bhagwan Charitable Trust. (v) genesis of assessee-society was in resolution dt. 30th March, 1963 passed by trustees of Shri Bhagwan Charitable Trust. This was to effect that out of income of that trust for previous year relevant to assessment year 1964-65 and for six subsequent years 75per cent of gross income should be accumulated or set apart to enable Shri Bhagwan Charitable Trust to establish educational institution. On 23rd Aug., 1968 trustee of Shri Bhagwan Charitable Trust passed another resolution for establishing aided girls college in name of Angoori Devi Sher Singh Girls College out of donations which were being accumulated under resolution of 30th March, 1963. After considerable correspondence with Delhi University and U.G.C. Shri Bhagwan Charitable Trust got approval of University to start college from academic year 1970-71. On receipt of such approval assessee-society was formed on 9th June, 1970. In compliance with conditions laid down by Delhi University for endowment of sum Rs. 3,20,000 and further sum of Rs. 2,00,000 for college building Shri Bhagwan Charitable Trust transferred to assessee Rs. 3,20,000, as noted above. This included Rs.79,600 out of income of Shri Bhagwan Charitable Trust for year ending 31st March, 1971 plus Rs. 2,40,000 being amount accumulated upto year ending 31st March, 1970 by Shri Bhagwan Charitable Trust under s. 11(2) of Act. According to ITO, assessing Shri Bhagwan Charitable Trust, since proposed college had not come in existence on 31st March, 1971 assessee-society was not educational institution; but this finding was considered erroneous by AAC, Special Range-IV as seen from his order dt. 26th March, 1973. (vi) In order dt. 26th March, 1973 passed on appeal filed by Shri Bhagwan Charitable Trust AAC Range-IV had observed as under: Even if new society had not been established, Shri Bhagwan Charitable Trust had necessarily to constitute governing body for new college and transfer funds thereto as laid down by University. fact that new society was not able to spend its income received by way of donations, for reasons beyond its control, will not make it case of circumvention of s. 11(2) by Shri Bhagwan Charitable Trust. (vii) above factual position showed clearly that assessee-society w s educational institution. It only received voluntary contributions from another charitable trust. Such donations formed part of its corpus. ITO wrongly treated receipt of Rs. 79,600 as voluntary donation received, which was not applied for charitable purposes. Any contribution with specific direction that it shall form part of corpus of donee-trust cannot be deemed to be income derived from property held under trust. Under circumstances, ITO was justified in bringing to tax Rs. 79,600. Tribunal has already noted and confirmed above findings of AAC for asst. yr 1971-72. 8. Coming to asst. yr. 1976-77 Tribunal noted that ITO had not given any reason except to remark that Department did not accept order of AAC for asst. yr. 1971-72 and had filed appeal before Tribunal. (That appeal was dismissed by Tribunal as already noted). 9. second aspect mentioned by ITO for this asst. yr. (1976-77) was with regard to registration under s. 12A. He noted that registration was granted under CIT's Order dt. 23rd Sept., 1979 and that exemption under s. 80G was also granted for period 1st April, 1979 to 31st March, 1980 under CIT's order dt. 23rd Sept., 1979; that however, audit report under s. 12A(b) was filed by assessee only on 23rd March, 1979 and not along with return of income which had been filed on 4th Sept., 1978. ITO, therefore, held that assessee was not entitled to benefits of s. 11 of IT Act, 1961. 10. third aspect mentioned by ITO was that assessee-society though ostensibly established in 1970 had not utilised its income for any charitable purpose for 9 years. He rejected assessee's case that proposed college could not be started due to shortage of funds and society was seeking to start smaller educational institution. ITO, therefore, held that till such time as educational institution was actually started, exemption was not available to assessee under s. 10( 22 ) of Act. In this view, he brought to tax interest income of Rs. 45,110 shown by assessee in its income and expenditure account. 