High Court Of Gujarat
CIT vs. Sthanakvasi Vardhman Vanik Jain Sangh
Sections 11, 12
Asst. Year 1986-87
M.S. Shah & K.A. Puj, JJ.
IT Ref. No. 73 of 1993
18th July, 2002
Manish R. Bhatt, for the Petitioner : None, for the Respondent
K.A. PUJ, J. :
This reference was made at the instance of the Revenue and the following question of law was referred for the opinion of this Court : “Whether, the Tribunal is right in law and on facts in holding that donation received by the assessee-trust of Rs. 1,85,064 which was not utilized for the object of the trust, was not income of the trust ?”
The assessment year involved in this reference is asst. yr. 1986-87. The assessee is a public charitable trust. The ITO has found from the perusal of the balance-sheet that an amount of Rs. 1,85,064 received by the assessee during the accounting period relevant to the assessment year in question was taken to the balance-sheet directly.
The said amount was received by the assessee towards construction of Wadi for the caste people. The amount was thus received towards the object of the trust. The ITO has taken the view that the amount in question represented income of the assessee and the same was added in the total income of the assessee.
Being aggrieved by the said order of the ITO, the assessee has preferred an appeal before the Dy. CIT(A) and before him a contention was raised by the assessee that the amount was received by the assessee with a specific direction for construction of Wadi and hence the same shall form part of the corpus of the trust. The Dy. CIT(A), therefore, directed the ITO to exclude that amount from the computation of income of the assessee.
The Revenue has taken up the said issue before the Tribunal in second appeal and the Tribunal following its earlier order in the case of Swetamber Murtipujak Topagachha Jain Sangh has confirmed the order of the Dy. CIT(A). While drawing the statement of case in the present reference, the Tribunal has also observed that an identical question has been referred to in the case of another assessee in R.A. No. 1228/Ahd/1980 vide statement of case dt.
3rd Feb., 1983.
Reference arising out of the R.A. No. 1228/Ahd/1980 in the case of Shri Plot Swetamber Murti Pujak Jain Mandal being IT Ref. No. 141 of 1983 was decided by this Court on 19th Dec., 1995. In that case also, this Court was called upon to decide the question as to whether the contributions to Deva Dravya fund should be treated as specifically earmarked for the corpus of the trust and consequently these contributions were out of the purview of the provisions of s. 12 of the Act. While deciding the said reference, this Court has taken the view that Deva Dravya fund is a fund maintained for a specific purpose and forms part of the corpus. This Court has further observed that it is an established maxim of the Jain religion that Deva Dravya was religious property which cannot be diverted to purposes other than those which are considered sacred by the Jain scriptures. This Court has, therefore, confirmed the view taken by the Tribunal and decided the reference in favour of the assessee and against the Revenue.
In the present reference, all the three authorities below have found that the amount was received by the assessee- trust for the purpose of construction of Wadi and it is the case of the assessee althroughout that since the said amount was received towards corpus of the trust and for a specific purpose, it would not form part of the income of the trust and the said amount is exempt looking to the provisions contained in s. 12 of the Act. Sec. 12 of the Act reads as under : “12. Any voluntary contributions received by a trust created wholly for charitable or religious purposes or by an institution established wholly for such purposes (not being contributions made with a specific direction that they shall form part of the corpus of the trust or institution) shall for the purposes of s. 11 be deemed to be income derived from property held under trust wholly for charitable or religious purposes and the provisions of that section and s. 13 shall apply accordingly.”
