High Court Of Madras
Honesty Engineers & Contractors Trust vs. CIT
Sections 11, 161(1)
Asst. Year 1973-74, 1974-75
R. Jayasimha Babu & K. Raviraja Pandian, JJ.
Tax Case Nos. 112 & 113 of 1997
9th October, 2002
Counsel Appeared
P.P.S. Janardhanaraja, for the Applicant : Mrs. Pushpa Sitaraman, for the Respondent
ORDER
R. JAYASIMHA BABU, J. :
The assessee carries on business under the name of Honesty Engineering and Contractors Trust. The assessee made a declaration on the 10th of October, 1968, before the magistrate at Pondicherry declaring that business is being carried on by him for the sole benefit of the Aurobindo Ashram. Later, he executed a deed of trust on the 21st of June, 1972, in which it was set out that he was a sole trustee; that the business was held in trust and that the sole beneficiary thereof is the Aurobindo Ashram, Pondicherry. The object of the trust was stated to be the contribution to and aid in perpetuity of Shri Aurobindo Ashram Trust and its various activities and institutions including Aurobindo International Centre of Education and other charitable institutions. The trust was irrecoverable. In case of winding up or closure of the business under any circumstances and for any case whatsoever, the whole of the surplus of the assets of the business is to be offered and made over to Sri Aurobindo Ashram Trust, Pondicherry.
The assessee made credit entries in its books of account for the asst. yrs. 1973-74 and 1974-75 in favour of the Aurobindo Ashram to the tune of Rs. 1,74,570 of which Rs. 1,55,155 was actually applied. For the year 1974-75, the credit was for Rs. 1,44,759, the amount applied being Rs. 1,31,592.
The assessee’s claim that it is only a representative assessee and that as the income is received for the benefit of the Aurobindo Ashram and the Ashram is exempt from tax, no liability will attach to the assessee, was not accepted by the AO, the appellate authority and the Tribunal. At the instance of the assessee the following two questions have been referred to us : Whether, on the facts and in the circumstances of the case, the assessee-trust is not entitled to exemption under s. 11 r/w s. 161(1) of the IT Act, 1961 ? Whether, on the facts and in the circumstances of the case, the Tribunal having held that the applicant cannot be treated as a private discretionary trust was right in holding that the benefit of assessment under s. 161(1) of the Act is not available in view of the fact that moneys were not handed over in the previous year though entries were made and amounts were disbursed subsequently over a period ?
The genuineness of the declaration made by the assessee in the year 1968 and later in the year 1972 was not questioned by the Revenue at any time. The fact that credit entries have been made in favour of Aurobindo Ashram, Pondicherry, and that the bulk of the amount so credited was applied for the benefit of the Ashram is also accepted. It has been held by the apex Court in the case of CIT vs. Thanthi Trust (1999) 156 CTR (SC) 605 : (1999) 239 ITR 502 (SC) and by this Court in the case of CIT vs. Thanthi Trust (1999) 156 CTR (Mad) 607 : (1999) 239 ITR 510 (Mad) that credit entries made in favour of the educational institution in the assessee’s books of account would be sufficient and would amount to application of income. The fact that the entire amount credited was not applied during the year, therefore, cannot result in the assessee being rendered ineligible for claiming that the monies had been applied for charitable purposes.
The assessee’s claim that it be treated as a representative assessee under s. 161(1) was a proper claim as the trust under which the assessee functioned was for the benefit of the Aurobindo Ashram and the Ashram itself was a charitable trust, which was exempt under s. 11 of the Act. The beneficiary being the Aurobindo Ashram and the assessee being its representative was required to be taxed in the same manner and to the same extent as the beneficiary would have been. The fact that the trust deed refers to the contributions made to the Aurobindo Ashram Trust and its various activities and institutions including the Aurobindo International Centre of Education and such other charitable institutions also would not render the assessee ineligible from claiming the benefit. It has been held by the apex Court in the case of CIT vs. Kamalini Khatau (1994) 119 CTR (SC) 169 : (1994) 209 ITR 101 (SC) that there can be many beneficiaries and that in cases covered by s. 161 (1), the option could be exercised on the strength of the trust deed itself, since the income in such cases is specifically receivable by the trustees on behalf of or for the benefit of a single beneficiary or, where there are more beneficiaries than one, the individual shares of the beneficiaries being determinate and known.
The assessee, therefore, was entitled to be regarded as a representative assessee and, as such, the beneficiary being Aurobindo Ashram, which was exempt from tax under s. 11, the income which the assessee received for the benefit of the Ashram was also exempt.
The questions referred to us are, therefore, answered in favour of the assessee and against the Revenue.
[Citation : 262 ITR 266]