11. assessee contested this assessment in appeal. It is not clear what were grounds of appeal raised before AAC. AAC order is very brief and is not very helpful. All that it says is as under: "The present appeal is directed against order of ITO in holding that appellant trust was not entitled to be covered under s. 10( 22 ) of IT Act. He had based this finding on strength of order passed by him for asst. yr. 1971-72. Authorised Representative of appellant has, however, drawn my attention to fact that Tribunal, Jabalpur Bench, Camp Delhi vide their order contained in ITA No. 15/Del/76-77 asst. yr. 1971-72 dt. 30th Nov., 79 have accepted contention of appellant. Even in assessment order 1972-73 AAC, Range vide order no. 1565/79-80 dt. 7th Feb., 1980 has followed decision of Tribunal. In view of above, ITO is directed to compute income of trust in accordance with decisions referred to above. He is further directed to allow accumulation of income to extent of Rs. 43,793 under s. 11(2) of Act". Revenue contested above order in appeal raising objection reproduced in para 2 supra. 1 2 . Tribunal found no substance in above objection of Revenue. It recorded following findings in this regard: (i) Tribunal had confirmed on 30th Nov., 1979 findings recorded by AAC for asst. yr. 1971-72. By its order for 1971-72 it specifically rejected Revenue's objection to effect that assessee was not educational institution whose income was derived from property held under trust in terms of s.11. Hence following said order of 30th Nov., 1979, first part of objection taken for Revenue had to be rejected. (ii) As regards audit report being filed on 23rd March, 1979, that could not be ground for denying assessee benefit of s. 11. This was because of interpretation of term "along with" occurring in section 12A(b). That term was of directory and not mandatory nature. Since report had been filed before completion of assessment under s. 143(3), benefit of exemption under s. 11 could not be denied. 1 3 . Tribunal then took up for consideration second ground of objection taken by Revenue before it. This objection was as under: "On facts and in circumstances of case, AAC erred in directing t o allow accumulation of Rs. 43,307 under s. 11(2) without verifying as to whether prescribed conditions for accumulation are fulfilled in this case". On this ground Tribunal observed as under: "We have considered position. We find that AAC has given direction in this matter without any reference to ITO. No doubt, powers of AAC are wide but when he touches upon aspect that was not considered by ITO at all, and especially, when it requires factual inquiry as well, he ought to have given opportunity to ITO of being heard. This not having been done, we find it necessary to restore this aspect and only this limited aspect to file of ITO for disposal afresh after hearing assessee in matter". 14. On above facts and circumstances and after hearing parties before us, we do not see that question No. 1 raised by Commissioner arises for reference. This is because issue sought to be raised by Commissioner's question does not arise out of order of Tribunal. Though Tribunal has used expression "educational institution" in para 6 of its order of 19th March, 1986, its finding was that assessee was entitled to exemption under s. 11. Hence this question is not referred. 15. Question No. 2 of Commissioner is based on misconception. As we have noted above, Tribunal did not hold that income of assessee was exempt under s. 10( 22 ). As regards restoration of enquiry to ITO recorded in paragraph 14 of Tribunal's order of 19th March, 1986, that was in exercise of discretionary power of Tribunal. Such exercise is not seen to be arbitrary or capricious and hence no question of law can arise in matter. We, therefore, do not refer question No. 2 also. 16. reference application is rejected. December 18, 1986 S.S. MEHRA, J.M. I have privilege of going through order prepared by Dr. Narayanan, ld. Accountant Member rejecting reference application. I, however, regret my inability to be able to disagree with conclusion arrived at. facts by and large appear to have fully been incorporated in draft order of ld. Accountant Member. Nonetheless for sake of continuity and clarification brief facts are being stated. 2. In ITA No. 2059(Del) 84 for asst. yr. 1976-77 Revenue took following two grounds before Tribunal: 1. "On fact and in circumstances of case as well as in law AAC erred in directing ITO to compute income of assessee-trust in accordance with order dt. 20th Nov., 1979 of Tribunal for asst. yr. 1971- 72 in Tribunal No. 15(Del) 76-77 and to treat income as exempt in spite of delay in filing audit report under s. 12A(b). 2. On facts and in circumstances of case, AAC erred in directing to allow accumulation of Rs. 43,307 under s. 11(2) without verifying as to whether prescribed conditions for accumulation are fulfilled in this case". 3. said appeal was allowed for statistical purposes vide order dt. 19th March, 1986 of 'B' Bench of Tribunal, New Delhi and in fact issue No. 2 pertaining to accumulation of Rs. 43,307 under s. 11(2) of IT Act, 1961 was restored to lower authorities for examining allowability. 