On the plain reading of section, it is obvious that any voluntary contribution which is made with a specific direction that they shall form part of the corpus of the trust or institution would not be deemed to be income derived from the property held under trust wholly for charitable or religious purposes. In our view, the earlier decision of this Court in the case of Shri Plot Swetamber Murti Pujak Jain Mandal (supra) as well as the provisions contained in s. 12 of the Act squarely cover the issue in favour of the assessee. However, at this stage, Mr. M.R. Bhatt, the learned senior standing counsel for the Revenue has invited our attention to the decision of the Supreme Court in the case of State of Kerala vs. M.P. Shanti Verma Jain (1998) 149 CTR (SC) 279 : (1998) 231 ITR 787 (SC) wherein it is held that the objects of the trust clearly showed that the trust was meant for propagation of the Jain religion and rendering help to the followers of the Jain religion. Even the medical aid and similar facilities were to be rendered to persons devoted to the Jain religion and the medical aid could be given to non-Jains only if any member of the families managing the trust, showed sympathy and was interested in their treatment. The Tribunal was right in its conclusion that the dominant purpose of the trust was propagation of the Jain religion and to serve its followers and any part of agricultural income of the trust spent in the State of Kerala also could not be treated as an allowable item of expense. The Court has further held that the assessee-trust was not entitled to exemption under the Kerala Agrl. IT Act, 1950. In the case before the Supreme Court, the issue was quite different. There was no contention to the effect that any contribution received by the trust was towards a specific purpose and it would form part of the corpus of the trust fund. As a matter of fact, the provisions of s. 12 were not invoked at all and were not referred to. We are, therefore, of the view that no support can be derived from this judgment.
Mr. Bhatt has also invited our attention to the decision of the Supreme Court in the case of CIT vs. Nagpur Hotel Ownersâ Association (2001) 165 CTR (SC) 1 : (2001) 247 ITR 201 (SC). In that case, the issue was as to whether the assessee has to move an application before the ITO for the purpose of claiming exemption under s. 11 of the Act on the ground that the income is to be accumulated and the said income shall not form part of the taxable income. In that context, the Supreme Court has observed as under : “It is abundantly clear from the wordings of sub-s. (2) of s. 11 of the IT Act, 1961, that it is mandatory for the person claiming the benefit of s. 11 to intimate to the assessing authority the particulars required, under r. 17 in Form No. 10 of the IT Rules, 1962. If during the assessment proceedings the AO does not have the necessary information, the question of excluding such income from assessment does not arise at all. As a matter of fact, this benefit of excluding this particular part of the income from the net of taxation arises from s. 11 and is subject to the conditions specified therein. Therefore, it is necessary that the assessing authority must have this information at the time he completes the assessment. In the absence of any such information, it will not be possible for the assessing authority to give the benefit of such exclusion. Even assuming that there is no valid limitation prescribed under the Act and the Rules, it is reasonable to presume that the intimation required under s. 11 has to be furnished before the assessing authority completes the concerned assessment because such requirement is mandatory and without the particulars of this income the assessing authority cannot entertain the claim of the assessee under s. 11 of the Act, therefore, compliance of the requirement of the Act will have to be any time before the assessment proceedings. Further, any claim for giving the benefit of s. 11 on the basis of information supplied subsequent to the completion of assessment would mean that the assessment order will have to be reopened. The Act does not contemplate such reopening of the assessment.
11. As stated earlier, in the present reference, there is no question of seeking any permission of the ITO for accumulation of income as the contribution was received by the assessee-trust for a specific purpose and towards maintenance of the trust. We are, therefore, of the view that the reliance placed on this decision is also misconceived.
Mr. Bhatt has further invited our attention to the decision of the Supreme Court in CIT vs. Programme for Community Organization (2001) 66 CTR (SC) 401 : (2001) 248 ITR 1 (SC). In that case, the facts before the Supreme Court were that the assessee-trust received donations in the aggregate sum of Rs. 2,57,376. It applied therefrom for its charitable purposes the aggregate sum of Rs. 1,70,369 leaving a balance of Rs. 87,010. On these facts, the Court has taken the view that on the plain language of s. 11(1)(a) of the IT Act, 1961, the assessee was entitled to accumulate 25 per cent of Rs. 2,57,376 and not merely 25 per cent of the balance of Rs. 87,010.
The issue involved in the present reference is quite different as in the present reference the assessee is claiming the benefit of s. 11 on the ground that the contribution received by the assessee-trust was towards a specific purpose for construction of Wadi and hence, it would not be treated as the income of the trust.
In the above view of the matter, we are of the view that the Tribunal has not committed any error in holding that the donation received by the assessee-trust of Rs. 1,85,064 which was not utilized for the object of the trust was not income of the trust. We, therefore, answer the question referred to us in the affirmative i.e., in favour of the assessee and against the Revenue.
The reference is disposed of accordingly with no order as to costs.
[Citation : 260 ITR 366]