4 . Revenue thereafter raised following two questions for being referred to Hon'ble Delhi High Court for their esteemed opinion: 1. "Whether on facts and in circumstances of case Tribunal was justified in exempting income of assessee society under s. 10( 22 ) of Act when no educational institution for educational purposes was in existence? 2. Whether on facts and in circumstances of case Tribunal was justified in restoring matter back to ITO to examine allowability of accumulation under s.11(2) of Act when Tribunal itself held income of assessee to be exempt under s. 10( 22 ).?" 5. assessee appears to have put up claim for exemption under s. 10( 22 ) of Act. ld. ITO after detailed discussions denied exemption with following observation: "To establish, develop and maintain educational institution called by Angoori Devi Sher Singh Girls College and no manage, supervise and administer its affairs". 6. said finding was subsequently contested by assessee and ld. AAC allowed relief in matter noticing Tribunal's order for asst. yr. 1971-72 and first appellate order for asst. yr. 1972-73. 7 . On appeal by Revenue what Bench did has been mentioned earlier. Vide order dt. 19th March, 1986 Bench examined each aspect of matter and came to conclusion that assessee was entitled to exemption under s. 10( 22 ) of Act and also observed that issue pertaining accumulation required examination. From above facts, I am of view, that following question of law does definitely arise for making reference: "Whether on facts and in circumstances of case, Tribunal was justified in exempting income of assessee under s. 10( 22 ) of Act?" 8 . I am, therefore, of view that above question of law is referable one and does arise from Tribunal's order. said question should, therefore, be referred for esteemed opinion of Hon'ble Delhi High Court. December 12, 1986 Order Under S.255(4) OF IT ACT, 1961 We have been able to differ with respect to above reference application. matter is, therefore, to be placed before President for proceeding under s. 255(4) of Act. difference of opinion is as under: "Whether on facts and in circumstances of case question formulated by Judicial Member emanates from Tribunal's order and warrants reference thereof?" May 26, 1987 K.C. SRIVASTAVA, A.M. (AS THIRD MEMBER) above reference application had come up before Members constituting "B" Bench of Delhi Benches. But while hearing reference application there was difference of opinion between two Members. Whereas ld. Accountant Member was inclined to reject Commissioner's reference application, ld. Judicial Member was inclined to refer following question as question of law to Hon'ble High Court: "Whether on facts and in circumstances of case, Tribunal was justified in exempting income of assessee under s. 10( 22 ) of IT Act, 1961?" 2. On this difference of opinion following point of difference had been referred to me by President, Tribunal under s. 255(4) of IT Act, 1961: "Whether on facts and in circumstances of case question formulated by Judicial Member emanates from Tribunal's order and warrants reference thereof?" 3 . I have heard Departmental Representative and ld. Counsel for assessee. I entirely agree with ld. Accountant Member and am further of view that question as formulated by Judicial Member does not arise from order of Tribunal and, therefore, does not warrant any reference. reason for above view is not far to seek. 4. Tribunal had considered question of exemption of income of assessee as educational institution as well as question of its income being not chargeable to tax under provisions of s. 11 of IT Act. As matter had come up for consideration before Tribunal in earlier years as well, Tribunal considered earlier orders specially for asst. yr. 1971-72 and held that income of institution derived from property held under trust was exempt in terms of s. 11 and same finding was given in this year. Tribunal further considered question of application of income of trust and restored matter to ITO for ascertaining afresh question of exemption of income under s. 11. Tribunal has not held that assessee was institution exempt under s. 10( 22 ) of IT Act. In view of this, observation of ld. Judicial Member that Tribunal came to conclusion that assessee was entitled to exemption under s. 10( 22 ) is not borne out by records. In case Tribunbal had held that assessee was entitled to exemption under s. 10( 22 ) there could have been no question of directing ITO to ascertain extent of chargeable income under s. 11(2) of IT Act. question as suggested by Judicial Member, therefore, does not arise out of aforesaid order of Tribunal. In view of this that question cannot be referred for opinion of Hon'ble High Court. 5 . Now this matter would go back to Bench to pass order on reference application. *** COMMISSIONER OF INCOME TAX v. ANGOORI DEVI SHER SINGH GIRLS' COLLEGE SOCIETY
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